Select Sector Sues PowerShares Over Tickers

July 26, 2010

What’s better than a trademark lawsuit in the red-hot world of ETFs?

The trademark holder behind a group of popular State Street S&P 500 sector funds sued PowerShares for trademark infringement charging that trading symbols on a series of PowerShares ETFs are similar enough to those used by Select Sector SPDRs to create confusion.

At issue are nine ETFs SSgA has marketed since 1998 under the Select Sector SPDRs brand name that divide the S&P 500 Index into nine individual sectors. The PowerShares offering, launched in April, divides the S&P 600 small-cap index into the nine same sectors. The tickers on the two sets of ETFs are identical, save for an “S” PowerShares added onto the end of each of its funds.

"This is a deliberate and unconscionable act on the part of PowerShares to confuse both institutional and retail investors," said Dan Dolan, director of Wealth Management Strategies for the Select Sector SPDR Trust, the party that sued PowerShares under Section 43 of the Federal Trademark Act, and common law of the state of Texas. Dolan is also a registered representative of ALPS Distributors, Inc, a company at the center of sales and marketing efforts of many ETFs.

The suit seeks to block PowerShares from using the nine “XL Family of Marks” members or anything similar in creating tickers for ETFs and requests that PowerShares pay the SPDR Trust’s legal costs.

The SPDR Trust argued in the court papers that prior to the April launch of the PowerShares small-cap fund, tickers of virtually all of the firm’s ETFs started with the letter “P”—an attempt to signal to the public that the ETFs were part of the PowerShares lineup.

The suit was filed in the U.S. District Court in Houston against PowerShares Exchange-Traded Fund Trust II, INVESCO PowerShares Capital Management, LLC, and INVESCO Distributors, Inc, according to a press release from Select Sector SPDRs.

A spokesman for PowerShares said the firm doesn't comment on ongoing litigation.

Select Sector SPDRs is a trademark of the McGraw-Hill Companies, Inc., and has been licensed for use.

The funds and tickers in question are:

Market Sector

SPDRs Symbol

PowerShares Symbol

Consumer Discretionary

XLY

XLYS

Consumer Staples

XLP

XLPS

Energy

XLE

XLES

Financial

XLF

XLFS

Healthcare

XLV

XLVS

Industrial

XLI

XLIS

Materials

XLB

XLBS

Technology

XLK

XLKS

Utilities

XLU

XLUS

 

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