Dive Brief:
- Wells Fargo is being ordered to pay $102.8 million in damages after a federal jury in Texas on Friday found the bank infringed on two United Services Automobile Association patents that allow customers to deposit checks using mobile devices.
- The technology at issue was developed by software company Mitek Systems and is used by about 6,500 financial institutions, which would have to negotiate with USAA to pay additional licensing fees for their mobile deposit technology, if the verdicts stand.
- The case marks the second nine-figure judgment against the bank — and in favor of USAA — in the past two months. A separate jury in November said Wells Fargo should pay the military-focused insurer $200 million for infringing two other patents. The bank said it "strongly disagrees" with the verdict, adding that it is considering its options, including an appeal.
Dive Insight:
Friday’s verdict "validates" USAA’s position that it created mobile deposit capture technology, said Nathan McKinley, the insurer’s vice president of corporate development.
"Wells Fargo, and the rest of the banking industry, has benefited from our technology and we look forward to working with banks to create reasonable and mutually beneficial license agreements," McKinley said in a statement. "Our goal has always been to be reasonably compensated for the investment in mobile-banking innovation we have made."
Beth Richek, a Wells Fargo spokeswoman, called the case an "industry issue involving numerous other banks that license remote mobile deposit technology from the same vendor, not USAA."
Mitek filed its own lawsuit Nov. 1 against USAA in California, saying the lawsuits against Wells Fargo have "placed a cloud over Mitek’s products and services."
The patent battle between Mitek and USAA has spanned more than a decade. Mitek developed optical character recognition and intelligent character recognition software, which translates typed and handwritten text into ASCII coding that computers can read. The technology was originally used to read scanned paper checks and documents.
The companies began collaborating in the early 2000s on remote deposit capture technology that would let customers deposit checks using their phones. But Mitek and USAA had a falling out, described as a contract dispute at the time.
The companies separately launched similar mobile deposit capture products — first Mitek in February 2008, then USAA in August 2009.
USAA sued Mitek in March 2012, claiming it "misappropriated USAA’s proprietary and confidential information while working under contract for USAA, and then took numerous steps to claim it as its own."
Mitek countersued USAA two weeks later, claiming it violated Mitek’s five patents on remote deposit capture. Mitek also accused USAA of breaching a licensing agreement.
The companies settled in 2014, and both kept their patents. But USAA sent letters to 100 banks in 2017, warning them they were violating the insurer’s mobile deposit patents. USAA sued Wells Fargo in June 2018 and again in August of that year.
"Wells Fargo has been and continues to be a leader in enabling seamless payments and mobile banking experiences, and this ruling has no impact on our customers’ ability to remotely deposit checks or the company’s work to provide innovative tools and technologies to our customers," Richek said in a statement Friday.
USAA could send new letters to its targeted banks, urging them to buy licenses. Or it could continue suing other banks.
"There is only so much due diligence a bank can do on a software product of which it is contemplating purchase to assure that the purchased program does not infringe another party’s patent rights," Stanley Ragalevsky, a partner at K&L Gates in Boston, told American Banker.
Banks can build indemnification provisions into their vendor contracts to hold third parties accountable for any patent liability. But even that isn’t a sure thing, Ragalevsky said. "Patent damages for an infringement claim involving millions of transactions are often substantial even if the infringement was not intentional," he said.
