Protecting Patents

It appears that claiming patent infringement is en vogue within the financial technology community, judging by Reuters' recent patent infringement accusation of Bloomberg. Reuters Group has brought suit against Bloomberg LP, alleging that the latter infringed upon three patents for electronic trading technology. "Our primary intention is to protect our intellectual property," says a Reuters spokesman. "We originally came to them with offers to license the software, but we weren't able to get anywhere in terms of licenses. Our lawsuit specifically asks for them to stop development."

In response, a spokeswoman for Bloomberg said that Bloomberg is confident that no patents were violated, and that "the suit has no merit."

The suit comes just two weeks after interdealer-broker eSpeed filed a patent infringement suit against BrokerTec USA, alleging patent infringement on electronic trading systems and methods. "eSpeed has caught onto something and shown that sort of strategy can succeed," says Sang Lee, a senior analyst at Celent Communications, referring to eSpeed's success in patent suits against exchanges.

However, Lee says that the current patent infringement suits seem to differ in intent. "With the exchanges, eSpeed just wanted recognition and payment and was happy to have them use the technologies," Lee notes. "In the case of BrokerTec, they are intent on stopping them from using the technologies altogether, and it seems as though the Reuters/Bloomberg case may be similar. In cases like these, it is using a patent to keep a competitor out of the market."

Gregory Silberman, a patent attorney in Kaye Scholer LLP's technology, intellectual property and outsourcing group, explains that the 1998 case of State Street Bank & Trust Co., v. Signature Financial Group, Inc., set a precedent for patents to be obtainable on business methods and concepts.

During the dot-com boom, many companies filed technology and business-method patents defensively, Silberman notes. "They didn't want to have to worry about someone coming in and saying that they were infringing," he explains. "But it can also be a potential barrier to their competitors in the market, and could raise capital when the economy is down."

Regardless of the intent of filing, there is no doubt among industry insiders that this will not be the last patent infringement suit on Wall Street. Celent's Lee notes that he wouldn't be surprised if Reuters files suit against other competitors allegedly infringing on its patents, especially if it is successful against Bloomberg.

Lee adds that Reuters won't be the only one filing suit. "Anyone else with a patent will certainly think about taking some action," he says. "It throws a wrench into your competitors' overall strategy. It may not go anywhere, but at least it keeps them occupied dealing with legal issues."

Reprinted from Wall Street & Technology Online, part of the InformationWeek Media Network.