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CBOE-ISE Trial Over Automated Markets Patent Is Canceled

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March 14 (Bloomberg) -- International Securities Exchange LLC, an all-electronic options trading market, opted out of a patent trial against Chicago Board Options Exchange Inc. on the day its lawyers were to deliver opening statements to a jury.

U.S. District Judge Joan H. Lefkow, who was presiding over the lawsuit in federal court in Chicago, issued a series of adverse pre-trial rulings that compelled ISE to “cease pursuit of the case,” it said in a statement today.

The Deutsche Borse AG unit alleged the Chicago exchange had infringed an automated trading patent. CBOE, in a separately filed case, asked Lefkow to find the ISE patent was invalid.

“ISE strongly believes in the merits of its case that CBOE copied and continues to infringe ISE’s patented trading technology,” the New York-based company said. “ISE plans to immediately file an appeal to the Federal Circuit to reverse these rulings.”

The trial, set to start on March 11 and delayed for three days while Lefkow addressed the preliminary motions, was one of at least three legal disputes between ISE and Chicago-based CBOE Holdings Inc., operator of the biggest U.S. options exchange.

Jury Discharged

Jurors were discharged today without ever hearing arguments or evidence in the trial Lefkow had told them on March 11 would last until early April.

Jonathan Marshall, an attorney for the CBOE, said in a courtroom interview that lawyers for ISE asked the judge to enter a judgment of non-infringement, freeing ISE to appeal.

ISE concluded the “net effect of the rulings would make it impossible to make their case at trial,” Marshall said.

In one ruling, made public on March 11, Lefkow had barred ISE from presenting evidence of pre-suit damages to the jury, concluding that the exchange had failed to comply with a federal “marking statute,” requiring it to make public its patent claim.

“We are gratified that this case has reached the correct result,” CBOE Chairman and Chief Executive Officer William J. Brodsky said in a statement today.

The cases are Chicago Board Options Exchange Inc. v. International Securities Exchange LLC, 07-cv-00623, and International Securities Exchange LLC v. Chicago Board Options Exchange Inc., 07-cv-04709, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Andrew Harris in the Chicago federal courthouse at aharris16@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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