Finance: Nasdaq slams upstart rival IEX with an intellectual property lawsuit

Nasdaq claims IEX used its intellectual property and it is seeking compensation.

• Nasdaq, the exchange operator, has filed a lawsuit against upstart rival IEX in a New Jersey court.
• It claims IEX, the exchange made famous in the popular book "Flash Boys," used its intellectual property and it is seeking compensation.

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Nasdaq, the exchange operator, filed a patent infringement lawsuit against IEX, the company made famous in Michael Lewis' hit book "Flash Boys," in federal court in New Jersey, the company announced Thursday.

Nasdaq alleges that IEX used seven of its patented electronic trading technologies, which Nasdaq says cost "millions of dollars in investment over decades."

In the suit, Nasdaq says IEX hired four former Nasdaq employees — with knowledge of its patented technology — joined IEX and were involved in the building 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," Nasdaq said in a statement.

A spokesperson for IEX wrote in an email, "Similar to our exchange application process, this is yet another attempt by Nasdaq to obstruct an innovative new competitor."

It's been a tough go for IEX, which has been trying to chip away at the market share of its larger rivals. Since it got the green light from regulators it has been trying to lure companies from NYSE and Nasdaq. But its plan to snag the listing of Wynn Resorts hit a snag when its founder Steve Wynn was ousted because of allegations of sexual misconduct.

This story is developing. Check back for details.

Nasdaq claims IEX used its intellectual property and it is seeking compensation. Read Full Story