The Patent King of Pasadena
Jun 17th, 2007 | Filed under: CAPM / Alpha TheoryLawrence Carrel at TheStreet.com writes about the “Godfather of Fundamental Indexing” last week. Rob Arnott, founder and CEO of Pasadena-based Research Affiliates not only invented fundamental indexing, but he apparently also patented the idea. As Carrel discovers, however, critics are quick to point out that fundamental indexing bears a remarkable resemblance to simple old-fashioned value-investing.
In fact, Carrel points out that ETF manufacturer WisdomTree never even sought permission from Arnott before launching their own ETF based on the same concept. Says Carrel:
“It was also a challenge to Rob Arnott, the godfather of fundamental indexing. Arnott’s investment firm, Research Affiliates, had licensed the first ETF based on a fundamental index a year earlier and filed a patent application for all indices based on fundamentals. But WisdomTree didn’t seek Arnott’s blessing for its new products. In essence, the firm was saying that fundamentally weighted indexing isn’t the property of Research Affiliates but of the entire world.”
The patentability of business processes came to the fore late last century in the froth of the tech bubble. In fact, Alpha Male himself even applied for provisional patent protection on an e-business process that he thought would someday make him a rich man (he still thinks it’s a cool idea).
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