Recently, we published a story that looked at the issue of data ownership: while it may be an obscure topic, it has important consequences for firms considering alternative data models, or firms looking to commercialize their in-house pricing or other resources.

Right now, the prevailing school of thought seems to be “live and let live.” Those who believe exchanges unjustly claim ownership of their data aren’t actively fighting it, but are looking for ways around it. The exchanges are being fairly gracious about ownership, but continue to charge hefty fees for their role in aggregating said data. Here’s the catch: as I wrote in a recent column, it only takes one major trading house to break ranks, and this house of cards could come tumbling down. So who owns the data? We could be just one momentous dispute or lawsuit away from finding out.

The newest development in the reference data world perhaps signals this most. As Reb Natale reported on Friday, a class-action complaint was filed in the Southern District of New York alleging that Cusip Global Services (CGS), S&P Global, the American Bankers Association (ABA), and now FactSet—CGS’s new operator—do not have the right to charge hefty licensing fees for use of the Cusip identifier, a de facto industry utility that underpins nearly every single stock or bond transaction in the US and Canada.

The plaintiffs in the case are investment bank/broker-dealer Dinosaur Financial Group and Swiss Life Investment Management Holding, but was filed on behalf of a class, which includes all persons or entities, excluding data vendors, who paid a license fee to S&P or FactSet pursuant to CGS’s subscription agreement and use of services statement at any time beginning at least four years prior to the complaint’s filing. The complaint alleges that the quartet violated parts of the US Copyright Act, sections 1 and 2 of the Sherman Antitrust Act, and section 4 of the Clayton Act.

If successful—a huge if—this lawsuit would completely change the world of identifiers (at least, as it relates to North American securities) as we know it. Much like with the issue of data ownership between investment firms and exchanges, market participants have long griped about the cost of using Cusip numbers. However, no one has thus far been inclined to take legal action. Dinosaur and Swiss Life have broken ranks. Here are some of the immediate questions I have as a result.

* Most obvious, will this go anywhere, and how many financial institutions would need to join the suit as plaintiffs to reach a tipping point? If others don’t join, does that mean that the industry is OK with the current setup?

While we haven’t properly canvassed the market for observers’ thoughts yet, the suit has already drawn some skepticism. It’s no secret that the US is a litigious country, and we’ve seen numerous industry-related tech and data cases that never made it to trial. The fact that no attention-grabbing titans—with names like JP Morgan, Goldman, Bridgewater or Pimco—are involved in the complaint (at least not yet, anyway) might lead many to think that this lawsuit isn’t that serious.

You would be incorrect to take that line of thinking, though. Which brings me to…

* Should CGS, S&P, FactSet and the ABA be worried about the impressive legal team backing the plaintiffs? Whenever I hear about a legal dispute, I first look at the legal team to see just how serious the players involved are. I’m not a legal expert by any means, but the lawyers backing Dinosaur and Swiss Life are legit.

First there’s Irell & Manella LLP, and the filing specifically names David Nimmer, a giant in the field of copyright law who has twice served as co-counsel representing clients before the US Supreme Court—his side won both times in unanimous decisions. Leiv Blad of Competition Law Partners PLLC is an expert in the field of antitrust law with a focus on financial services. And Robert Kaplan and Frederic Fox of Kaplan Fox & Kilsheimer LLP have been lead or co-counsels on several major class-action cases involving financial institutions.

I am wholly unqualified to rate lawyers (or anybody, really), but the resumes of those backing the plaintiffs seem, at first glance, to be impressive.

* If the plaintiffs are successful and firms no longer have to pay licensing fees to CGS—which has been described as S&P’s (and now FactSet’s) “cash cow”—would that render the product worthless to FactSet, which spent nearly $2 billion for the right to operate the identifier business?

Now it should be noted that on February 18, FactSet filed an 8-K, a form to notify the Securities and Exchange Commission and shareholders of an unscheduled material event, amending certain terms to the original agreement between FactSet and S&P, “including provisions related to the liabilities of the Business to be assumed by the Purchaser or to be retained by the Seller, as applicable, arising out of or related to certain actions or proceedings arising out of or related to the Business.”

Even if FactSet has an exit hatch—and I’m not saying it does—CGS is a massive money-making business with very low overhead that would essentially be wiped out overnight. I recommend reading the lawsuit—it’s actually a very good history lesson on Cusip, how it became so omnipresent, and why it became a massively profitable business for S&P. Will the New York Southern District really be willing to overturn more than a half-century of business practice (well, the complaint really starts with a change made in the 1980s…but the point stands)?

Outside of the defendants, there’s one more company that is likely having private discussions right now that I’m dying to overhear: Bloomberg. (A spokesperson for the company declined to comment for this column; other companies mentioned previously either declined to comment or did not respond to earlier requests for comment.)

Bloomberg is behind the Financial Instrument Global Identifier, aka Figi, which is a similar identifier that’s free of fees and licensing restrictions. Last September, after a lengthy fight, it was recognized as an official US data standard, putting it side-by-side with Cusip, though its actual use is not nearly as widespread (for reasons that have little to do with the identifier itself and much more to do with how difficult and costly it is to replace decades of records informed by Cusip numbers inside firms’ systems).

* Does the existence of Figi hurt the plaintiffs’ case? Yes, Cusip is the de facto standard in the US, but Figi aims to change that. But the suit says this: “Alternative numbering systems are inadequate substitutes for Cusips.” OR, does this complaint actually help make the case for Figi? The US government, through various regulatory reporting requirements has, according to the complaint, established Cusip as a monopoly. “Issuers and financial institutions that were required to use the Cusips in their regulatory reporting had an absolute need for the Cusips and correspondingly had no need or use for any rival numbering system,” the filing states.

* Why file the suit almost immediately right after the FactSet deal closed? Was FactSet’s huge spend the last straw for Dinosaur and Swiss Life? Were they content with S&P, but saw a near $2 billion deal as a bridge too far?

* The lawsuit repeatedly notes that S&P was essentially able to hold Cusip users over a barrel due to the way the data giant structured its contracts. Under those contracts, if customers didn’t agree to the terms of the Cusip license, they could not access S&P’s ratings data. That shouldn’t be a concern with FactSet, as this data vendor is not in that game. How much does this change matter?

* Someone asked this question to Reb. It’s a question for which I have no answer and cannot seem to find one: If the plaintiffs are citing the Sherman Antitrust Act, why did the Justice Department not initiate the proceedings from a criminal standpoint?

* Finally, I’m not the strongest at using the Pacer legal filing database, but are there any past lawsuits that would set a precedent for whether or not this case has merit?

So here’s the thing: After reading the full complaint and looking at these lingering questions, I’d like to see this case go to trial—a definitive line needs to be drawn in the sand. I’m not for one side or the other, but this also shouldn’t be a lingering question going forward. It’s time for reference data to have its day in court.

And I’m sure I’ll develop more questions, but I’m out of ammo for now. Have answers? Have additional questions? Let me know: anthony.malakian@infopro-digital.com.

The image accompanying this column is “Pierrot in Criminal Court” by Thomas Couture courtesy of the Cleveland Museum of Art’s open-access program.