THERE is a new cold war on the horizon. An intellectual property arms race is escalating on Wall Street, where financial services firms like Goldman Sachs and Citigroup are building up stockpiles of patents on processes like software-based pricing, trading and risk analysis systems and products like credit cards, exchange-traded funds and exotic derivatives.In 1997, there were 927 patent applications for various methods of processing financial and management data. Last year, there were 6,226.
Last year, more than 1,000 patents for processing financial and management data were approved, up from 200 in 1997.
Goldman, viewed by many as a patent leader on Wall Street, has hundreds of patent applications in the pipeline and has received patent rights on a couple of dozen products and systems….
Most of the skirmishes have so far involved smaller players. For instance, eSpeed, whose majority owner is Cantor Fitzgerald, sued and reached settlements with a number of large commodity exchanges a few years ago over a patent it acquired from a third party that covered computerized matching of bids and offers for securities. In 2003, the Reuters Group sued its rival Bloomberg, accusing it of infringing on automatic trading technology patents it held. The two settled earlier this year.
No one is ruling out the possibility of a patent war between the financial titans some time down the road. It has happened before. In 1982, Merrill Lynch sued the rival brokerage firm Paine Webber, accusing it of infringing on a patent Merrill received on its cash management accounts. Eventually, the two reached a settlement.