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A small but growing number of fund managers are finding that patenting an index strategy can have strategic and marketing advantages.
Only WisdomTree and Research Affiliates are the only two fund companies that have thus far successfully patented index strategies, but other ETF players are now focused on protecting their platforms. Todd Rosenbluth, director of ETF & Mutual Fund Research at S&P Capital IQ, says ETF players like WisdomTree have gone the patent route for their index strategies not just for marketing to advisors and investors, but also as a preemptive strike against competitors who may try to jump in.
"If it is effective the others will want to piggy back off it and by patenting it they can't," says Rosenbluth. "The longevity of the strategy is going to be strengthened since others aren't able to replicate it without permission."
LENGTHY PROCESS
Research Affiliates first filed a patent application for the RAFI Fundamental Index in February 2004 and got its first approval in November 2009. Mike Bowers, senior vice president for marketing and strategy at Research Affiliates, says a major part of the initial patent process involves having product specialists educating examiners at the U.S. Patent Office about why a particular index strategy is unique. He adds, however, that once the first approval comes in other applications...