The Vanguard and the Standard and Poor's names have been inextricably linked for years. Now, those names have been joined on legal papers. McGraw-Hill, S&P's parent company, has filed a lawsuit against Vanguard in Manhattan federal court, alleging that Vanguard's new exchange-traded funds, the Vipers, use the S&P indices and name without permission.

Details about the suit are sketchy, and neither side is talking. The dispute centers around the licensing agreement between S&P and Vanguard, which permits Vanguard to track S&P indices and use the S&P name, e.g., the Vanguard S&P 500 Index fund.

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Vanguard has recently been taking the necessary steps to launch the Vipers, including seeking SEC approval. Vanguard's plans call for some of the Vipers to track S&P indices and use the S&P name. Apparently, the parties have not entered into a separate licensing agreement to cover the Vipers.

S&P claims that Vipers are qualitatively different from Vanguard's other funds, that they're not covered by any licensing agreement, and that as a result, Vanguard is using the name and indices without permission and without payment.

Although it hasn't yet responded to the lawsuit, Vanguard presumably claims that the existing agreement is broad enough to cover the Vipers, and that no separate agreement is necessary.

Conversations with the firms produced the expected results. "We have no comment," said a Vanguard spokesman. "I'm really not at liberty to talk about it," added an S&P official. As part of the lawsuit, S&P has asked the court to order Vanguard to withdraw its SEC application for the Vipers, as well as other relief and damages.

*UPDATE*

This afternoon, Vanguard issued a response to the lawsuit. Not surprisingly, the firm called the lawsuit "baseless and without merit," and said that it intends to "vigorously defend against this action."

Vipers aren't new funds, but "represent interests in the same funds already covered by S&P licenses," reads the statement. "The exchange traded shares represent merely a different form of distributing shares of our existing funds," said Greg Barton, managing director and general counsel for Vanguard, in the statement.  

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