United States Automobile Association (USAA), a financial services company that provides insurance, banking, investment, and retirement products and services for members of the military and their families, filed a surprising patent infringement complaint against Wells Fargo Bank in the Eastern District of Texas on June 7, 2018 (United States Automobile Association v. Wells Fargo Bank). 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.

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 Deposit@Mobile 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 Deposit@Mobile 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’s Defense Strategy

On September 18, 2018, Wells Fargo filed a motion for judgment on the pleadings in the litigation, alleging that USAA’s patents were invalid under 35 U.S.C. §101 for claiming an abstract concept of taking a photograph.  Subsequently, Wells Fargo also pursued simultaneous 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. Wells Fargo’s CBM petitions repeated the same argument about the patents being invalid for claiming an abstract concept. By statute, a patent qualifies for a Covered Business Method review if (i) the patent has claims that are used in the practice, administration, or management of a financial product or service, and (ii) the patent does not claim a “technological invention.”

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 there are “technical challenges associated with capturing sufficient quality images such that they could recognized by a machine.”[1]

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 petitions remain pending.

The Jury Trial

A 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 USAA’s patents. This jury also awarded USAA $200 million in damages after just three hours of deliberation. 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. The second case has a pretrial conference set for December 16, 2019.

Lessons Learned

Many of the issues within this case reflect on Wells Fargo’s decision to pursue CBM review of the patents-in-suit, and being faced with having to prove that they are not “technological inventions” in order to prevail. Wells Fargo’s initial claims that the patents were not related to a technical solution in each petition ended up bringing the credibility of their expert witness, Dr. Alexander into question in a way that significantly worked against them, thereby torpedoing Wells Fargo’s invalidity arguments based on the abstractness of the USAA patents before both the trial judge and the PTAB. Although Judge Gilstrap’s reference to “gamesmanship” reflected poorly on both parties, the fact that the testimony was inconsistent with Wells Fargo’s core arguments seems to have more severely worked against Wells Fargo’s interests.

Additionally, this case highlights some of the challenges associate with maintaining concurrent PTAB proceedings with a district court litigation from a defendant’s perspective. This case counsels towards the careful selection of certain defenses and arguments to be used exclusively at the PTAB while saving other arguments exclusively for the district court litigation. In this case, the overlap of the two proceedings seems to have worked against Wells Fargo and contributed to the resulting verdict. It will be interesting to see whether Wells Fargo runs into similar issues in the IPR proceedings, and what the outcome of the second district court case will be.