The saga of Zillow's totally bullshit legal threat has lasted all of three days. Following a terrible (and still wrong) attempt at damage control, Zillow has sent a note to all the reporters who have covered the story to say that it won't be taking legal action:
We have decided not to pursue any legal action against Kate Wagner and McMansion Hell. We’ve had a lot of conversations about this, including with attorneys from the EFF, whose advocacy and work we respect. EFF has stated that McMansion Hell won’t use photos from Zillow moving forward.
It was never our intent for McMansion Hell to shut down, or for this to appear as an attack on Kate’s freedom of expression. We acted out of an abundance of caution to protect our partners – the agents and brokers who entrust us to display photos of their clients’ homes.
Even this response is bullshit. Note, first of all, there still isn't any apology there. Second, notice that they're still prattling on about how the action was justified and are also happy that McMansion Hell won't be using images from Zillow, even though the site and its founder, Kate Wagner absolutely could do so if doing so meets the standards of fair use (which all of the examples I've seen on the site so far almost certainly do). Third, "decided not to pursue legal action against Kate Wagner." Well, no fucking duh. This is because any lawyer with an ounce of knowledge on these topics has already explained that you have no actual legal claim here at all. Fourth, this was not done "out of an abundance of caution" or "to protect" your partners. It appears to have been done in a fit of anxious cluelessness, in a manner that made Zillow look terrible and petty -- not to mention clueless on the law.
Still, good on EFF for getting involved and helping out. EFF has a blog post about this issue and has posted the incredibly thorough debunking letter it sent Zillow, explaining how Zillow has literally no legal leg to stand on. And it also makes quite clear that Wagner has every right to continue to use images from Zillow -- but that she is choosing not to do so going forward (it's a little unclear if she intends to replace older images sourced from Zillow).
Either way, Zillow still comes out of this looking like shit. The fact that it never apologized and still seems to think that the legal notice was the right thing to do (not to mention that it's still focused on whether or not Wagner will make use of these images) suggests that Zillow has not even remotely learned a lesson here. This does not speak well of Zillow as a company.