The International Securities Exchange did not violate index providers’ intellectual property rights by listing options on a pair of popular exchange-traded funds, a federal appeals court has ruled.
Dow Jones and Standard & Poor’s sued the ISE and the Options Clearing Corporation last year after the New York-based electronic exchange listed options without licenses on the widely-traded Standard & Poor’s Depositary Receipts, which track the S&P500 and are better known as SPDRs, and the Dow DIAMONDS, which track the Dow Jones Industrial Average. The index providers argued that the ISE should not be allowed to trade the options without a license. The Chicago Board Options Exchange holds an exclusive license to trade options on both indices.
The Second Circuit Court of Appeals, upholding a September lower court decision, ruled that the allegations were “legally insufficient.” According to the ISE’s law firm, DLA Piper Rudnick Gray Cary, the court said that, in authorizing the ETFs to be traded in the secondary market, Dow Jones and S&P forfeited their power to control how the shares are traded. The New York court also rejected the index provider’s claim that the ISE had infringed their copyrights by trading under the DIAMONDS and SPDR brands.
DLA Piper Rudnick partner Andrew Deutsch, in a statement, called the ruling “a complete victory for ISE.”
Spokesman David Guarino said S&P is “currently evaluating our options” with regard to an appeal. In a statement, S&P said it was “disappointed” with the decision, but called it “a narrow ruling that applies only to intellectual property rights associated with ETF-based options.”
Calls to Dow Jones for comment were not returned at press time.