Trading Technologies in second patent suit
Wed Sep 29, 6:50 PM ET
By Jeremy Grant in Chicago
Trading Technologies, one of the fastest growing providers of software for global futures trading, has issued a lawsuit against Chicago-based broker Goldenberg, Hehmeyer & Co alleging patent infringement.
The move comes only weeks after the company issued a separate patent infringement suit against eSpeed, the electronic bond trading unit of Cantor Fitzgerald.
While details of the latest suit will not be made public until Thursday - court officials have yet to complete routine document scans - the action against eSpeed alleged infringement by eSpeed of two patents relating to software developed by Trading Technologies.
The suit is likely send a chill through the US futures and securities industry, already unnerved by the eSpeed action. That is because it is a sign that Trading Technologies is willing to enforce a US patent it received in August for an electronic trading system that it believes has been copied by rivals with clients across the globe.
Trading Technologies is an example of a new breed of technology providers known as Independent Software Vendors (ISVs), which provide the technology that links derivatives exchanges' electronic trading systems to thousands of traders around the world.
Many ISVs grew rapidly from their roots as start-up business and did not bother to patent the technology they had developed, some of it possibly based, even loosely, on existing ISVs' technologies.
"Most of these companies started in a garage and the last thing they were thinking about - or could afford - was patenting," said an executive at another ISV.
Many of such ISVs have grown rapidly and have customers that are the world's largest brokers and derivatives exchanges. Trading Technologies estimates that more than 50 per cent of electronic trades in the world's top four futures exchanges - Eurex, Euronext-Liffe, the Chicago Mercantile Exchange and Chicago Board of Trade - goes through its order entry system.
By securing a patent, Trading Technologies is now free to pursue rival ISVs that have developed trading software that it believes may now be infringing its patent.
"It could destroy the whole industry. If the patent is held up then there's not much of a limit to who TT [Trading Technologies] couldn't sue," the executive said.
The development is a reminder of fears that stalked the derivatives industry three years ago when Cantor Fitzgerald sued derivatives exchanges - including the CME and CBOT - alleging infringement of its so-called Wagner Patent.
The CBOT and CME eventually paid $15m each to Cantor Fitzgerald in out-of-court settlements.
Brokers are also vulnerable because many have developed their own proprietary trading systems. Goldenberg, Hehmeyer has its own proprietary trading system.
Trading Technologies' latest suit was filed on Tuesday at the US Federal District Court of Northern Illinois. A cover sheet seen by the FT shows Trading Technology as the plaintiff and Goldenberg, Hehmeyer & Co as defendant in a case before Judge Blanche Manning.
Neither Trading Technologies nor Goldenberg, Hehmeyer would comment.
