Nasdaq in patent suit v ‘Flash Boys’ IEX Group

Nasdaq, Inc. said it filed a patent infringement lawsuit in the US District Court for the District of New Jersey “aiming to protect Nasdaq’s electronic trading technology from unauthorized use by IEX Group, Inc. and Investors Exchange LLC (IEX).”

IEX Group was made famous by Michael Lewis’ 2014 best-selling book Flash Boys.

Nasdaq said the seven patents asserted in the lawsuit “represent millions of dollars in investment over decades, and cover several industry-leading innovations.”

Nasdaq said: “These patents contribute to the performance of Nasdaq’s trading platforms related to closing auction processes, multi-parallel order processing, matching engine performance, and data feed optimizations.

“The lawsuit asserts IEX knowingly violated this series of Nasdaq patents in the development of its trading platform.”

Edward Knight, Nasdaq general counsel and chief regulatory officer said: “In addition to using our technology to power our markets, Nasdaq is a leading technology provider to other market operators across the world.

“These seven patents cover important innovations that we, and our customers, rely on for reliability, scalability, and transparency.”

Nasdaq added: “As described in the lawsuit, IEX employs several former Nasdaq employees familiar with Nasdaq technologies who have been involved in the development of IEX’s trading platform.

“IEX admitted in public filings that its closing auction process was ‘designed based on extensive review of’ Nasdaq’s patented process and that the information its system is designed to disseminate to the market during closing auctions is ‘substantially similar’ to the ‘Nasdaq Net Imbalance Order Indicator,’ one of the key features of patents asserted in the lawsuit.

“The lawsuit seeks to stop, and obtain fair compensation for, IEX’s unauthorized use of Nasdaq intellectual property.”

Reuters quoted IEX spokesman Gerald Lam as responding: “Similar to our exchange application process, this is yet another attempt by Nasdaq to obstruct an innovative new competitor.”