Nasdaq is Getting Bullish on Patent Litigation. Are Crypto Exchanges the Next Target?


Robert Bob Kelly by: Robert Kelly | March 20, 2018

Nasdaq, Inc. and Nasdaq Technology AB (collectively “Nasdaq”) filed a complaint for patent infringement in the United States District Court for the District of New Jersey earlier this month. Nasdaq asserted seven of its U.S. patents against IEX Group, Inc., a competitor based out of New York. This marks the second time in six months that Nasdaq has asserted its patents—in September of 2017 Nasdaq sued competitor Miami International Holdings, Inc. in the same U.S. District Court. In its most recent lawsuit, Nasdaq accuses IEX of patent infringement stemming from the employment of several former Nasdaq technology employees. Though unlike the Miami International case, Nasdaq does not accuse IEX of misappropriating trade secrets.

In light of these lawsuits, should cryptocurrency/digital asset exchanges like those offered by Coinbase, Inc. and Bittrex, Inc. worry about a Nasdaq patent offensive?

Yes, they should.

Crypto exchanges are generating millions of dollars in trading revenue every day (see Bloomberg’s Kings of Crypto graphic below), and Nasdaq has been taking steps to build its blockchain IP portfolio over the past several years. These circumstances, along with Nasdaq becoming increasingly litigious with respect to its IP, have created an environment that is ripe for disputes over blockchain IP and related exchange technology.

Nasdaq has filed hundreds of patent applications over the years, and starting around 2016 it began filing patent applications around blockchain technology. At least one of those patents, U.S. Patent No. 9,794,074 “Systems And Methods For Storing And Sharing Transactional Data Using Distributed Computing Systems”, has already issued. And while it’s possible that Nasdaq is filing these applications because it wants to carve out space around blockchain technology in the context of traditional stock exchanges, it’s almost certain that they’re considering enforcement potential against up-and-coming digital asset exchange companies.

Crypto exchanges are growing their war chest of patents too. For example, Coinbase has been patenting around blockchain exchange technology since at least 2015. Coinbase said these assets are for defensive purposes, so they’re likely well aware of the patent arms race that is upon them.

It’s still unclear how much of a threat crypto exchanges pose to traditional exchange companies like Nasdaq. Much of the public believes the cryptocurrency market is a speculative bubble and that the future for crypto exchanges is bleak. However, large financial institutions are slowly becoming more comfortable with the idea of cryptocurrencies as an asset class, and that could drive companies like Nasdaq to increase their patenting activities in this space. And once that happens, all cryptocurrency companies, including exchanges, should be ready to take their IP strategy to the next stage.

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