Three financial firms have joined forces to file an amended class-action lawsuit against Cusip Global Services (CGS), S&P Global, FactSet, and the American Bankers Association (ABA), alleging violations of US antitrust laws, breach of contract, and violations of New York and Connecticut unfair business practice statutes, after a federal judge in the Southern District of New York last month ordered two previously competing civil suits brought by the firms against Cusip be consolidated.

New York-based broker Dinosaur Financial, Connecticut-based Hildene Capital Management, and Swiss Life Investment Management are seeking a ruling on whether Cusip numbers—de facto serial numbers used to identify nearly all North American stocks and bonds—are copyrightable or not, challenging the ABA’s assertion of copyright over the Cusip numbering system, which it has held for more than 50 years.

The new suit also alleges CGS, S&P, FactSet, and the ABA violated sections 1 and 2 of the Sherman Antitrust Act by boycotting Cusip users who refused to enter into licensing agreements with S&P and FactSet, and by using the standard-setting process—Cusip is the national standard for securities identification under the American National Standards Institute’s Accredited Standards Committee X9—to squash would-be competitors to Cusip, such as Bloomberg’s Financial Instrument Global Identifier (Figi).

However, the suit sets up a fallback, stating that if Cusip numbers are found to be copyrightable, then the foursome is at least in violation of 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 two initial suits were each filed in March, days after FactSet closed its acquisition of CGS from S&P Global for more than $1.9 billion. S&P had operated the CGS on behalf of the ABA for 53 years until the European Commission stipulated that the data giant must divest the business unit as part of its ongoing merger with IHS Markit.

What’s in a patent

Since then, the defendants have rejected the  claims in court, particularly on the challenge to Cusip numbers’ copyrightability. The basis for the challenge comes from a precedent-setting case in US copyright law—Feist Publications Incorporated versus Rural Telephone Service Company—in which the US Supreme Court ruled that facts, or information alone, cannot be copyrighted without a minimum of creativity. For example, telephone numbers are facts and therefore cannot be copyrighted.

Though the plaintiffs don’t dispute that the ABA holds copyright over CGS’s master database of 60 data elements relating to more than 26 million financial instruments, they are challenging whether the underlying individual reference numbers that make up the database are copyrightable.

In a letter from June, S&P’s lawyers wrote that the CGS subscription agreement grants users the right to access, download and use any of the data originating from the Cusip database, not just individual Cusip identifiers, and that anyone, including financial institutions, can obtain and use individual Cusip identifiers for free from government and public sources such as the websites of the Securities and Exchange Commission and its Edgar database, the Municipal Securities Regulatory Board and its Emma database, and the security issuers themselves.

“It takes less than a half-second Google search to find the Cusip of the common stock of Amazon, Inc.,” the letter said. “Plaintiffs have no basis to plead that Defendants have done anything to stop them from doing the same and making use of an individual Cusip identifier (or other information) that is publicly available.”

However, some industry practitioners disagree. The CEO of a data vendor that licenses Cusip numbers for its own users says that one reading the CGS license page, which states that “CGS license fees for access to and usage of CGS’s commercial products or services (and the CGS data contained therein) apply to both direct and indirect end-user customers” gets a different impression.

According to CGS’s own website, the company states that its data may be publicly available in some offering documents and from other sources. “End users can elect to collect this information themselves and store such information in their internal databases for non-commercial use,” it reads.

“The problem, and what I think a lot of people in the industry are really ticked off about, is who has to pay to use it?” the CEO says. “[For example] DTCC has to pay to use it. Then DTCC takes those things—the trades—and they will ship it to BlackRock. BlackRock has to pay when they receive the data from DTC, and then they have to turn around and pay for it again if they take that data and push it to somebody else… And so Cusip basically has this monopoly that says anybody who sends and anybody who receives it needs to have a license.”

However, all those different affected parties may find some solace in the new lawsuit. As part of the amended complaint, the suit now represents all entities who pay license fees to use Cusip numbers in their businesses, rather than only financial institutions. The new class includes institutions, data vendors, fintech companies, and other potential competitors who could develop innovative products and services using the CUSIP numbers.