A Texas company has filed suit against Financial Engines, claiming patent infringement and asking the court to place a permanent injunction on the software supporting its managed account services.
GRQ Investment Management is claiming that Sunnyvale, California-based Financial Engines, the largest independent provider of managed accounts to 401(k) plans, has built its massive book of business on the back of two patents owned by two authors, one of whom helped Financial Engines founder William Sharpe develop his business plan in 1996.
Financial Engines said it plans to "vigorously defend" itself against the allegations.
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According to the complaint, Brian Tarbox helped Sharpe build a business model for a software-based advisory firm. The complaint says that Tarbox helped Sharpe raise initial seed money for Financial Engines.
Last June, the Supreme Court unanimously rejected another patent claim in another financial services software case, Alice Corp v. CLS Bank International.
In Alice, the Supreme Court found that the claims of patent infringement were based on abstract ideas, ruling in favor of the defendant.
Some analysis has suggested the Alice case has set the bar higher for software patent claims going forward.
"Alice was about what software is eligible for patent protection," said Jennifer Spaith, a patent attorney with Dorsey & Whitney.
She said the Supreme Court's ruling in that case may affect GRQ's claims against Financial Engines.
"You would expect one will be thinking whether or not this falls under the same type of abstract idea that the Supreme Court found un-patentable in Alice," explained Spaith.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
