Nasdaq slams upstart rival IEX with an intellectual property lawsuit

REUTERS/Natalie Behring

Nasdaq CEO Adena Friedman

• 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.

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

This story is developing. Check back for details.