Liquidnet is suing agency brokerage Pulse Trading for patent infringement.
The operator of the popular block-trading system claims the design of Pulse’s BlockCross alternative trading system is too similar to the one Liquidnet patented in November 2006.
The information came to light last week in the Form S-1 registration statement Liquidnet filed with the Securities and Exchange Commission. The firm is in the process of going public.
Pulse, a small agency brokerage based in Boston, launched its BlockCross system in Spring 2007. As with the Liquidnet methodology, Pulse’s BlockCross plugs into buyside traders’ order management systems in order to bring buyers and sellers together.
Both systems were designed by men who previously ran buyside OMS vendors. Seth Merrin, who launched Merrin Financial, the industry’s first buyside OMS, is the founder of Liquidnet.
Preston Ford, who ran LongView Trading, designed BlockCross with former ITG head Robert Russel.
At 1 cent a share, trades in BlockCross cost half as much as those in Liquidnet.
The Pulse suit, which was brought in 2007, is the second patent infringement suit brought by Liquidnet in the past two years. In November 2006, Liquidnet sued Investment Technology Group, claiming three of its products infringe on the patent.
Both cases are working their way through the New York State court system. Pulse recently filed a countersuit, claiming the Liquidnet patent was invalid and, therefore, unenforceable.
Liquidnet states the final outcomes of the two cases will not effect it adversely.
