T. Rowe Price finds itself in the litigation crosshairs, according to a recent blog in The Wall Street Journal. The cases outcome could have a significant impact on what until now has been a critical ingredient in boosting plan participation rates.
According to the paper, the lawsuit alleges that widespread auto-enrollment practices infringe on patents first applied for more than a decade ago. The suit, filed against T. Rowe Price Group in U.S. district court in Marshall, Texas, by a company that owns a group of these patents, aims to collect fees from T. Rowe Price on behalf of plaintiffs.
Of course, WSJ wisely notes that such fees could potentially mean higher costs for some retirement-plan participants. T. Rowe Price spokesman Edward Giltenan declined to comment to the paper about on the lawsuit, which was filed on behalf of GRQ Investment Management of Plano, Texas, by the Dallas law firm Ni, Wang & Massand.
“The patents involved here mostly relate to design work by Brian Tarbox, an investment and retirement-plan specialist who died 10 years ago of cancer at age 55. The patents were issued after his death, in some cases with additional work by co-inventor Mark Greenstein, an attorney who is a pension-law specialist at the U.S. Labor Department.”
Over the past few years, in an effort to profit from the patents, Tarbox’s estate and business associates went looking for a law firm that would take on the cost of filing patent-infringement litigation, the paper says, citing two former colleagues, the attorney for a family trust and his widow, Robin Hartl.
“The two former colleagues of Tarbox’s, who say they had a small financial interest in the patents and now have a financial stake in the legal efforts, are Marcia Wagner, a Boston attorney who works on retirement plans and other matters, and Larry Medin, chairman of New York investment adviser Toroso Investments.”
The website of GRQ Investment Management says it was formed “to monetize the inventions of the late Brian Tarbox and Mark Greenstein.”
Last year, GRQ filed a patent-infringement suit against robo advisor Financial Engines. That suit, also filed in U.S. district court in Marshall, Texas, alleged that Financial Engines “infringed on two different patents issued to Tarbox and Greenstein about the provision of objective financial advice in 401(k)s. The suit was dismissed in January. Medin said he was told that there was some financial settlement paid by Financial Engines but not enough for anything to flow to him.”
At Financial Engines, spokesman David Weiskopf said he couldn’t disclose the specifics but that “the matter has been resolved” and Financial Engines “does not have to make any changes to our services or business model,” according to the paper.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
