So Much For Competing In The Market: Grab Bag Of IP Weapons Used In Legal Fight Between Options Exchanges

from the whatever-happened-to-competition? dept

We’ve pointed out that while we’re told that intellectual property is supposed to be about the incentive to create, the reality is that it tends to be a protectionist tool to attack the competition. If you want to see an amazing example of this and how some companies will use any and all possible IP claims, look no further than the ongoing legal battle between the Chicago Board Options Exchange and the International Securities Exchange. Now, you might think that financial markets wouldn’t need “intellectual property protection” in order to incentivize their creation and continued innovation. And you’d be right. But, if you wanted to use those tools to annoy the hell out of competitors, well, you’ve stepped up to the right window.

The legal disputes, starting back in 2006 and continuing to escalate, touch on a little bit of everything, starting with patents, moving on to copyrights and hot news and then right back to patents again, as described in the article linked above. A few key snippets on the history:

ISE first sued the Chicago board back in 2006, claiming infringement on its own patent—filed in 1999, just two months before CBOE’s first patent filing. CBOE beat that lawsuit at the district court level, but this May, it was revived (PDF) by the nation’s top patent appeals court. Now it looks like the lawsuit against Chicago is going to go forward, whether the exchange likes it or not—and filing their own “defensive” patent suit is the best way to get leverage.

[….] The patent suits seem to have grown out of an earlier dispute over licensing, which also reached a head this year. ISE had long wanted to offer “index options” tied to the Dow Jones Industrial Average and the S&P 500. Dow Jones & Co. had maintained that was a use of its intellectual property rights and required a license; McGraw-Hill Companies, which owns the S&P 500 Index, held the same position.

[….] ISE tried to take that case to federal court, saying it was a copyright issue. The court sided with CBOE and the index owners, however, saying the claims for misappropriation and unfair competition weren’t about “authorship.”

That left the case in Illinois state courts, which sided with the Chicago exchange and its allies. The courts said that ISE shouldn’t be allowed to “profit for free from the efforts, skill, and reputation of the Index Providers.” ISE appealed that to a higher state court, but in May it lost there as well. In that case, Illinois judges allowed the index owners to lean on the controversial “hot news” doctrine, first enunciated in a 1918 case brought by The Associated Press against a competitor.

Basically, these two exchanges don’t like each other and don’t like competing, so they’re pulling out all sorts of random IP arguments and throwing them at each other, culminating in the latest effort which is suing each other over patents. CBOE is suing over a few patents (7,356,498, 7,980,457 and 8,266,044) which all seem like relatively broad business method patents.

I don’t think anyone actually thinks the patents and what they cover really matter here. This is all about a fight between two competitors and them trying to use IP laws as leverage to hurt one another. This isn’t “business”, this is about wasting a ton of money on lawyers in the hopes that the other side wastes even more money — and with the hope that, at the end, a judge miraculously tells one competitor to hand over barges full of cash to the other for no good reason.

Is it really so wrong to wonder whatever happened to just competing in the marketplace?

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Companies: chicago board options exchange, international securities exchange

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Comments on “So Much For Competing In The Market: Grab Bag Of IP Weapons Used In Legal Fight Between Options Exchanges”

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out_of_the_blue says:

Well, to begin, both parties are parasites.

That fact would never strike Mercantile Masnick, nor would that it’d be better to do away with both in this new information age: traders are dinosaurs, could all be done a whole new way online.

And of course it strikes Mike as bad and odd for two gangs of parasites to go after each other over loot skimmed off labor! Some days I think Mike doesn’t know the first facts about capitalism, and then days like this, I’m sure of it.

Every click for Mike “Streisand Effect” Masnick is a click for him!
Do your part as often as you can! Click early! Click often!

Anonymous Coward says:

Re: Re: Well, to begin, both parties are parasites.

Fat chance to both those things. Especially the latter. OotB stop being an idiot? That’s like asking the sun to stop rising. It’ll happen eventually. But no freaking way it’s going to happen in any of our lifetimes.

As for that signature, he thinks he’s getting a shot in against Mike by using it. I’m sure him and his handful of AC chuckleheads high five themselves and say, “Man, you got him!” constantly. But that’s as far as it goes. It really is quite pointless and just a sign of how little of an argument he can make against anything Mike says at all that he resorts to using that as a mark against him.

PaulT (profile) says:

Re: Re: Well, to begin, both parties are parasites.

The sig is a prime example of his idiocy. I can’t think of any reason why it’s there other than to annoy people and get people to click on that link. Since it’s not only about a concept regularly discussed here, but also says nothing negative about either Mike or Techdirt, I can’t see what logical purpose it serves. Perhaps, if it was an article saying something negative and little discussed about Mike, there might be some purpose behind this action – but it doesn’t. Hell, the page is even locked due to regular vandalism so it’s not like he can just be generating a popular link in order to add negative information later down the line.

My guess is that it’s yet another basic concept that ootb has completely misunderstood and is now attempting to clumsily yield as a weapon in some way. That’s his biggest problem, of course – he’s not only as loud and obnoxious as possible at attacks the articles here, he doesn’t even grasp what they’re talking about in the first place.

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