Nasdaq Options Trading Patents Challenged by Rival MIAX Exchange

  • Patents cover routing security orders, financial price quotes
  • Nasdaq is embroiled in patent lawsuits with MIAX and IEX

Pedestrians are reflected in the window of the Nasdaq MarketSite in New York.

Photographer: Victor J. Blue/Bloomberg

Nasdaq Inc. is trying to claim that it invented the concept of options trading, rival Miami International Holdings Inc. said in a series of petitions seeking to have seven of Nasdaq’s patents canceled.

Miami International, the parent company for fully electronic options trading exchanges known as MIAX, says in filings with the U.S. Patent and Trademark Office that the ideas that Nasdaq patented between 2003 and 2013 aren’t eligible for such protection. It’s asking the agency’s Patent Trial and Appeal Board to invalidate the patents.

The patent board will consider the petitions and any response filed by Nasdaq. If it decides that MIAX has a “reasonable likelihood” of winning its argument, the board will institute a review and issue a final decision a year after that.

The challenge comes as Nasdaq is suing rival exchanges for infringing its patents. Last month, Nasdaq sued IEX Group Inc., accusing IEX of hiring a group of Nasdaq employees with intimate knowledge of how its stock exchange technology works, and subsequently violating seven patents.

Miami International is trying to use the patent office to dispense with an infringement lawsuit that Nasdaq filed against it in September in federal court in Trenton as it can be faster, easier and cheaper to invalidate a patent through the review board than in court.

In each of the seven petitions filed in with the review board in the past week, Miami International said the patents cover an “abstract idea” and cites a 2014 U.S. Supreme Court ruling that has led to invalidity rulings against hundreds of software patents.

One patent for routing security orders covers “a basic ‘building block’ of almost all forms of mass communication,” while one for quoting financial prices “is essentially a day-to-day communications practice,” Miami International said in the petitions.

Joe Christinat, a spokesman for Nasdaq, declined to comment.

In a January filing with the court in New Jersey, Nasdaq said the patents “serve as the foundation of a platform that has processed transactions representing 972 million shares and $28.9 billion in notional value in under a second.”

MIAX’s “analysis relies on an oversimplification of Nasdaq’s inventions, laughably equating them to things like centuries-old trading floors when they in fact claim specific technological improvements and methods in the electronic trading space to make electronic trading fairer, more accurate, and more reliable,” Nasdaq said in the filing.

The patent board will consider the petitions and any response filed by Nasdaq. If it decides that MIAX has a “reasonable likelihood” of winning its argument, the board will institute a review and issue a final decision a year after that.

In both the MIAX and IEX lawsuits, Nasdaq claims the companies pilfered workers and copied key technology.

MIAX has asked that the lawsuit against it be dismissed, saying any claims that trade secrets were stolen are years old and thus outside the statute of limitations. That request has been put on hold by the district court judge until other legal issues are resolved.

The civil suit is Nasdaq Inc. v. Miami International Holdings Inc., 17-6664, U.S. District Court for the District of New Jersey (Trenton).

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