Chicago Board Options Exchange, Inc. v. International Securities Exchange, LLC

The Dow Jones Industrial Average (DJIA) and the S & P 500 Composite Stock Price Index (S & P 500) both serve as indicators of the overall activity of the stock market. Both indexes result from complex calculations considering multiple factors. CME Group Index Services, LLC owned the DJIA, and McGraw-Hill Companies (collectively, the index providers) (plaintiffs) owned the S & P 500. The index providers granted respective exclusive licenses to Chicago Board Options Exchange, Inc., (CBOE) (plaintiff), a national securities exchange that handled over 90 percent of all United States index options by volume. CBOE offered index options tracking the DJIA and S & P 500 indexes under its exclusive licenses. International Securities Exchange, LLC (ISE) (defendant), also a national securities exchange, specialized in the trading of options contracts, including index options. ISE created over 24 of its own indexes, but three of them highly correlated with the S & P 500. In the early and mid-2000s, ISE sought a license to offer S & P 500 index options and expressed an interest in acquiring a license for the DJIA, but the index providers instead granted the exclusive licenses to CBOE. On November 2, 2006, ISE (1) announced its intention to offer options based on the DJIA and S & P 500 without obtaining licenses from the index providers; and (2) filed a declaratory judgment action against the index providers in the United States District Court for the Southern District of New York, seeking a declaration that ISE did not infringe any rights of the index providers by offering index options tied to the DJIA and S & P 500 without a license. On November 15, 2006, however, the index providers and CBOE sued ISE in the circuit court of Cook County, Illinois, asserting three claims under Illinois law, including a claim for misappropriation. The parties filed cross-motions for summary judgment. The circuit count granted the index providers and CBOE’s motion as to the misappropriation claim, denied ISE’s motion, and enjoined ISE from offering index options tied to the index providers’ indexes. ISE appealed.