Index provider Research Affiliates dropped its patent-infringement lawsuit against ETF provider WisdomTree Investments.
The suit, which was filed in U.S. District Court in Los Angeles, claimed the indexes WisdomTree was using, without authorization, for some of its ETFs were based on Research Affiliates patents.
WisdomTree will receive a one-time $700,000 payment from Research Affiliates, according to a joint news release from the two companies.
“Based on information that came to our attention during the lawsuit, Research Affiliates can now acknowledge that WisdomTree's fundamentally weighted indexes and strategies were developed by WisdomTree independently of Research Affiliates,” Research Affiliates Chairman and CEO Robert Arnott said in the release.
William Katz, a Citigroup analyst who covers the financial services sector, said in a research note that he believed the payment was to cover WisdomTree's legal fees. Mr. Katz said the settlement was “a major positive development” for WisdomTree because some investors were pointing to the lawsuit as a reason to avoid buying shares of the company.
“We are pleased the matter is resolved and our businesses will continue as usual,” Jonathan Steinberg, CEO of WisdomTree, said in the release.
The release did not elaborate on what caused the lawsuit to be withdrawn. Joel Chernoff, a spokesman for Research Affiliates, and Wisdom Tree spokeswoman Jessica Zaloom said the companies would not comment beyond the news release.