How two advisor tech companies battled it out in patent court

After more than three years of litigation and an eight-day trial, it took a jury only two hours of deliberation to reach a verdict in the case between advisor technology companies CellTrust and ionLake.

CellTrust was hoping to win more than $2 million for a claim that ionLake and its co-founders, Derrick Girard and his uncle Wade Girard, violated patents held by CellTrust to provide compliant text messaging and archiving to financial advisors. But a Minnesota federal jury found not only that ionLake, provider of MyRepChat, and its executives didn’t infringe the patents, but that CellTrust’s patents were invalid.

The case isn’t over yet, as CellTrust could still appeal the decision. A CellTrust spokesperson said the company had been advised not to comment since litigation is ongoing. On a statement posted to its website, CellTrust said that the jury’s decision is “contrary to and not supported by the evidence,” and that the company “intends to seek available post-verdict relief.”

“CellTrust continues to believe in the strength of its patents and will vigorously enforce its intellectual property rights,” the company said in the statement.

But for Derrick Girard, it’s a chance to exhale after a “surreal” experience that began in November 2019, when he first learned about the lawsuit — not from attorneys or anyone at CellTrust, but from an international company offering its services.

“All of a sudden, I wake up one morning and there was an email saying, ‘Now that you’re being sued, allow us to help you,’ from some company in India,” Girard said. “My god, now I’m in the middle of a federal lawsuit.”

Girard started ionLake in 2017 while working as a financial advisor to solve the challenge of how to compliantly respond to clients who increasingly communicated via text message. He enlisted his uncle, Wade, a software developer, to build the technology that eventually became MyRepChat. While there were other solutions on the market, such as CellTrust and Hearsay Systems, Girard wanted to build something specifically tailored to financial advisors.

MyRepChat started to attract significant attention in 2018. A year before Girard learned about the lawsuit, the company partnered with Lincoln Investment, a broker-dealer and registered investment advisor with 1,100 financial advisors servicing a collective $36 billion in assets. A few months later, 1^st Global, the wealth management firm that partners with 400 tax, accounting and legal firms, announced it would use MyRepChat. And in August 2019 at its annual Focus conference, LPL Financial announced that MyRepChat would power a new text messaging service for its vast network of independent broker-dealers and registered investment advisors as part of the “next generation of wealth management.”

IonLake also began working with Securities America, which had previously announced a partnership with CellTrust for compliant texting and archiving, according to documents shown during the trial. CellTrust, which also counted Merrill Lynch among its clients, took notice and felt it had “some catching up to do,” according to an internal email presented during the trial.

That’s why the company decided to take action to enforce its patents, Girard said.

“[CellTrust] never viewed us as a threat because we weren’t a big company, but we were landing the biggest fish in the pond,” Girard said.

At first, CellTrust sent a licensing agreement to ionLake, seeking payment for using its patented technology in MyRepChat. However, the amount they asked for simply wasn’t feasible for ionLake, Girard said.

A year after the initial filing, CellTrust amended the complaint to include personal lawsuits against Derrick and Wade Girard. This gave the ionLake executives (Wade eventually left the company in 2020) no choice but to fight to the end, Girard said.

Two months before the trial began, the company retained the services of Patrick Arenz, a trial lawyer with Robins Kaplan who specializes in high-stakes patent disputes. Based on his experience working with plaintiffs in these cases, CellTrust took the most aggressive positions it could during every step of the case. For example, while personal suits like the ones filed against the Girards are allowed under the law, they are rare in patent cases, Arenz said.

“[CellTrust] wanted to get a multimillion-dollar judgment and put ionLake out of business,” Arenz said. “[The Girards] had no choice but to put everything on the line and go to trial.”

Arenz’s strategy was to show the jury that what CellTrust had patented was just generic software rather than something new and novel. CellTrust’s original attempts to earn a patent for an “archiving system,” were rejected by the patent office, but were later approved after it changed the words to “e-discovery, “ Arenz said in his closing arguments.

“CellTrust didn’t invent any technology. They didn’t invent any innovation,” Arenz told the jury during his closing arguments, according to a court transcript. “And they’ve recognized they can’t compete with ionLake in the marketplace, so they’re trying to compete here in the courthouse.”

CellTrust was represented by Loren Hansen and Lee Bennin of Lathrop GPM. The law firm did not respond to InvestmentNews’ request for comment.

In his closing statements, Hansen argued that CellTrust proved that ionLake infringed on the patents, that the infringement was willful and that it resulted in lost sales. Even if MyRepChat built a superior product that the market favored, it still used CellTrust’s property, he said, comparing the situation to parking the world’s best food truck in a McDonald’s parking lot during lunchtime.

“They could work really hard in building that food truck, the food might be prepared perfectly, but that doesn’t give them the right to be on McDonald’s property,” Hansen told the jury. “It doesn’t matter if the food truck isn’t taking all of McDonald’s sales. It doesn’t matter if some people prefer the food truck food to McDonald’s. It doesn’t matter that McDonald’s is a huge company. The fact is that food truck can’t be on McDonald’s property without McDonald’s permission. The same thing is true here. MyRepChat can’t compete in this space without CellTrust’s permission.”

However, the jury disagreed and ruled entirely in ionLake’s favor, deciding that none of CellTrust’s infringement allegations were proven, and that every asserted claim was invalid.  

IonLake has since filed a motion for attorney’s fees against CellTrust, but as Girard awaits whatever comes next in this case, he’s enjoying a chance to get back to growing his business. MyRepChat is the second-most popular social media archiving tool behind Smarsh (which utilizes CellTrust’s technology; Smarsh did not respond to a request for comment) among financial advisors, according to the 2023 T3 Inside Information Advisor Software Survey. However, the company was also second on the list of programs that advisors are considering, next to Redtail Speak.

Meanwhile, Bank of America Merrill Lynch, which announced in 2018 that CellTrust would power its financial advisors’ compliant texting service, still uses it today. Securities America did not respond when asked whether it had switched from CellTrust to MyRepChat, or if the company makes both technologies available to advisors. 

“It’s hard to explain how mentally exhausting this is, having to go through this process for 3½ years, waking up every day wondering if this is all going to be taken from me,” Girard said. “Is everything I worked so hard for just going to be taken from me and there’s nothing I can do about it?”

While he recognizes the toll that fighting the charges took on his company as well as on him personally, Girard is glad he didn’t give up. The industry is better off for it, he said.

“I was fighting for MyRepChat and ionLake, but also for Hearsay and Redtail Speak and any other company out there that wants to build a tool to do what we do,” Girard said.

Hearsay and Redtail both declined to comment.