Defendants in Cusip suit make their case for dismissal

Cusip Global Services (CGS), its operator FactSet, its former operator S&P Global, and its creator and patent-holder the American Bankers Association (ABA), have jointly filed a motion to dismiss the class-action lawsuit brought against them last year, which alleges anti-trust violations and challenges the copyright and licensing structure of the Cusip numbering system.

In the filing, the companies asked that the case be dismissed with prejudice, which, if granted, would spell out a permanent dismissal and ensure that the plaintiffs—New York-based broker-dealer Dinosaur Financial and European real estate investor Swiss Life Investment Management—cannot refile the same charges in the Southern District of New York.

In a rebuttal of the plaintiffs’ most serious assertion—that the foursome has violated sections 1 and 2 of the Sherman Antitrust Act—counsel for the accused argue that the licensing structure utilized by CGS, which requires that users, both direct and indirect, pay fees to access and use CGS data, is in accordance with companies’ rights to limit access to their products and services when they have invested time and resources into making them valuable.

They also argue that Dinosaur and Swiss Life have offered no conclusive evidence to show that S&P, FactSet, CGS, and the ABA have done anything to prevent anyone from developing a competing identifier and convincing industry stakeholders and government agencies to adopt it.

The motion to dismiss rests on the argument that data creators have a right to charge for their data; that the right extends to all companies regardless of size or market share; and that the right is not dependent on whether the data (or other services) are copyrightable.

It reads: “In essence, plaintiffs allege that defendants are required to give away data they spent years collecting and updating to help potential rivals including plaintiffs develop competing products.”

The build-up

The suit as it stands today is the result of Judge Katherine Failla’s order to consolidate two competing suits that were filed last year in rapid succession—first by Dinosaur and then by Swiss Life. Both had alleged similar wrongdoings. In addition to standing by the Sherman Act grievances, the co-plaintiffs made further accusations in the amended suit, including breach of contract and violations of New York and Connecticut unfair business practice statutes.

It also alleged CGS, S&P, FactSet, and the ABA had conspired to manipulate the US standard-setting process—Cusip is the national standard for securities identification under the American National Standards Institute’s Accredited Standards Committee X9—to quash would-be competitors to Cusip, such as Bloomberg’s Financial Instrument Global Identifier.

Finally, in the new allegations part of the amended complaint, the plaintiffs argued that the quartet has violated the ABA’s commitment to X9 that it would offer licenses to Cusip numbers on fair, reasonable and non-discriminatory (Frand) terms, including price, which the suit says was and is a condition of X9’s designation of Cusip as the national standard.

The motion to dismiss also disputes both X9-related allegations, again stating the plaintiffs have not presented, and cannot present, any evidence that CGS and the other companies engaged in any improper conduct at X9 to block competition, and that the plaintiffs have misread or purposefully omitted language that limits any X9-required commitment to patent rights, not copyrights.

“We have long believed that the claims made in the lawsuit are without merit, and now—after the plaintiffs have made several amendments to their original complaint—we still believe strongly that any further litigation would be an unnecessary use of public resources,” said a CGS representative in a statement to WatersTechnology. “Our motion to dismiss the plaintiff’s complaint reflects compelling precedent and case law supporting our longstanding business practices and we will continue to defend our position vigorously. Market participants around the world recognize and value the transparency, efficiency, and reliability the Cusip system delivers to the global capital markets, and we remain focused on that mission every day.”

The plaintiffs will have a deadline of April 3, 2023, to respond to the motion. The defendants will have a further deadline of April 27, 2023, to make their case for dismissal once again before the judge rules on whether to let the case proceed to trial, as requested by the plaintiffs.