PHOENIX – A local inventor has filed suit against five credit unions, alleging they infringed on his patent for a system to provide loans to employees in order to fund their personal contributions to 401(k) retirement plans.
The suit last week was transferred from U.S. District Court in Chicago, where First Northern CU, one of the credit unions, is located, to Phoenix, near the home of the Clark Mitchell, the patent holder. Mitchell’s patent covers a so-called “Participation Loan,” which funds an employee’s matching share in a defined contribution pension plan, and the data processing for managing the plan.
The patent describes a method of managing a loan for funding a pension. The focus of the patent is the data processing system that administers all aspects of the loan program, including disbursement of the loan, employee and employer contributions, the investments, withdrawals, taxes, etc. First Northern CU claims the patent is invalid because Mitchell only recently filed the necessary illustrations with the U.S. Patent office, making it unenforceable.
Also named as defendants in the suit are: Credit Union One, Arizona State CU, Georgia Telco CU and Georgia Central CU. Lawyers for Georgia Telco and Georgia Central called the suit a “patent troll,” in which patent holders are waiting for an opportunity to sue users of similar technology.
Charles Shiffley, a Chicago lawyer representing the two Georgia credit unions, said he is confident that neither of his clients performs the kind of work described in the patent and neither one offers the 401(k) loans. "So far as I’m aware, nobody does it," he told The Credit Union Journal yesterday. Mitchell’s lawyer did not return phone calls.
