CAFC Says Mobile Check Deposit Systems Don’t Improve Underlying Technology of Generic Computers

On Thursday, the U.S. Court of Appeals for the Federal Circuit (CAFC) issued a precedential decision in United Services Automobile Association v. PNC Bank N.A. reversing the Eastern District of Texas’ summary judgment ruling that USAA’s asserted patent claims are directed to patent eligible subject matter under 35 U.S.C. § 101. Assessing Step 2 of the Alice/Mayo framework in the first instance, the Federal Circuit ruled that USAA’s patent claims were directed to the abstract idea of depositing a check using a handheld mobile device without any inventive concept sufficient to confer patent eligibility.

Eliminating Need for Specialized Scanners Does Not Improve Generic Computers

In one of two decisions leading to Section 101 invalidations to USAA’s patent claims, the Federal Circuit found U.S. Patent No. 10402638, Digital Camera Processing System, directed to unpatentable subject matter. The system claimed by the ‘638 patent applies optical character recognition (OCR) in real-time error checking for details on deposit check images that have been captured by an account owner’s handheld mobile device, which USAA alleges improved upon prior art remote check deposit systems that required specialized check scanners. Representative claim 20 of the ‘638 patent claims the system for depositing a customer’s check and authenticating user data using an app to capture the check image and transmit the deposit to a bank system once OCR and error checks are performed.

Noting a series of cases outlined in Electric Power Group v. Alstom S.A. (2016) that found claims directed to collecting and analyzing information to fall within the realm of abstract ideas, the Federal Circuit clarified that the analysis for Step 1 under Alice/Mayo asks whether the challenged claim’s focus is on an asserted improvement in computer capabilities or rather an abstract idea for which computers are invoked as a tool, reciting part of the appellate court’s ruling in Enfish v. Microsoft (2016).

In the present appeal, the Federal Circuit found that the technological solution presented by the ‘638 patent involved routine processes implemented by a general purpose device in a conventional way, regardless whether the resulting invention accomplishes mobile deposits without the use of specialized check scanners. Claiming a handheld mobile device to carry out routine data collection and analysis only provides the concept of improving the check deposit process without any detail about the system’s technical configuration, which has led to patent eligibility being upheld for computer technologies in cases like McRO v. Bandai Namco Games America (2016).

De Novo Review Allows Federal Circuit to Reach Step 2 of Alice/Mayo

While the district court’s Alice/Mayo framework ended at Step 1, the Federal Circuit also analyzed Step 2 to determine that USAA’s claims included no inventive concept. In a footnote, the Federal Circuit underscored that, because Section 101 patent eligibility is a question reviewed de novo by the appellate court, it was capable of reaching Step 2 without the district court addressing this step first.

USAA argued that its patent claims, when taken as a whole, solves the technological problem of accurate detection and extraction of information from digital check images using general purpose mobile devices. However, the appellate court held that all of the image capture, OCR and data processing steps were well-known, routine and merely implemented by a generic mobile device. Unlike decisions such as DDR Holdings v. Hotels.com (2014), where the claimed invention improved the functioning of Internet hyperlink protocol, USAA’s invention created no fundamental change to the way the technology functions.

USAA also argued that material disputes of fact over the conventionality of OCR and other claim elements should cause the Federal Circuit to deny summary judgment in PNC Bank’s favor. The appellate court, however, found ample evidence that these elements were conventional both in the record and its own case law. Finding remaining arguments unpersuasive, the Federal Circuit did not reach USAA’s cross-appeal challenging the admission of expert testimony on damages as improper as there were no longer any valid patents to support the jury’s verdict.

In its other USAA v. PNC Bank decision, the Federal Circuit reversed another Eastern Texas ruling upholding the validity of several USAA patents under Section 101. Here, the appellate court similarly concluded that USAA’s patent claims to other remote mobile check deposit technologies were also invalid under Section 101 without prior analysis of Step 2 of Alice/Mayo by the district court.