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CBOE files $525 million patent infringement suit against ISE

The Chicago-based stock options exchange claims that its rival’s automated trading system violates three of its patents

The futures industry is at it again. On the heels of CME Group’s lawsuit against the U.S. Commodity Futures Trading Commission comes a multimillion-dollar patent infringement lawsuit courtesy of CBOE Holdings Inc., the parent company of the Chicago Board Options Exchange (CBOE).

The company is suing its rival, electronic stock options market International Securities Exchange (ISE) for allegedly infringing three CBOE patents with its automated trading system. The patents at issue cover quote-risk monitoring and quote-adjustment technology designed to reduce trading risk by automatically adjusting buy and sell prices on options contracts. CBOE is seeking at least $525 million in damages for lost profits and royalties.

The two companies have clashed over patents several times before. In 2007, CBOE sued ISE after the latter demanded royalties for one of its patents. ISE reciprocated in 2010, filing a $300 million infringement suit involving CBOE’s hybrid open outcry-electronic trading system.

In May, the Illinois Supreme Court declined to review a ruling that gave CBOE the exclusive right to list options on the Standard & Poor’s 500 and Dow Jones Industrial Average stock indexes.

Read more at Thomson Reuters and Nasdaq.

For more InsideCounsel coverage of the financial industry, see:

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Barney Frank defends JPMorgan against government lawsuit

MF Global customers add PricewaterhouseCoopers as defendant in lawsuit

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Merrill Lynch’s petition to vacate $10.2 million broker award vacated

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Alanna Byrne

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