Financeware v. MoneyGuide Pro: Legal Case Isn't Going Away Anytime Too Soon

Thursday, August 11, 2011 12:56
Financeware v. MoneyGuide Pro: Legal Case Isn't Going Away Anytime Too Soon

Tags: Financial Planning Apps

Los Angeles patent attorney Ken Ohriner says the fact that Financeware’s patents were approved recently is a big plus in its favor.

This Website Is For Financial Professionals Only

Ohriner says it means the U.S. Patent Office approved Financeware’s patents “under current standards.”

“It makes it less likely to be held invalid,” says Ohriner. One of my best friends since high-school but nonetheless a very smart guy, Ohriner attended St. John’s University School of Law while working as a mechanical engineer, and has specialized in patent law for about 25 years.


Another factor in favor of Financeware’s case, Ohriner says, is that the Patent Office actually seems to have made a “through examination.”

Prior art,” all the information that has been made available to the public about an invention, is established when a patent is granted. One way an inventor backs a claim of originality is with research and articles in trade journals. Sometimes the Patent Office examiner actually does this legwork, but that’s difficult for them.

Ohriner says that the Patent Office became aware of prior art supporting Financeware’s claims in journal articles about financial planning. “Presumably, these articles were sent in that were relevant to what the patent is claiming,” says Ohriner.


Keep in mind, if an obscure Ph.D. thesis 30 years ago is submitted to the Patent Office by an inventor to prove the invention is not original, the patent claim could be held invalid. So an examination of prior art is crucial in patent cases.

In this case, it’s likely that David Loeper, the founder and inventor of Financeware, showed a patent examiner research proving that his process of wealth management was different enough from all other approaches to wealth management. In applying for a patent, keep in mind, that the inventor is required by law to disclose everything he knows about prior art and similar inventions.

That is the nub of this case--the wealth management process is the invention Loeper has patented.

I’m still working on getting a better understanding of what that means.


“We want to protect our property rights,” Loeper says at the start of our call Wednesday.

“It’s our advising process that’s patented,” says Loeper.

One chilling aspect of the lawsuit is that Financeware is suing UBS, not MoneyGuide Pro. UBS is MoneyGuide’s customer and software company agreements typically indemnify customers against such legal claims.

That creates tension. UBS presumably has higher priorities at this moment of market madness than which wealth management package it provides its advisors. It just wants this lawsuit to go away.

Ohriner says it is common that customers get sued. And indeed customers can be the party actually infringing on a patent. But UBS ultimately “doesn’t have a horse in the race,” Ohriner says. They may choose the most expedient course.

(I’ll update with comment from UBS later.)

Point is, this legal battle is not going away anytime soon. The U.S. Patent Office says Loeper’s invention is original, but Bob Curtis, the founder and inventor of MoneyGuide of money has no choice but to spend a lot of money invalidating Financeware’s patents.

The human tragedy is the stress and distraction—not just on Curtis but employees of MoneyGuide Pro. Legal tangles are costly and prevent both companies from spending on research, development, and implementation of new ideas -- productive work. Loeper can’t like it either.

For his part, Curtis this morning was resolved to fight while compartmentalizing the difficulties.

“We take it seriously,” says Curtis, who says he's had legal counsel since Loeper delivered the pending patents to his office three years ago. “We have to go through full defense, and the leverage he (Loeper) has is that he has a patent and can sue,” adding, "but we are not violating his patent.”

“It eats some resources but our job is to make sure it does not divert us from what we do,” says Curtis. “We have to segment this from our normal operations. It won’t slow down or development or plans we have in place.”

Curtis says the lawsuit by Financeware actually poses an industry problem.

“The broader industry issue is how much of the planning process is he (Loeper) trying to claim,” says Curtis.

Indeed, this could invite trade groups to chime in to protect their members’ rights to give financial advice without infringing on Financeware’s patents. Presumably, the Financial Planning Association, Investment Management Consultants Association, and other groups could want to join the fray.

“The process is difficult for all parties and this is going to draw in a lot of parties,” says Curtis. “A lot of organizations should have real strong interest in this.”

Curtis says he’s received support from many MoneyGuide Pro users. “We’ve had users say they would contribute to a defense fund. “

Still, Loeper genuinely believes he’s right and he has patented an advice process. “We will litigate this because we have clients who are ethically licensing our intellectual property and shareholders who have invested millions and millions of dollars,” he says. “we’re confident we could win in a jury trial.”

In the spring of 2008, when Financeware’s patents were pending, Loeper sent them to me. He’s been pursuing proving the originality of his wealth management process for a long time.

Financeware, doing business as Wealthcare, has multiple patents on a system of financial advising. Two patents are the crux of the complaint naming UBS filed earlier this week in U.S. District Court in Manhattan. “What we have is valuable,” says Loeper.  “People using it should respect that we own it.”

When I asked Loeper to explain exactly what was patented, however, his lawyer intervened. “With a lawsuit pending right now, one of the deals will be what exactly is in and what’s out of the patent,” said Mark Hannemann, of Kenyon & Kenyon, LLP in New York.

Loeper says the lawsuit is not aimed at the industry.  “We’re not going after the financial planning industry—not at all,” he says. “That’s why we call our process something different from financial planning.  It’s not financial planning, it’s Wealthcare.

“We encourage advisors to go ahead and do financial planning. Just don’t use the Wealthcare process and call it financial planning.”

I’ll post more about this case—it will be an ongoing story, I’m afraid—throughout the day. Please comment.

Comments (5)

Andy, I used Financeware's software as an individual RIA for about five years; there was a lot about it that I liked. I don't know if it was unique and original, but it certainly had some emphases built-in that I think were atypical in the planning profession at that time. It also has some useful features that I haven't see in other packages. I am missing out on this, however, as I shifted to Money Guide Pro when Financeware dramatically changed their pricing and went to a "per-client" (not "per-advisor") pricing model which as I recall would have increased my cost about ten-fold. Their somewhat unique justification was that their software company was a fiduciary to the end client.

I have to say that Money Guide Pro's "G2" software release (which as rolling out just after I initially subscribed to MGP) immediately reminded me of some features in Financeware I had been missing. I wouldn't be surprised if the duplication of these might be a reality and a violation of intellectual property. However, the Wealthcare "process" seems to me to simply be financial planning done well.

This will be interesting to follow.
benjwa , August 12, 2011
Wow, I think some of my language got changed in my comment above! I don't see a way to edit, so my apologies to readers for the confusing sentences.
benjwa , August 12, 2011
Innovation in this country is being killed by the explosion of patent suits by so called patent trolls. I have no idea if this is the case with this particular situation.

I'd suggest you become educated on this major issue. The NPR program "This American Life" recently had a excellent hour long podcast on the the topic and there is an article in last week's Business Week magazine.
AndyTilp , August 12, 2011
Benjwa: The comment text reads exactly as you submitted it. Please fee free to add a new comment with the correct language, however.
agluck , August 14, 2011
Patent trolls are very different from what this is. Trolls are an industry. This case isn't going away and we'll have expert sources for advisors opining on it. I think the patent wars, totally absent from advisor software business till now, are likely to come to advisorland in the years ahead.
agluck , August 14, 2011

Write comment

You must be logged in to post a comment. Please register if you do not have an account yet.