Strategy Lessons From Wells Fargo Fintech Patent Litigation

February 3, 2020 Articles

United States Automobile Association (USAA) is a financial services company that provides insurance, banking, investment, and retirement products and services for members of the military and their families. On June 7, 2018, USAA filed a surprising patent infringement complaint against Wells Fargo Bank in the Eastern District of Texas.[1] In a suit that rapidly caught the banking industry’s attention, USAA alleged that Wells Fargo infringed four of USAA’s patents by offering its banking customers the option to conveniently deposit paper checks from their smartphones in real-time by taking photographs of paper checks and submitting them through a mobile phone. USAA also targeted features such as the check alignment guides and feedback indicator to assist the customer in orienting the camera to take high-quality, legible photographs automatically when the image is adequate. This accused remote check deposit technology had been widely adopted and implemented in very similar fashions by many of the nation’s leading banking institutions.

USAA filed a second, follow-on case against Wells Fargo on August 17, 2018, asserting three additional patents also related to the mobile check deposit technology with the addition of the ability to collect data to publish the transaction automatically.[2]

During the litigation, USAA also argued that Wells Fargo actually copied USAA’s patented products when Wells Fargo had access to and analyzed USAA’s [email protected] application and had pre-suit knowledge of the patents. USAA suggested that the striking similarities between Wells Fargo’s mobile check deposit feature and USAA’s [email protected] application further supported USAA’s argument that copying occurred. USAA intended to present this evidence to the jury to support its contention that Wells Fargo willfully and intentionally infringed the patents, making Wells Fargo liable for enhanced damages.

Wells Fargo licensed the mobile check deposit system from Mitek, who was previously embroiled in a patent lawsuit with USAA from 2012-14.  Mitek also filed a lawsuit in California on November 1, 2019, seeking a declaratory judgment that its technology did not infringe the USAA patents. That case remains pending while USAA seeks to transfer it to the Eastern District of Texas, where the other two trials were held.[3]

Two Jury Trials

The first jury trial commenced on October 30, 2019, and on November 6, 2019, the jury returned a unanimous verdict in which they found Wells Fargo willfully infringed two of USAA’s patents.  The jury awarded USAA $200 million in damages after just three hours of deliberation.[4] Because the infringement was willful, Wells Fargo may end up having to pay treble damages resulting in a total of $600 million, depending on what Judge Gilstrap decides. In January 2020, the second case between these parties went to trial and resulted in an additional $102.8 million judgment in favor of USAA.[5]

Wells Fargo’s Attempt to Invalidate the Patents-In-Suit

On September 18, 2018, Wells Fargo filed a motion for judgment on the pleadings in the first lawsuit, alleging that USAA’s patents were invalid under 35 U.S.C. §101 for claiming the mental process of taking an image of a check and applying it to a generic computer processor.[6] After USAA amended its complaint, Wells Fargo did not re-file its motion. Instead, Wells Fargo pursued relief before the Patent Trial and Appeal Board (PTAB) by filing a series of petitions for covered business method (CBM) review on all the asserted patents from both cases on November 8, 2018. Wells Fargo’s CBM petitions repeated the same argument about the patents being invalid for claiming an abstract mental process.

Unfortunately for Wells Fargo, the Patent Office dismissed all the CBM petitions based on a finding that USAA’s patents provided a technical solution for capturing electronic images of a check for remote deposit, and therefore fell into the “technological invention” exclusion for CBM review. In denying Wells Fargo’s petition, the Patent Office directly referenced the inconsistency between Wells Fargo’s arguments and the deposition testimony of its expert, Dr. Peter Alexander, who admitted at his deposition there are “technical challenges associated with capturing sufficient quality images such that they could be recognized by a machine.”[7],[8] The PTAB further relied on statements made in Dr. Alexander’s declaration explaining that “inadequate imaging of checks … would result in errors in electronic checking transactions.”[9]

Wells Fargo is additionally seeking to invalidate USAA’s patents by filing petitions for inter partes review (IPR) with the PTAB on all the asserted patents, arguing that the USAA patents were invalid under 35 U.S.C. §§102 and 103 because the claimed inventions had been first invented by others. Several of those IPR petitions have been instituted and the proceedings remain ongoing.


One of the unique avenues – and associated challenges – present in financial industry patent litigation is the availability of pursuing a CBM patent review before the PTAB.  As patent practitioners are aware, the CBM review process is only available for patents that perform data processing used in the practice, administration, or management of a financial product or service.[10] For parties in the financial and banking industry, the CBM review process is an attractive option for challenging the validity of patents that claim a financial product or service, in part, because (i) there is a high rate of stays being imposed in district court litigation,[11] (ii) CBM petitions permit more grounds for invalidity challenges as compared to IPR petitions, including section 101 challenges, and (iii) CBM petitions are statutorily required to be completed within one year from institution.[12] Thus, it is understandable that Wells Fargo would pursue a strategy of challenging the USAA patents through a series of CBM petitions.

These two cases also highlight the challenges associated with maintaining concurrent PTAB proceedings with a district court litigation from a defendant’s perspective.   While the parties were awaiting a decision by the PTAB on whether it would agree to institute Wells Fargo’s CBM petitions, the district court litigation continued forward in the Eastern District of Texas. USAA aggressively pursued the deposition of Wells Fargo’s technical expert, Dr. Peter Alexander, and was able to obtain testimony that the PTAB ultimately used to reject Wells Fargo’s CBM petitions because the USAA patents satisfied the “technological inventions” exception to the CBM petition process. By being forced to conduct a two-front war, Wells Fargo had to expose its expert witness to cross-examination, and the testimony in the litigation ultimately contributed to the downfall of their CBM petitions.

While it is apparent that Wells Fargo selected certain defenses and arguments to be used exclusively at the PTAB while saving other arguments exclusively for the district court litigation, these cases exemplify that, without a stay, a party has to assume every defense and argument will be litigated in district court litigation.  It also counsels towards preparing CBM or IPR petitions as quickly as possible, perhaps even pre-suit if there are pre-suit negotiations, to try and get the PTAB to institute the petitions while any litigation is still in its dormancy. It will be interesting to see whether any deposition or trial testimony will be used by USAA to try and defeat Wells Fargo’s pending IPR petitions.

Another interesting takeaway from these cases is the importance of having suppliers completely resolve disputes with patent holders through licenses and releases.  USAA and Wells Fargo’s supplier, Mitek, were embroiled in earlier lawsuits involving claims of trade secret misappropriation and patent infringement over the remote check imaging technology.[13] While the Mitek cases eventually resolved in 2014, it appears that the resolution did not include downstream protection such as a license for Mitek’s customers like Wells Fargo. This further highlights the importance for customers to seek robust indemnification provisions before purchasing or licensing technology.


[1] United States Automobile Ass’n v. Wells Fargo Bank, N.A., No. 2:18-cv-00245-JRG (E.D. Tex.).

[2] United States Automobile Ass’n v. Wells Fargo Bank, N.A., No. 2:18-cv-00366-JRG (E.D. Tex.).

[3] Mitek Systems, Inc. v. United States Automobile Ass’n, No. 3:19-cv-07223-EMC (N.D. Cal.).

[4] United States Automobile Ass’n v. Wells Fargo Bank, N.A., No. 2:18-cv-00245-JRG (E.D. Tex.), Dkt. 322.

[5] United States Automobile Ass’n v. Wells Fargo Bank, N.A., No. 2:18-cv-00366-JRG (E.D. Tex.), Dkt. 263.

[6] United States Automobile Ass’n v. Wells Fargo Bank, N.A., No. 2:18-cv-00245-JRG (E.D. Tex.), Dkt. 28.

[7] United States Automobile Ass’n v. Wells Fargo Bank, N.A., No. 2:18-cv-00245-JRG (E.D. Tex.), Dkt. 89, Ex. A, p.26.

[8] An interesting sidenote in this case emerged when USAA initially tried to compel the deposition of Dr. Alexander in the district court litigation. At the time, Wells Fargo had not designated Dr. Alexander as an expert in the district court litigation, and Wells Fargo’s original motion for judgment on the pleadings had been denied as moot in light of the amended complaint. Judge Gilstrap accused both sides of improper “gamesmanship” by using the court system as a tool to better posture their arguments in the pending CBM proceedings before the PTAB. Id. at Dkt. 71, p.4.

[9] United States Automobile Ass’n v. Wells Fargo Bank, N.A., No. 2:18-cv-00245-JRG (E.D. Tex.), Dkt. 89, Ex. A, p.26.

[10] 125 Stat. 284 (“America Invents Act”), at Section 18(d)(1).

[11] The Federal Circuit has previously held that district court litigations should be stayed pending the resolution of an instituted CBM petition. See VirtualAgility, Inc. v., Inc., 759 F.3d 1307 (Fed. Cir. 2014).

[12] According to the America Invents Act, the CBM program will sunset in September 2020.

[13] United States Automobile Association, et al. v. Mitek Systems, Inc., et al., No. 5:12-cv-00282 (W.D. Tex.) and Mitek Systems, Inc. v. United States Automobile Association, No. 12-462 GMS (D. Del.).

Firm Highlights


Paycheck Protection Program Eligibility for Private Equity and Venture Capital-Backed Entities

Congress’ recently enacted Coronavirus Aid, Relief and Economic Security Act (CARES Act) created a new small business lending program to provide a direct incentive for small businesses to keep their workers on their payroll...

Read More

CARES Act Paycheck Protection Program Summary (Updated)

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) Paycheck Protection Program (PPP) aims to provide qualifying small businesses, nonprofit organizations, veterans organizations, tribal businesses, sole proprietors, and independent contractors forgivable loans of...

Read More

SEC Expands Definition of “Accredited Investor” – Here Are 5 Key Takeaways

The SEC recently adopted amendments to Rule 501(a) of Regulation D of the Securities Act of 1933 that expand the definition of “accredited investor” by adding new categories of eligibility based on professional knowledge...

Read More

Top 10 Practical Business Implications Arising From the Passage of the CPRA

California’s Proposition 24 passed as expected, and the new California Privacy Rights Act will change the privacy landscape created by the California Consumer Protection Act (CCPA), which went into effect only months ago. While...

Read More

Farella Braun + Martel Elevates Five to Partner

Read More

San Francisco Bay Area Counties Issue Stricter Limits on Commercial Activities in Updated COVID-19 Shelter-In-Place Orders

To combat the growing number of coronavirus cases in the Bay Area, six local counties (Alameda, Contra Costa, Marin, San Francisco, San Mateo, and Santa Clara) have issued updated Shelter-In-Place orders that extend the...

Read More

Alexis Sinclair Joins Farella Braun + Martel’s Financial Services Industry Group

SAN FRANCISCO, October 14, 2020: Northern California legal powerhouse Farella Braun + Martel is pleased to announce that business transactions lawyer Alexis Sinclair has joined the firm as special counsel in its Financial Services...

Read More

M&A Deals and PPP Loans: Unexpected Parties in Your Deal

The Payroll Protection Program has been a lifesaver to many businesses this year, but its quick roll out, and many generous features (including potential forgiveness) could tempt a borrower to treat the PPP as...

Read More

Fed Announces New Main Street Lending Program

Loans Will Provide Additional Support for Small and Mid-sized Businesses On April 9, 2020, the Federal Reserve released the terms of its Main Street Lending Program , a $600 billion loan fund for U.S...

Read More

COVID Relief Granted to Opportunity Zone Investors

Opportunity Zones are economically-distressed communities designated under the Tax Cuts and Jobs Act to provide private investors that deploy capital there with certain tax advantages, provided those investors, and funds, comply with a vast...

Read More