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USAA Remote Deposit Capture Technology Infringement Update

As credit unions are aware, USAA has been pursuing financial institutions claiming that the  technology they use to provide remote deposit capture services to their customers infringes on the United States patents owned by USAA which address the use of a mobile device to capture an image of a bank check and to transmit it for deposit (aka RDC).  Starting in 2017, USAA sent cease and desist letters to financial institutions inviting them to enter into a licensing agreement or risk a patent infringement lawsuit.  In addition, in 2018 and then again in 2020, two large banks were sued by USAA for their RDC technology allegedly infringing USAA’s patents and USAA was awarded jury verdicts in these lawsuits.  The first two patent infringement lawsuits were filed against Wells Fargo in 2018 and juries awarded a total of $302.8 million to USAA in 2019 and 2020.  In 2021, Wells Fargo and USAA settled the lawsuit for an undisclosed amount.    In 2020, USAA sued PNC Bank and a $218.5 million jury verdict and a $4.3 million jury verdict were awarded to USAA in May 2022 and September 2022.

New Developments

Truist Bank Lawsuit:  In July 2022, USAA filed a patent infringement lawsuit against Truist Bank alleging its RDC technology infringes three of USAA’s patents.  This lawsuit remains pending.

PNC Patent Challenge:  Although PNC Bank lost in the jury trials, it challenged some of USAA’s patents at the USPTO and earlier this year, the USPTO invalidated three of the patents; however, USAA says that it will appeal the USPTO’s decision.  It is important to note that USAA still has patents related to RDC that have not been invalidated by the USPTO so it is not clear whether the fact that three of the patents were invalidated will assist financial institutions and their financial technology providers if they are pursued by USAA for a licensing agreement or sued.  Earlier this year, the same federal district court where the jury verdicts were awarded against PNC Bank refused to throw out the verdicts based on PNC Bank’s argument that one of the patents had been ruled invalid as well as other arguments presented by PNC Bank.  The current status of the USAA/PNC Bank litigation is that jury verdicts were awarded against PNC Bank and we can only assume that the parties will settle the case or PNC Bank will appeal.

Discover and USAA License Agreement:  In perhaps the most significant recent development, in August 2023, Discover and USAA agreed to a license agreement for Discover to use the RDC technology which USAA claims is covered by its patents.  According to published reports, the licensing agreement covers more than 130 of USAA’s patents.  Notably, USAA’s public statement after the announcement of the licensing agreement was: “We look forward to working with more banks to create reasonable licensing agreements that benefit their customers.”

How Do These Developments Affect Credit Unions?

By all indications, USAA will continue to pursue license agreements from financial institutions and/or their RDC technology providers.  Most credit unions license this technology and it is standard for financial technology vendors to provide an indemnification against patent and other intellectual property claims brought against the credit union licensee.  If the credit union’s current contract with its RDC technology vendor does not contain robust patent infringement defense and indemnity obligations from the vendor (including carve-outs in provisions limiting the vendor’s liability for defense and indemnification events), then a condition of a contract renewal should be the addition of sufficient defense and indemnification language to fully protect the credit union in case of a patent infringement claim.  Also note that most indemnification clauses require timely notice from the credit union to the vendor.  As such, a credit union should immediately notify its vendor (and the credit union’s legal counsel) if it receives any communication from USAA regarding its RDC technology or its patents or requesting a license agreement from the credit union.  Otherwise, the credit union risks waiving its indemnification rights under its contract with its financial technology vendor.

We also recommend that credit unions perform due diligence focused on inquiring about: (1) the vendor’s position with respect to its RDC technology and the USAA patents; (2) whether the vendor has its own RDC technology and patents; and (3) whether the vendor licenses the technology from a third party and whether the third party licensor has its own patents on the RDC technology.

Article by Janet Jones, Attorney at Moore, Brewer & Wolfe.

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