November 1, 2006

Journal of Indexes / Written by: Jonathan Mazer

This article reviews the relevant case law and examines whether, under prevailing legal precedents, exchange-traded funds ("ETFs"), mutual funds or other investment vehicles may track the same basket of stocks that make up an index without obtaining (or paying for) a license.

Index providers have long argued that they have an intellectual property right in the basket of stocks and other components that comprise their indexes. Based on their considerable success in defending this right, they limit the number of ETFs and other financial products that track their indexes by entering into exclusive and restrictive licensing agreements with product developers. These agreements have become a central part of the industry's business model, and they collectively represent tens, if not hundreds, of millions of dollars in annual revenues.1

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