United Servs. Auto. Ass'n v. PNC Bank

UNITED SERVICES AUTOMOBILE ASSOCIATION, Plaintiff, v. PNC BANK N.A., Defendant

No. 2:20-CV-00319-JRG-RSP (LEAD)

United States District Court, E.D. Texas, Marshall Division

May 3, 2022

REPORT AND RECOMMENDATION AND ORDER

ROY S PAYNE UNITED STATES MAGISTRATE JUDGE

Before the Court are three motions all related to 35 U.S.C. § 101:

• Motion for Summary Judgment Dismissing PNC's Patent-Eligibility Defenses filed by Plaintiff United Services Automobile Association (“USAA”), Dkt No. 323;

• Motion For Summary Judgment Of Lack Of Patent Eligibility Under 35 U.S.C. § 101 filed by Defendant PNC Bank N.A. (“PNC”), Dkt. No. 322; and

• Motion to Strike Portions of the Opening Expert Report of Mark Webster, Dkt. No. 310.

Having reviewed the briefing, it is recommended that USAA's Motion for Summary Judgment be GRANTED. (Dkt. No. 323). In light of this, the Court recommends denying as moot PNC's Motion for Summary Judgment (Dkt No. 322). Finally, most of USAA's Motion to Strike is rendered moot by granting USAA's Motion for Summary Judgment, but the Court GRANTS IN PART other portions of the Motion to Strike (Dkt. No. 310).

I. Background

In this suit, USAA alleges that PNC infringes U.S. Patent Nos. 10, 482, 432 (“'432 Patent”), 10, 621, 559 (“'559 Patent”), 10, 013, 681 (“'681 Patent”), 10, 013, 605 (“'605 Patent”), 8, 977, 571 (“'571 Patent”), and 8, 699, 779 (“'779 Patent”) (collectively, the “Asserted Patents”). The Asserted Patents can be divided into two groups based on the priority date and the technology of the patents:

the first group, referred to as the “MRDC Patents” consists of the '605, '681, '432, and '559 patents, which all claim priority to applications filed on October 31, 2006. Dkt. No. 323 at 3-4. Three of the MRDC patents-the '681, '432, and '559 patents-are continuations of the same application (No. 11/591, 247) and have substantially identical specifications, and the remaining patent-the '605 Patent-originates from a related application (No. 11/590, 974), which has a similar specification. Id. at 4.

The second group of patents, referred to as the “Autocapture Patents” consists of the '571 and '779 Patents, both filed in August 2009 and relating to improvements to USAA's MRDC technology. Id. at 5.

Three of the Asserted Patents have been involved in previous litigation before this Court, and in each case, the Court addressed the eligibility of the claims under § 101. The claims of the '605 and '681 patents were found to be directed to eligible subject matter by this Court. United Servs. Auto. Assoc. v. Wells Fargo Bank, N.A., No. 2:18-cv-366-JRG-RSP, Dkt. No. 182, (E.D. Tex. Dec. 20, 2019), R&R adopted id. Dkt. No. 239 (hereinafter “Wells Fargo II”). Likewise, the claims of the '571 Patent were also found to be directed to eligible subject matter. United Servs. Auto Assoc. v. Wells Fargo Bank, N.A., 414 F.Supp.3d 947 (E.D. Tex. 2019) (hereinafter “Wells Fargo I”).

In addition to district court litigation, the '681 Patent was the subject of a Covered Business Method review, where the PTAB denied institution based upon the PTAB's finding that Claim 1 of the '681 Patent recites “technological features that solve a technical problem using a technical solution by capturing electronic images of a check using a digital camera and a portable device for remote deposit.” Wells Fargo Bank, N.A. v. United Servs. Auto Assoc., CMB2019-00028, Decision Denying Institution, Paper 14, at 27 (P.T.A.B. Oct. 1, 2019). The '571 and '779 Patents were also the subject of Covered Business Method reviews, and the PTAB denied institution because the PTAB found the claims of both patents recited a technological solution. Wells Fargo Bank, N.A. v. United Servs. Auto Assoc., CMB2019-00004, Decision Denying Institution, Paper 22, at 28-29 (P.T.A.B. May 15, 2019); Wells Fargo Bank, N.A. v. United Servs. Auto Assoc., CMB2019-00005, Decision Denying Institution, Paper 25, at 22 (P.T.A.B. Jun. 3, 2019).

II. Legal Standard

a. Summary Judgment

Summary judgment should be granted if “there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-55 (1986). A “material fact” is one that “might affect the outcome” of the case, and a dispute about a material fact is “genuine” when the evidence is “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. Any evidence must be viewed in the light most favorable to the nonmovant. See id. at 255 (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970)). “If the moving party does not have the ultimate burden of persuasion at trial, the party ‘must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial.'” Intellectual Ventures I LLC v. T Mobile USA, Inc., No. 2:17-cv-00577-JRG, 2018 WL 5809267, at *1 (E.D. Tex. Nov. 6, 2018) (quoting Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th Cir. 2000)).

b. 35 U.S.C. § 101

The Court determines whether patent claims cover ineligible subject matter using a two-step analytical framework set out by the Supreme Court in Alice Corp. Pty. Ltd. v. CLS Bank Int'l, et al., 573 U.S. 208 (2014). At the first step, the Court evaluates whether the claims are directed to ineligible subject matter, such as an abstract idea. Id. at 217. To do so, the Court looks to the claims' “character as a whole.” Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1335 (Fed. Cir. 2016). Although all claims embody abstract ideas and other ineligible subject matter at some level, the Court's task is to examine “whether the claims [] focus on a specific means or method that improves the relevant technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery.” McRO, Inc. v. Bandai Namco Games Am. Inc., 837 F.3d 1299, 1314 (Fed. Cir. 2016). Furthermore, the step one analysis must be “directly tethered to the claim language” and avoid recasting specific elements “at a high level of abstraction.” Solutran, Inc. v. Elavon, Inc., 931 F.3d 1161, 1168 (Fed. Cir. 2019). If a Court determines that the claims are not directed to an abstract idea, the claims are patent-eligible and there is no need to proceed to Alice step two. See, e.g., SRI Int'l, Inc. v. Cisco Sys., Inc., 930 F.3d 1295, 1304 (Fed. Cir. 2019).

At Alice step two, if the claims are directed to ineligible subject matter, the Court then determines whether the claims contain an “inventive concept-i.e., an element or combination of elements that is sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [abstract idea] itself.” Alice, 573 U.S. at 217-18 (internal citations and quotes omitted). “[A]n inventive concept can be found in the non-conventional and non-generic arrangement of known, conventional pieces, ” BASCOM Glob. Internet Svcs., Inc. v. AT&T Mobility LLC, 827 F.3d 1341, 1349-50 (Fed. Cir. 2016), but must be more than mere “‘well-understood, routine, conventional activit[ies].'” Alice, 573 U.S. at 225 (quoting Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66, 71 (2012)).

III. Analysis

a. USAA's Motion for Summary Judgment

i. MRDC Patents

USAA argues that PNC over-generalized the claims and makes the same arguments that were found unpersuasive in Wells Fargo II. Therefore, the Court should again find the claims of the MRDC Patents eligible at Alice step 1. Dkt. No. 323 at 6-13. In Wells Fargo II, the Court found that the claims of the patents-in-suit, which included the '605 and '681 patents, were directed towards inventions that “improve specialized check processing machines by enabling the function of those machines to be performed without specialized equipment.” Wells Fargo II, Dkt. No. 182 at 13. As stated in the specification of the '605 Patent, “a particular advantage of embodiments of the invention is its ability to operate in conjunction with electronics that today's consumers actually own.” Id. Furthermore, the Court found that the claims “improve check depositing technology, not simply by reciting check deposit using a computer, but by enabling, via enumerated specific steps, to deposit checks remotely and quickly without the need for specialized equipment ” Id. at 13-14.

Relying on this Court's decision in Wells Fargo II, USAA argues that the claims of the MRDC patents “claim a technological solution to specific problems with prior art methods of check deposit, which involved paper checks or specialized check equipment that was often very expensive and was not readily available to ordinary consumers.” Dkt. No. 323 at 7. Citing to the specification of the '681 Patent, the patents describe that the prior art required specialized equipment to create and process an image of check that satisfied the requirements of the Check 21 Act. Id. To solve this problem, the claimed system turns “an ordinary, general-purpose computer into a device capable of capturing and processing check images that meet the technical image quality requirements for check deposit.” Id. at 8.

In response, PNC generally argues that the claims of the MRDC Patents do not claim a specific technical improvement that solves any technological problem. Dkt. No. 385 at 1-4. According to PNC, “substituting a consumer device for a specialized device is a business strategy, not a technical solution.” Id. at 2. PNC further argues that the claims do not recite any...