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November 30, 2005 11:20 pm

Man Group settles patent suit

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Man Group on Wednesday agreed to settle a lawsuit alleging the UK financial services group infringed two patents for electronic trading software, a move that could drag the world’s largest investment banks into a legal battle.

Trading Technologies, a US software group, sued more than a dozen futures brokers, alleging that they used trading systems for their clients that infringed a patent the company secured last year. TT had already reached settlements with a number of firms, but its victory over Man, now the world’s largest independent futures broker, could precipitate further action, notably against the large banks that dominate futures trading.

“TT’s focus will shift to Wall Street,” said John Lothian at the Price Group, a leading Chicago broker. “They’ve [now] got a body of settlements where people have validated their patent.”

The company’s system for displaying prices and executing computer-based trades had become an industry standard as the futures industry moved towards electronic trading. It became embedded in a number of systems used and distributed by banks and brokers before the patent was secured.

Harris Brumfield, the company’s chief executive, has taken an aggressive stance in attempting to secure a greater share for his company’s role as a key intermediary between the trading community and futures exchanges. He proposed that the four largest exchanges pay a 2.5-cent fee to TT for each of the millions of trades passing through them.

Tim Geannopulos, TT’s global head of sales, said the proposal to the exchanges still stood, though he declined to comment on discussions with them and the banks. “It’s very possible that other groups will be influenced by Man’s decision,” he said, predicting further settlements ahead.

The latest deal covers the suit against Man brought earlier this year, as well as former clients of Refco that have transferred to the company. The UK group acquired most of Refco’s futures business last month in the wake of its parent’s collapse after an alleged accounting fraud. Man agreed not to infringe TT patents in the future, while TT absolved the company and its clients from any past liability for infringement of patents involving its MD Trader software. TT received no cash payment.

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