The patent infringement case of United Services Automobile Association (USAA) — a reciprocal interinsurance exchange — against Wells Fargo Bank kicked off Wednesday in Marshall’s federal court over mobile remote deposit capture technology, which allows banking customers to deposit checks with smart phones.
“This lawsuit is brought to address Wells Fargo’s large-scale use of USAA’s patented technologies that relate to remote check deposit for mobile banking systems,” the lawsuit, filed June 7, 2018, states. “These patented technologies enable USAA to connect members of the military and their families across the globe to financial services. USAA developed these technologies seeking to deliver on its mission to improve the financial security of its members.”
“Wells Fargo has nonetheless chosen to use USAA’s patented technologies without permission and to use them for its own commercial gain,” the lawsuit adds. “This lawsuit is designed to address Wells Fargo’s misconduct.
In the case, Wells Fargo denies infringement of the two patents in suit. USAA is seeking nearly $300 million in the case.
“Wells Fargo has (received) $932 million for use of infringing (technology),” said USAA’s attorney, Jason Sheasby, of Irell & Manella law firm of Los Angeles, California. “We’re asking for $299 million of these profits.”
In his opening statements, Sheasby noted that USAA is the first commercial bank anywhere in the nation to ever implement MRDC technology
“Evidence will show Wells Fargo knew that USAA was first in mobile remote deposit capture,” said Sheasby.
Sheasby said USAA even took it a step further and developed a system called “auto-capture,” which monitors the check for machine image quality.
Giving a history of USAA, he noted how 15 Army officers in San Antonio established the company in 1923.
“They pulled their money together to create a mutual,” he said, noting that they did that to insure and protect each other.
Since its founding, membership has grown and is open to armed service members, those honorably retired in the armed services and their families.
Giving a timeline of the development of its technology, Sheasby said, in 2016, USAA discovered that it carefully capture a check image with a digital camera. In 2009, they launched the first generation system MRDC at the same time they were creating the second generation, auto-capture.
In 2013, USAA launched auto-capture and in 2015 the patent was granted.
Showing internal documents of Wells-Fargo, Sheasby said the defendant knew it was behind the industry in May 2011 when it started discussions on building a system of their own.
“A year after us, they launched their auto-capture MRDC,” he said.
Sheasby said since USAA didn’t have its constitutional property right of the technology from May 2014 to March 2015, they were not asking for any compensation during that time period. The plaintiff is only seeking damages from when they marked their products, starting in December 2016.
Sheasby said the plaintiff did reach out to Wells Fargo to inform them of the need to license the technology from them, to no avail. He told jurors that they will present evidence to show that the defendant’s alleged infringement is willful.
“Willful infringement is whether there was intentionality in what Wells Fargo did,” he said.
Representing the defendant, Attorney Thomas Melsheimer, of Winston & Strawn LLP, of Dallas, said in his opening statements that “timing” is everything in this case.
“Because timing is everything in this case, Wells Fargo does not infringe,” Melsheimer argued. “It does not owe USAA any money.”
Melsheimer contended that what USAA did invent was a specific way for automatically taking a picture of a check to deposit in the bank, with very specific steps.
“That’s it,” he said of USAA’s invention, arguing that the plaintiff is trying to go beyond its boundaries of the patents in the case. “They have a narrow invention with certain steps in a specific order; we don’t do that.”
“We’re going to ask you to hold the plaintiff to the bargain they made to the patent office — the actual invention that’s described,” said Melsheimer.
Melsheimer noted that Wells Fargo has been offering its product since May 2012. He said the defendant purchased the software from the product from Mitek, a company in California.
“We didn’t take anybody’s product,” he said. “We paid Mitek for the mobile deposit technology we use.”
Melsheimer further contended that USAA wasn’t even the first to announce the capability to do mobile deposit.
“Mitek was the first one to announce that on a smart phone in 2008,” he said.
Additionally, Melsheimer said the patents-in-suit do not cover all the various ways to perform mobile deposit.
“They told the patent office they created a specific method for first monitoring the image and then capturing the image with a camera,” he said. “They wanted to get rid pushing the button on the camera and that’s what’s called auto-capture.”
“The capture must occur ‘at or after’ — not ‘before’ the time that the check was analyzed,” Melsheimer argued. ‘The key to what the plaintiff claimed to invent is simply not automatically capturing the image, but when and only when it (crosses) the monitoring computer. That’s what they bargained for — nothing narrower; nothing broader than that.”
Giving a history of Wells Fargo, Melsheimer said the bank dates back to the 1850s and started out with stagecoaches. By the millennium, operations evolved and the company became one of the first banks to do online banking.
As smart phones came into play, Wells Fargo started offering mobile banking back in 2007. Later, they decided to offer mobile deposit and sought out Mitek to help to create its mobile deposit app.
“We went to Mitek because Mitek held itself as an industry leader,” said Melsheimer.
Wells Fargo launched its mobile deposit feature May 2012, three years before the patents-in-suit were issued, the attorney argued.
In May 2014, Wells Fargo added Mitek’s auto-capture feature to its mobile deposit app.
Melsheimer said representatives from Mitek will testify in the trial to explain how their product and source code works.
“When Wells Fargo was sued in this case, we went to Mitek and said: ‘Hey, these folks are saying the software you gave us is infringing their patents, so we need to see the source code,’” said Melsheimer.
“These patents require analyze first and then capture. Mitek captures first and then analyze. It’s just that simple; we don’t infringe these patents.”
Melsheimer further argued that the fact that the plaintiff was founded by military men is irrelevant to this case.
“I’m here to tell you that is not going to play a role in this case,” he said. “There’s nothing about the military that plays a factor (in how jurors decide).”
“Their invention is not auto-capture. It’s auto-capture using a specific set of steps,” he added. “This damage claim, we believe the evidence will show it’s outrageous.”
The case resumes today in Marshall’s Sam B. Hall Jr. Federal Building and United States Courthouse, with US District Court for the Eastern District of Texas Chief Judge Rodney Gilstrap presiding.