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UNITED STATES DISTRICT COURT


EASTERN DISTRICT OF TEXAS
MARSHALL DIVISION
GRQ INVESTMENT MANAGEMENT, LLC
Plaintiff,
v.
FINANCIAL ENGINES, INC. and
FINANCIAL ENGINES ADVISORS L.L.C.
Defendant.
Case No.
COMPLAINT
FOR PATENT INFRINGEMENT
DEMAND FOR JURY TRIAL
ORIGINAL COMPLAINT FOR PATENT INFRINGEMENT
Plaintiff GRQ Investment Management, LLC (GRQ or Plaintiff) hereby alleges for
its Complaint for patent infringement against Defendants Financial Engines, Inc., and Financial
Engines Advisors L.L.C. (collectively, Financial Engines or Defendants) as follows:
PARTIES
1. Plaintiff GRQ Investment Management, LLC is a Texas limited liability
company, having a principal place of business at 7005 Chase Oaks Blvd., Suite 180, Plano, TX
75025.
2. On information and belief, Defendant Financial Engines, Inc. is a corporation
organized and existing under the laws of the State of Delaware, with its principal place of
business located at 1050 Enterprise Way, 3rd Floor, Sunnyvale, California 94089. On
information and belief, Financial Engines, Inc. may be served via its registered agent,
Corporation Service Company, 2711 Centerville Rd., Ste. 400, Wilmington, DE 19808.
3. On information and belief, Defendant Financial Engines Advisors L.L.C. is a
limited liability company organized and existing under the laws of the State of Delaware, with its
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principal place of business located at 1050 Enterprise Way, 3rd Floor, Sunnyvale, California
94089. On information and belief, Financial Engines Advisors L.L.C. may be served via its
registered agent, Corporation Service Company, 2711 Centerville Rd., Ste. 400, Wilmington, DE
19808.
JURISDICTION AND VENUE
4. This action arises under the patent laws of the United States, Title 35 of the
United States Code. This Court has subject matter jurisdiction pursuant to 28 U.S.C. 1331
and 1338(a).
5. Personal jurisdiction and venue are proper in this district under 28 U.S.C.
1391(b), 1391(c) and 1400(b). On information and belief, Financial Engines has transacted
business in this district and/or has committed, contributed to, and/or induced acts of patent
infringement in this district.
6. On information and belief, Financial Engines is subject to this Courts specific
and general personal jurisdiction pursuant to due process and/or the Texas Long Arm Statute,
due at least to its substantial business in this forum, including: (i) at least a portion of the
infringements alleged herein; and (ii) regularly doing or soliciting business, engaging in other
persistent courses of conduct, and/or deriving substantial revenue from goods and services
provided to individuals in Texas and in this judicial district.
7. For example, Financial Engines provides advisory services to companies such as
J.C. Penney Company, Inc., and Texas Instruments Incorporated.
(http://corp.financialengines.com/about/who-we-work-with.html)
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8. For example, from 2007-2011, J.C. Penney Company, Inc. paid Financial Engines
over $15.6 million dollars for its asset management and investment advisory services related to
JC Penneys 401k plans.
(http://www.brightscope.com/form-5500/service-providers/55251/J-C-Penney-Corporation-
Inc/56193/J-C-Penney-Corporation-Inc-Savings-Profit-Sharing-And-Stock-Ownership-
Plan/2011/)
9. For example, from 2007-2012, Texas Instruments Incorporated paid Financial
Engines over $5.7 million dollars for its asset management and investment advisory services
related to Texas Instruments 401k plans.
(http://www.brightscope.com/form-5500/service-providers/349543/Texas-Instruments-
Incorporated/354415/Ti-Contribution-And-401k-Savings-Plan/2012/)
U.S. PATENT NOS. 7,120,600 AND 8,229,825
10. GRQ is the owner by assignment of United States Patent No. 7,120,600 (the 600
Patent) entitled Systems and Methods for Improving Investment Performance. The 600
Patent issued on October 10, 2006. A true and correct copy of the 600 Patent is attached as
Exhibit A.
11. GRQ is the owner by assignment of United States Patent No. 8,229,825 (the 825
Patent) entitled Systems and Methods for Improving Investment Performance. The 825
Patent issued on July 24, 2012. A true and correct copy of the 825 Patent is attached as Exhibit
B.
12. Messrs. Brian C. Tarbox and Mark Greenstein are listed as the inventors on the
600 and 825 Patents.
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13. The late Brian C. Tarbox was a leading advisor in the field of retirement planning
and financial services.
14. On information and belief, in 1996 Mr. Tarbox assisted William Sharpe, the
founder of Financial Engines, by providing him an initial business model and explaining this
model to at least one third party so that Mr. Sharpe could obtain funding during the initial stages
of Financial Engines development. Specifically, Mr. Tarbox crucially participated in Financial
Engines initial meeting with venture capital partners, who put up the initial $5 million to fund
Financial Engines.
15. In 2001, after building upon and further developing the initial business model
described above, Brian C. Tarbox was instrumental in obtaining ERISA Advisory Opinion 2001-
09A, more commonly known in the industry as the SunAmerica Opinion.
(http://www.dol.gov/ebsa/programs/ori/advisory2001/2001-09A.htm) True and correct copies of
articles detailing Mr. Tarboxs fundamental role in creating the plan and obtaining the
SunAmerica Opinion are attached as Exhibits C-E.
16. As a result of the SunAmerica Opinion, independent advisory firms, such as
Financial Engines, were allowed to team up with money managers to offer one-stop investment
management services using an independent financial expert to provide the advice and asset
allocation decisions. A true and correct copy of the Pensions and Investments article detailing
Financial Engines request is attached as Exhibit F.
17. To provide such services, Financial Engines confirms that it operates in
accordance with the SunAmerica Opinion. For example, according to Financial Engines
Executive Vice President of Investment Management and Chief Investment Officer, Christopher
Jones, Financial Engines believes that our ability to operate under the SunAmerica Opinion has
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substantially facilitated the delivery of unconflicted advice to plan participantsWe believe the
SunAmerica framework allows Financial Engines to provide convenient and cost-effective
access to independent and unconflicted advice to more participants, particularly those working
for smaller companies. Employees benefit when investment advice is part of a single fully
integrated source for all their 401(k) plan questions.
(http://www.planadviser.com/House_Lawmakers_Hear_Investment_Advice_Bill_Pleas.aspx)
18. As a result of the SunAmerica opinion, independent advisors such as Financial
Engines are allowed to provide managed account services. In September 2004, Financial
Engines offered its first managed accounts to Motorola and J.C. Penney employees, and by
December 2004, Financial Engines had $1 billion in assets under management.
http://www.forbes.com/sites/tomanderson/2014/06/18/nest-egg-onomics-financial-engines-revs-
up-retirement-plans/
19. As of 2014, Financial Engines existing contracts cover 7.9 million workers with
$824 billion in their 401(k) plans and it is managing $92 billion of those assets.
http://www.forbes.com/sites/tomanderson/2014/06/18/nest-egg-onomics-financial-engines-revs-
up-retirement-plans/
20. On information and belief, to the extent any marking was required by 35 U.S.C.
287, predecessors in interest to the 600 Patent complied with such requirements.
21. On information and belief, to the extent any marking was required by 35 U.S.C.
287, predecessors in interest to the 825 Patent complied with such requirements.
COUNT I
INFRINGEMENT OF U.S. PATENT NO. 7,120,600 BY FINANCIAL ENGINES
22. Plaintiff GRQ incorporates paragraphs 1 through 21 as if set forth herein.
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23. Financial Engines has, pursuant to 35 U.S.C. 271, infringed and continues to
infringe the 600 Patent in the State of Texas, in this judicial district, and/or elsewhere in the
United States by, among other things, making, using, selling, offering to sell, and/or importing,
without license, directly or through its customers, managed account services, such as its Personal
Asset Manager Program or customer programs such as the Vanguard Personal Online Advisor,
Vanguard Managed Account Program.
24. Financial Engines products and services fall within the scope of at least claim 1
of the 600 Patent, as evidenced by Financial Engines and its clients service description. For
example, Financial engines provides a system for providing a discretionary asset allocation
program for at least one investor, the discretionary asset allocation program provided by (i) at
least one conflicted person who receives variable fees or profits for providing services related to
the discretionary asset allocation program, or (ii) the at least one conflicted person in concert
with at least one person who is substantially independent of the at least one conflicted person.
25. For example, Financial Engines provides a discretionary asset allocation program
for an investor and a data storage means for storing data for that investor. Additionally,
Financial Engines provides means, operatively connected to the data storage means, for
automatically implementing discretionary investment allocation decisions utilizing the
discretionary asset allocation program, wherein the discretionary investment allocation decisions
are automatically implemented using process that reduces or eliminates the at least one
conflicted person's ability to self-deal, and wherein the discretionary investment allocation
decisions are implemented, developed, or maintained by the at least one substantially
independent person. Financial Engines is independent of the funds in an investor plan.
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JC Penney SPD Managing Your Account Attached as Exhibit G.
26. Additionally, Financial Engines provides a computer having a program,
operatively connected to said means for automatically implementing discretionary investment
allocation decisions, to implement the discretionary investment allocation decisions
implemented, developed, or maintained and means, operatively connected to said means for
automatically implementing discretionary investment allocation decisions, for eliminating or at
least ameliorating possible economic conflict of interest by separating or appropriately
combining, the determination of how much to save and how to allocate investment assets from
other fee generating functions.
27. As specified earlier, Financial Engines complies with the SunAmerica Opinion
which states: According to your submission, while SunAmerica will be making the Program, as
well as other services, available to Plans, the Model Asset Allocation Portfolios offered under the
Program will, in fact, be the product of a computer program applying a methodology developed,
maintained and overseen by a financial expert who is independent of SunAmerica (the Financial
Expert). The Model Asset Allocation Portfolio produced under the Program with respect to a
particular participant, therefore, will reflect the application of the methodologies developed by
the Financial Expert to the Designated Investments, taking into account individual participant
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data, as provided by the participant, Plan sponsor or recordkeeper. SunAmerica Opinion.
http://www.dol.gov/ebsa/programs/ori/advisory2001/2001-09A.htm
28. As a result of Financial Engines infringement of the 600 Patent, GRQ has
suffered monetary damages in an amount not yet determined, and will continue to suffer
damages in the future unless Financial Engines infringing activities are enjoined by this Court.
29. Unless a permanent injunction is issued enjoining Financial Engines and its
agents, servants, employees, attorneys, representatives, affiliates, and all others acting on their
behalf from infringing the 600 Patent, GRQ will be irreparably harmed.
COUNT II
INFRINGEMENT OF U.S. PATENT NO. 8,229,825 BY FINANCIAL ENGINES
30. Plaintiff GRQ incorporates paragraphs 1 through 29 as if set forth herein.
31. Financial Engines has, pursuant to 35 U.S.C. 271, infringed and continues to
infringe the 825 Patent in the State of Texas, in this judicial district, and/or elsewhere in the
United States by, among other things, making, using, selling, offering to sell, and/or importing,
without license, directly or through its customers, advisory services, such as its Income+ product.
32. Financial Engines products and services fall within the scope of at least claim 1
of the 825 Patent, as evidenced by Financial Engines and its Income+ product description. For
example, Financial Engines Income+ product provides a method of providing distribution
recommendation from an investment account to an investor.
http://corp.financialengines.com/individuals/managed_service_retirement_income.html#
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33. For example, Income+ uses software to receive information about the investments
in at least one investment account for an investor and stores the information in a computerized
database.
http://corp.financialengines.com/individuals/managed_service_retirement_income.html#
34. For example, Income+ also provides a computer program to process the
information received to arrive at a distribution recommendation such that the algorithm
contained in the program used to arrive at the distribution recommendation is originated or
approved by at least one person who is independent of at least one person who receives variable
fees or profits depending on the decision of the at least one investor so that the ability of the at
least one person who receives variable fees or profits depending on the decision of the at least
one investor to self-deal in providing the distribution recommendation is eliminated. In other
words, Financial Engines is independent from the funds being recommended.
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http://corp.financialengines.com/individuals/managed_service_retirement_income.html#
35. Additionally, Income+ then transmits the distribution recommendation by the
fund provider who receives fees or profits depending on the distribution decision of the at least
one investor, or by at least one other person in combination with the fund provider who receives
variable fees or profits depending on the distribution decision of the at least one investor.
36. As specified earlier, Financial Engines complies with the SunAmerica Opinion
which states: According to your submission, while SunAmerica will be making the Program, as
well as other services, available to Plans, the Model Asset Allocation Portfolios offered under the
Program will, in fact, be the product of a computer program applying a methodology developed,
maintained and overseen by a financial expert who is independent of SunAmerica (the Financial
Expert). The Model Asset Allocation Portfolio produced under the Program with respect to a
particular participant, therefore, will reflect the application of the methodologies developed by
the Financial Expert to the Designated Investments, taking into account individual participant
data, as provided by the participant, Plan sponsor or recordkeeper. SunAmerica Opinion.
http://www.dol.gov/ebsa/programs/ori/advisory2001/2001-09A.htm
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37. As a result of Financial Engines infringement of the 825 Patent, GRQ has
suffered monetary damages in an amount not yet determined, and will continue to suffer
damages in the future unless Financial Engines infringing activities are enjoined by this Court.
38. Unless a permanent injunction is issued enjoining Financial Engines and its
agents, servants, employees, attorneys, representatives, affiliates, and all others acting on their
behalf from infringing the 825 Patent, GRQ will be irreparably harmed.
PRAYER
WHEREFORE, GRQ incorporates each of the allegations in paragraphs 1 through 38
above and respectfully requests that this Court enter:
1. A judgment in favor of GRQ that Financial Engines has infringed, directly or
indirectly, the 600, and 825 Patents;
2. A permanent injunction enjoining Financial Engines and its officers, directors,
agents, servants, affiliates, employees, divisions, branches, subsidiaries, parents, and all others
acting in concert or privity, with any of them, from infringing, directly, jointly, and/or indirectly
(by way of inducing and/or contributing to the infringement) the 600, and 825 Patents;
3. A judgment and order requiring Financial Engines to pay GRQ its damages, costs,
expenses, and prejudgment and post-judgment interest for Financial Engines infringement of the
600, and 825 Patents Patent as provided under 35 U.S.C. 284;
5. A judgment and order finding that this is an exceptional case within the meaning
of 35 U.S.C. 285, and awarding to GRQ its reasonable attorney fees; and
6. Any and all other relief to which GRQ may show itself to be entitled.
DEMAND FOR JURY TRIAL
Plaintiff demands trial by jury on all issues triable to a jury.
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Dated: August 8, 2014 Respectfully submitted,
By: /s/ Neal Massand
Neal G. Massand
Texas Bar No. 24039038
nmassand@nilawfirm.com
Timothy T. Wang
Texas Bar No. 24067927
twang@nilawfirm.com
Stevenson Moore V
Texas Bar No. 24076573
smoore@nilawfirm.com
Ni, Wang & Massand, PLLC
8140 Walnut Hill Ln., Ste. 310
Dallas, TX 75231
Telephone: 972.331.4600
Fax: 972.314.0900
ATTORNEYS FOR PLAINTIFF GRQ
INVESTMENT, LLC