Patent Lather

Companies named in the lawsuits include Morgan Stanley, Bank of America, BNY Mellon, Credit Suisse, Goldman Sachs, HSBC, JPMorgan Chase and SWS Group, CME Group, BATS Trading, the International Securities Exchange, Nasdaq OMX, NYSE Euronext, the Options Price Reporting Authority, Thomson Reuters, Bloomberg, FactSet, Interactive Data and Penson Worldwide. Most of those named merely declined to comment on the litigation, though others expressed bafflement at the lawsuit.

Indeed, the initial filings do not allege any specifics surrounding the infringement. It could be some time before the court's discovery process brings specifics of the case to light.

Initially, sources speculated that the lawsuits might be targeting the FAST Protocol, which has quickly gathered momentum as an industry standard method for compressing streams of market data as firms and exchanges seek to reduce over-utilization of bandwidth. However, the fact that not all the defendants listed have implemented FAST, and that FIX Protocol Limited, the standard's governing body, has been spared litigation thus far, suggest that its target lies either in a much broader definition of data compression, or in more specific use cases particular to the firms named.

The filing describes Realtime Data as "a developer of software and hardware based data compression products, ranging from data compression cards to rack-mounted storage servers... [that] has worked with some of the largest technology companies in the world involved with the development of market data compression solutions."

However, Realtime Data does not have a Web site, and its place of business listed on the lawsuits is the address of Tashjian & Padian, a law firm specializing in commercial litigation. When I turned up at the firm's office, I was told that no one was available to discuss the case. The difficulty in finding concrete information about the company has prompted many to speculate that it is a so-called "patent troll"-a company that secures patents for the purpose of litigation-and that it has set its sights on an industry rich with cash that depends heavily on its ability to utilize and compress data. Certainly Realtime Data has issued more than 20 patents since 2001, and last year sued companies as diverse as Citrix Systems, 7-Eleven, DHL and Build-a-Bear Workshop.

One data executive suggests a more innocent explanation: that Realtime Data legitimately developed products that may have been bundled-wittingly or unwittingly-into other products.

Sources say that the industry may be able to fend off the lawsuit if it can prove "prior art" or "mutual discovery"-i.e. that someone else had already invented the patented technology, or that many people could have legitimately arrived at the same place. "The good news is that vendors and firms have been compressing data for years. The bad news is that each has probably treated it as a trade secret," says one, adding that these firms who so fiercely guarded their technologies may have to work together and share secrets to construct a defense that will withstand this assault.