From the January 01, 2007 issue of Futures Magazine • Subscribe!

Patent fight heats up

In what the International Securities Exchange (ISE) is calling an independent action not related to its battle with the Chicago Board Options Exchange (CBOE) over index licensing, the ISE filed a patent infringement lawsuit against CBOE in late November in the U.S. Court for the Southern District of New York alleging the CBOE infringed on its patent entitled “Automated Exchange for Trading Derivative Securities,” which was issued on Sept. 9, 2003. However, CBOE launched its Hybrid system June 2003. The CBOE released a letter to its members stating it plans to mount a vigorous defense against what it’s calling a meritless claim.

About a week earlier CBOE, in an attempt to preserve its exclusive licensing rights for options on the S&P 500 (SPX) and Dow Jones Industrial Average (DJX), filed a suit in Illinois against the ISE seeking to prevent the ISE from listing or trading SPX or DJX because of CBOE’s exclusive licenses. The action comes about two weeks after the ISE sued Dow Jones and S&P in federal court in New York, seeking a declaration that the ISE was entitled to trade SPX and DJX options without a license. Standard and Poor’s parent McGraw-Hill and Dow Jones are joining the CBOE in the lawsuit.

CBOE Chairman and CEO William J. Brodsky said in a statement, “CBOE initiated this action in order to enforce our contractual rights with our partners, S&P and Dow Jones.”

Niro, Scavone, Haller & Niro patent attorney Joe Hosteny says that once a patent is issued it’s presumed to be valid, but, “People fight over whether the patent is valid and they fight over whether the invention is one you can get a patent on.” He says such a case can take two to three years and cost several million dollars to resolve. “What a judge has to do is go over claim construction,” Hosteny says, adding, “In computer related inventions the case can get fairly involved.”

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