OANDA should stop fighting with GAIN Capital – Op Ed

This week, another instalment in the litigation battle between GAIN Capital and OANDA Corporation took place, this time in the form of GAIN Capital’s shoulder-shrugging gesture to opponent OANDA Corporation in relation to a rather absurd patent claim.

The basic outline of the interaction between the two companies stems from OANDA Corporation’s assertion that GAIN Capital infringed two patents that it has registered with the US Patent office, and as a result of which OANDA Corporation decided to go to court over it.

In many respects, the actual cause of this is not what companies in the retail sector that have a litany of commercial and leadership U-turns behind them should be concentrating on. Instead, perhaps moving forward and setting the tone as a good quality, technology led bastion of service and efficiency should be the focus.

OANDA Corporation is no stranger to alienating not only its rivals, but also its stakeholders through several years of headless leadership which resulted in a revolving door policy of recruiting completely unknown CEOs from unproven backgrounds who are here today, gone tomorrow, and often with a commercial disaster behind them.

The company seems to fit into two categories. One one hand, it has some of the highest quality technology in the retail industry. OANDA’s R&D center in Silicon Valley and its decade long commitment to refining the trading environment is to be very much admired, yet its leadership, until recently, was problematic to say the least.

For this reason, instead of spending millions of dollars trying to fight its only rival in its home market of the United States, and potentially getting nowhere apart from generating some bad press and concentrating resources on fighting with a competitor instead of enhancing its own service, perhaps OANDA should be taking this time to make use of its new, high quality management team and forging ahead.

GAIN Capital, despite its long standing time in the market, is unlikely to simply settle this matter and move on.

If patents have been breached, maybe the sensible way would be to make GAIN an offer, and then settle, and move on.

Patent infringement is almost impossible to prove.

A few years ago, some of the well recognized technology companies within the FX industry were blighted by fraudulent attempts to accuse them of copyright infringement by patent trolls.

Patent trolling has been less of a problem in Europe than in the U.S. because Europe has a ‘loser pays costs’ regime, however this has not stopped patent trolls approaching certain British FX technology companies and effectively ambushing them, requiring serious litigation in order to be able to put a stop to their activities.

Rather unbelievably, some companies have previously engaged in lawsuits regarding patent trolling, one of which is North American online trading platform software company ThinkorSwim, headquartered in Chicago, Illinois.

ThinkorSwim is a very long established company, owned by TD Ameritrade, and was founded by Tom Sosnoff in 1999, and according to FinanceFeeds sources, which are senior level American FX industry technology executives, ThinkorSwim is actually licensing some patent troll material in which any company with a revenue of over $10 million gets approached automatically.

ThinkorSwim provides services including thinkDesktop, webBasedTrading, thinkAnywhere, thinkMobile, thinkMicro, and paperMoney, and the ActiveTrader component of such products to provide access to exchanges in Chicago, including the Chicago Board Options Exchange (CBOE).

Five years ago, Trading Technologies sued ThinkorSwim and its owner, TD Ameritrade, alongside six other companies for infringement of patent in the Northern District of Illinois.

The case was closed in September 2015, five years after it was filed.

Trading Technologies sued ThinkorSwim for four patent infringements relating to click based trading with Intuitive Grid Display of Market Depth – Patent issued August 3, 2004, and a user interface for an Electronic Trading System – Patent issued May 1, 2007

With the lawsuit, Trading Technologies included original material in the form of the patent documentation.

In this particular case, in May 2015, a federal judge issued an order staying Trading Technologies’ litigious battle against infringers in seven cases while the U.S. Patent and Trademark Office undertakes a broad review of patent claims.

Trading Technologies objected to the order, however responding to the objection, Judge Virginia Kendall stated that as a result of the Patent Office’s structure, reasoning and determinations will necessarily affect how the court views the remaining claims, and that the court concluded that a stay of the consolidated cases is most efficient for the parties, best conserves judicial resources and avoids piecemeal litigation.

This is absolutely the way the OANDA lawsuit may end up. Endless stays, and eventual costs and waste of resources.

Back to the reference to patent trolls. Why do they exist? The reason is simple – they are unscrupulous lawyers who know very well that it is almost impossible to prove who came up with a specific software design or invention, hence having an actual patent lodged with the US Patent office is not sufficient to claim ownership of that patent.

On one hand, there are firms willing to invest substantial sums in litigation in order to preserve their patents, however there are other circumstances in which innovators may see patents as an obstacle.

One senior figure with substantial experience in software licensing told FinanceFeeds this week “My opinion is that software patents stifle innovation, I don’t think they’ll exist in the US for much longer and I don’t think many of them are valid.”

This actually points to a similar mindset of that held by the court in the aforementioned case, albeit viewed from a different perspective.

Today, FinanceFeeds spoke to an FX technology provider which had been the subject of a target by patent trolls recently. The company managed to fend them off but explained that it was similar to an ‘ambush’ and was not easy to deal with at all.

Another FX technology vendor explained “My experience of IP trolls was in the context of the US. The primary issue is that in the USA it is risk free to claim patent infringement because the burden of proof is with the defendant, and the defendant cannot claim costs, even if it is a spurious claim. It is only when it goes to court that the troll is at risk of incurring meaningful costs.”

“It is never the intention of the troll to take the matter to court because then they too will incur significant costs (each side would need to spend on average $2million) so it is typically settled on a commercial basis with a license of the patent and a mutual agreement not to sue in the future” he said.

Now, look at the cost to OANDA Corporation over the past ten years that has resulted from its own white elephant projects, this litigation being an example of perhaps another white elephant project by the company, at a time when it has finally realized that it must hire proper professionals with industry to lead the company.

OANDA has now finally got the potential to move ahead and rise to the very top, and should knock this fighting with GAIN on the head. They are two companies that have pretty much got the run of the entire US market, which is the best and most stable market for FX companies in the world, as the clients in the US have far higher average deposits and longer lifetime values than clients anywhere else.

Those with long memories will remember OANDA for high cost, low return corporate dalliances, but with the implementation of new management of good standing, these should be banished to the history books.

Gavin Bambury, a very senior and highly experienced industry executive took over as CEO, bringing a huge amount of high level expertise with him, most recently a leadership position at Integral Development Corporation. This should certainly turn OANDA round, if they focus on moving forward rather than biting the ears off a competitor.

OANDA Corporation’s Chairman of the Board, Tim Howkins, who is another longstanding industry executive who spent many years at IG Group as CFO before retiring, coming back out of retirement to join the board of OANDA commented at the time “We are extremely pleased to welcome Gavin to OANDA. A seasoned professional, he combines a deep-seated knowledge of financial technology with an unparalleled understanding of the trading sector, which will be invaluable as we continue to execute the firm’s strategic vision in the years to come.”

Far superior in credentials to any of OANDA’s anodyne leaders that preceded him, Mr Bambury had been ION Trading CEO and COO, and prior to that was Citigroup’s CTO in fixed income and currency sales and trading and spent almost 15 years at the company during the time at which Citigroup was the unfaltering market share leader in interbank FX here in London. He then joined Deutsche Bank for four years before ending up at ION Trading in 2011.

It is a positive development to see the appointment of a seasoned FX industry professional to this position, and hopefully a move which will resolve the several years of headless leadership at the firm.

Outgoing CEO Vatsa Narasimha, who was only in his position for two years, resorted to using FXCM’s at the time very grave situation as a PR exercise, a practice that FinanceFeeds frowned upon greatly.

Mr Narasimha, just weeks into his position at the time, launched a PR entitled “OANDA supports CFTC’s move to protect the interests of traders, the diatribe was preceded by a message from the public relations firm stating “By now, I am sure you have seen that the CFTC has levied a huge fine against FXCM for engaging in false and misleading solicitations forcing its withdrawal from the US market.”

“OANDA’s new CEO, Vatsa Narasimha, supports the CFTC’s move to protect the interests of traders. He has some strong views on how the retail trading industry needs to shape up to become more transparent, fair and supportive of investors and traders. He believes a broker should be held accountable for making questionable statements or falsely disclosing their interests” continued the public relations officer.

Our approach to OANDA at the time was to ask why this was necessary in a nation with the world’s highest level of loyal customers and highest assets under management per customer and only two FX firms. Surely it is better PR to remain discreet and simply onboard clients who would have nowhere else to go and would appreciate OANDA’s very highly sophisticated technology.

At approximately the same time, OANDA’s APAC team led by Rajesh Yohannan headed to AxiTrader in Australia, which immediately appointed Mr Yohannan as CEO.

OANDA Corporation has always enjoyed a top quality reputation for its technology-led and detail-orientated ethos, and has always been regarded as a bastion of ethics.

Nobody mocked OANDA Corporation when it made commercial faux pas.

OANDA Corporation’s failed attempt at taking its fxUnity product to a wide audience over four years ago is a case in point.

Under K Duker, another short term CEO, the company was already a technological tour de force, yet it brought ruinous R&D costs into the boardroom when it canned the fxUnity proprietary social trading platform a very short time after launch, before then becoming embroiled in the catastrophic purchase of the Currensee social trading network which was wound down and discontinued very soon after its acquisition.

Compare that to the self-directed traders that favor proprietary platforms and are experienced in navigating the markets electronically, and OANDA’s migration of 2,200 Tradestation users onto OANDA’s fxTrade platform just over two years ago when IBFX exited the US market demonstrates that the same company could not engage traders on social platforms, but was absolutely able to benefit from the onboarding of astute, self-empowered traders who favor a high quality brokerage environment and proprietary platform.

This may appear to be a scathing perspective, however it is not. OANDA Corporation’s fabric is excellent indeed, all it needed was leadership, which has been missing from the company for almost ten years as the revolving door continues.

With Mr Bambury on board as a level-headed and well respected professional, the future looks bright indeed in terms of taking the quality components of the firm and establishing firm and sustainable leadership.

Astute and experienced Mr Bambury now on board, the firm will be able to fill voids such as those left by former R&D executive Natasha Lala who was based at OANDA’s Silicon Valley facility and had left the firm with no equally talented replacement.

So, if I were to be able to give any advice, I’d say drop it and move on. OANDA has everything to gain and not much to lose if it moves stridently ahead.