US trading technology firm Bloomberg could be forced to stop using parts of its foreign exchange matching and conversational dealing technology if its UK rival Reuters succeeds in a patent infringement lawsuit.Filed in the Southern District of New York on July 11, the Reuters complaint alleges Bloomberg is infringing three Reuters patents that were filed in 1999. A spokesperson for Reuters in London said the patents refer to capabilities – rather than specific products – used in matching and conversational dealing systems, most obviously "in the FX area".
"The real aim is to protect our intellectual property," said the Reuters spokesperson. "Reuters has invested millions in research and development to deliver the best automated trading technology to the market. Although Reuters had preferred not to resort to litigation, it cannot allow the unauthorised use of its intellectual property."
Bloomberg last week hit back at Reuters’ claims: "We are confident that we have not violated the patent, and in our judgement the suit is without merit," said Bloomberg’s spokesperson in New York.
Allegations of patent infringement do not necessarily imply the defendant has copied business processes or software, said Nick Groombridge, a partner with the patent litigation group at Weil, Gotshal & Manges in New York. "It’s not limited to a copy like a copyright is. You could develop it on your own and not know about the patent."
Reuters said discussions have been ongoing since January to licence the processes covered by the patents to Bloomberg. But the UK company would not reveal how much it planned to charge for a licence, nor give the names of other companies that have licensed the technology.
If successful, said Groombridge, there would be an injunction against Bloomberg to prevent it from using the processes – or variants of the processes – covered by the patents. Damage payments would also be involved, which are calculated by assessing ‘lost profits’ – something that is difficult to determine in the field of services.
Patent owners succeed in at least half of cases that go to trial, said Groombridge. But it may take two or three years to get to trial, and the great majority of patent lawsuits result in an out-of-court settlement.
Some market participants see the move as Reuters’ reaction to Bloomberg’s increasing encroachment into foreign exchange – Reuters’ traditional stronghold. In the past 12 months, Bloomberg has launched an interbank forward swaps platform, Powermatch FX; Instant Bloomberg, a new instant messaging service; and, most threatening of all to Reuters, an alliance with its rival in spot interbank forex, EBS. From the third quarter, Bloomberg’s screens will offer EBS Trader, EBS’s conversational spot dealing platform.
"For the first time, Bloomberg is serious about the forex market," said one senior official at a foreign exchange trading technology firm in London. "Reuters may be panicking, but I don’t think it will have any impact in stopping Bloomberg. In fact, it may work the other way – it could bring them the publicity to make everyone aware that Bloomberg is serious about the forex space."
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