Securities Technology Monitor notes that IBM was awarded U.S. Patent US7865332 for a “scaled exponential smoothing for real time histogram” this month, which covers a method for estimating current volatility of the price of a security based on high-frequency trading and pricing data.

In the annals of the U.S. technology industry, IBM has been among the most voracious of patent acquirers, as its vaunted research unit has always been something of a patent machine. It has been known to wield its patents aggressively in business disputes.

Still, John Bollinger, founder of Bollinger Capital Management and the creator of Bollinger Bands, told the magazine: “I’m surprised IBM patented this. If Harry Markowitz had patented his model, it’s likely only a few people would have ever used it.”

It’s unclear exactly how this sort of analytical method patent will be used, if at all. It seems on the surface to be akin to business method patents, which have proven so controversial. It may be that the patent could form the basis of a “patent troll” string of lawsuits. But I doubt IBM would stoop to that. Perhaps the financial technology industry is seeing the  need to play the patent game when it comes to high-frequency trading. It never hurts to have a patent arsenal.

It’s unclear if this sort of patent is covered by the America Invents Act, which was signed into law in September. As a commentary from Shumaker Williams makes clear, one provision, Section 18, “creates a post-grant review procedure for certain business method patents. The “Transitional Review” proves a ‘post-grant’ review of patents for banks that have been sued.

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