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Texas Court May Decide Who Owns Mobile Check Deposit

Court Documents
The "Brownie No. 2" camera was produced by Eastman Kodak.

Thousands of banks, millions of customers and billions of dollars rely on remote deposit capture (RDC) through smartphones or tablets. San Antonio-based USAA went to federal court this week against Wells Fargo over who owns mobile check depositing technology. 

USAA says it rolled out remote deposit capture for its members in the pre-smartphone era of 2006. It was followed by an app-based version in 2009.

Since then, some version of RDC has become mainstream, and USAA wants banks that use it to pay a license fee. Specifically the company holds four patents with the federal government pertaining to an in-app alignment guide as well as ones that recognize the features of a check.

The financial institution sent out letters to more than 100 banks in 2017 informing them of the patents and the need to license them.

“This is groundbreaking technology that is now widely used in the industry, and we are seeking fair value,” said Neff Hudson, vice president of corporate development at USAA in a 2017 interview with online publication American Banker. 

USAA declined comment on this story while the trial is ongoing. At the time of the lawsuit the company wouldn’t disclose if it were licensing the product to any, or considering legal action against additional banks.

The functionality is popular across the board, including with Wells Fargo’s 21 million mobile app users.

“It’s the service our mobile customers request most often,” said a Wells Fargo representative named Brian Pearce in 2012, according to court documents. 

When Wells Fargo didn’t pay, USAA sued last June for patent infringement. This is its first suit over RDC against a bank. 

Wells Fargo denied the claims and countersued.

“Taking and processing check images using a digital camera or mobile device was well-understood, routine, and conventional” prior to USAAs patents, argued Wells Fargo lawyers who think the patent is invalid. To further the point, in court documents they included no fewer than 20 images of various cameras and their viewfinders from Nikon to Eastman Kodak’s “Brownie No. 2.”

Wells Fargo lawyers go on to argue the patents that help smartphones recognize characters are also invalid because computers and scanners have been doing it for years.

The trial began this week in Eastern District of Texas and court officials expect it to last through next week. Chief Judge Rodney Gilstrap is overseeing the case. Gilstrap has overseen many patent cases due to the Marshall, Texas region being seen as a fast-track district until recently. Gilstrap has often been called “the nation’s busiest patent judge.”

USAA officials told the online publication American Banker they wanted to use the money to fund future innovations. 

USAA is a local innovation engine. According to the U.S. patent office the financial services company was granted more than any other single San Antonio institution between 2000-2015. It was followed by sometime-NASA partner Southwest Research Institute as well as the University of Texas San Antonio. 

This isn’t the first time USAA has tussled over RDC, just the first bank. According to court docs, USAA sued and was sued by Mitek Systems in 2012. Several massive banks use Mitek mobile check depositing technology. Both companies claimed authorship and ownership of the technology. The two companies settled the matter without a trial. 

Paul Flahive can be reached at Paul@tpr.org or on Twitter @paulflahive.

Paul Flahive can be reached at Paul@tpr.org