The financial sector is constantly changing to accommodate more efficient and effective approaches that best fit the demands of a specific period. Algorithmic trading and AI are the latest technologies to make inroads in trading and finance and are set to transform the financial landscape in terms of efficiency and accuracy.
As the use of these technologies continues to take root in the finance sector, the question of their intersection with IP laws becomes increasingly important for technology developers. This article seeks to answer this question, so keep reading to learn more.
What Is Algorithmic Trading?
Algorithmic trading is a relatively new way of trading that utilizes computer program algorithms to execute a trade. The algorithm conducts market data analysis, identifies trading opportunities and guides traders on when to place trades based on the market analysis.
Traders can also set a program to execute a trade automatically, for example, when the price of an asset reaches a specific point in price drop or increase. This technology is way faster than relying on human market analysis and is highly accurate and efficient.
AI and ML power these technologies and get better with time by relying on past data to make better future predictions and generate actionable insights for traders.
Where Do IP Laws Come In
Financial institutions and app developers invest massive resources into developing technologies and want to be sure they can recoup their investments and profit from them.
This is why protecting their innovations’ IP rights becomes increasingly important. IP rights for algorithmic trading apps include patents, trade secrets, copyrights, and trademarks.
Patent protections apply to novel and non-obvious inventions. Traditionally computer programs were largely seen as non-patentable because of challenges proving the inventiveness of a program.
Algorithms are still viewed as mathematical processes which are non-patentable. However, an algorithm becomes patentable when used to create a new, eventive way of solving a problem.
Patenting an algorithm gives the patent holder exclusive rights to their invention for 20 years, after which the patent details become public. With the fast-changing world of tech, 20 years is more than enough time to profit from technology. In twenty years, the technology may as well be obsolete.
A trade secret is a form of intellectual property that gives holders exclusive rights to their proprietary information, giving them an advantage over their competitors. This information can include formulas, strategies, techniques, and technological processes.
Trade secret rights run indefinitely as long as the holder takes reasonable efforts to keep the information a secret, and they lose those rights when the information becomes publicly known.
Trademarks rights cover brand identifiers such as logos, product names, blog names, and slogans. By registering trademarks for their innovations, institutions and financial app developers can help keep others from marketing their products with rights holders’ trademarks or even using their trademarked keywords in their marketing ads.
Trademark protections last for ten years from the registration date but are renewable upon payment of fees. If you are registering your trademarks in Canada, this guide on the Canadian trademark fees breakdown will be a good read in helping you prepare financially.
Copyright protections focus on creative works such as art, photographs, algorithmic trading apps, and AI lines of code. Like other IP rights, copyright protections give the rights holder exclusive rights to the codes used in developing the technologies for a lifetime and years after the author dies.
Unlike other IP rights, copyrights apply by default. An author can still enforce their rights against an infringer even when they haven’t registered them with the relevant authority. However, enforcing those rights will be a little more challenging, so registering them is always a good idea.