USAA v. PNC Bank N.A., decided June 12, 2025

Date: June 12, 2025

Case Name: United Services Automobile Association (USAA) v. PNC Bank N.A.

Court: United States Court of Appeals for the Federal Circuit

Judges: DYK, CLEVENGER, and HUGHES, Circuit Judges. Opinion by HUGHES, Circuit Judge.

Outcome: Reversed the District Court's grant of summary judgment in favor of USAA on patent eligibility, finding the asserted patent claims ineligible under 35 U.S.C. § 101. Costs awarded against USAA.

I. Executive Summary

This case concerns the patent eligibility of United Services Automobile Association's (USAA) mobile check deposit technology, specifically U.S. Patent No. 10,402,638 ('638 patent). The Federal Circuit reversed the District Court's finding of patent eligibility, concluding that the asserted claim (claim 20 of the '638 patent) is directed to an abstract idea and lacks an inventive concept under 35 U.S.C. § 101, as defined by the Supreme Court's Alice Corp. v. CLS Bank Int’l framework. The court held that merely implementing conventional banking processes (like reviewing, recognizing, error-checking, and storing check data) on a generic handheld mobile device, even with features like real-time error checking and OCR, does not transform an abstract idea into patent-eligible subject matter.

II. Background and Procedural History

1. Patents at Issue: USAA asserted infringement of U.S. Patent No. 10,769,598 ('598 patent), U.S. Patent No. 10,402,638 ('638 patent), and U.S. Patent No. 9,224,136 ('136 patent).

2. Focus of Appeal: The Federal Circuit limited its discussion to the '638 patent because the asserted claims of the '598 and '136 patents had already been found unpatentable under 35 U.S.C. § 103 in separate inter partes reviews (affirmed by the Federal Circuit on Jan 30, 2025, and Mar 5, 2025, respectively). These prior invalidity findings had collateral estoppel effect.

3. '638 Patent Description: Entitled "Digital Camera Processing System," the '638 patent describes remote check deposit technology using a customer's personal mobile device (e.g., cell phone) to capture and transmit a check image to a financial institution. It emphasizes "real-time error checking steps, like using optical character recognition (OCR) to read the account number, routing number, and check number, to ensure the resultant image is of sufficient quality."

4. Asserted Claim: Claim 20 of the '638 patent describes a system for mobile check deposit, including:

5. A customer's handheld mobile device with a bank app.

6. Instructions to the customer to take a photo of the check, assistance with photo orientation, and display assistance.

7. Wireless transmission of the photo for mobile check deposit.

8. A bank computer programmed to update account balance.

9. The system configured to "check for errors before the submitting is performed" and "confirm that the mobile check deposit can go forward after optical character recognition is performed."

10. District Court Proceedings:USAA sued PNC for infringement.

11. Both parties filed cross-motions for summary judgment on patent eligibility under 35 U.S.C. § 101.

12. The District Court (Eastern District of Texas, Judge J. Rodney Gilstrap) granted USAA's motion, concluding the asserted claims were patent eligible because they were not directed to an abstract idea.

13. A jury trial ensued, finding no invalidity of the '598 and '638 patents and that PNC had infringed.

14. Appeal: PNC appealed the District Court’s summary judgment ruling on § 101. USAA cross-appealed regarding damages testimony. The Federal Circuit consolidated appeals and reviewed the § 101 issue de novo.
    

III. Key Themes and Important Ideas/Facts

The core of the Federal Circuit's decision hinges on its application of the Supreme Court's two-step Alice framework for patent eligibility under 35 U.S.C. § 101.

A. Alice Step One: Is the Claim Directed to a Patent-Ineligible Concept?

1. Court's Finding: The Federal Circuit disagreed with the District Court, concluding that Claim 20 of the '638 patent is directed to an abstract idea.

2. Abstract Idea Identified: The court identified the abstract idea as "depositing a check using a handheld mobile device."

3. Rationale:Routine Processes: The claim recites "routine data collection and analysis steps that have been traditionally performed by banks and people depositing checks—namely reviewing checks, recognizing relevant data, checking for errors, and storing the resultant data." The court cited Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat. Ass’n, noting that banks have long performed these functions.

4. Generic Computer Implementation: Merely implementing these routine processes on a "general-purpose device (e.g., a handheld mobile device) in a conventional way" is insufficient to render claims patent-eligible. "Mere computer-based implementation, without more, is not sufficient to render claims directed to patent-eligible subject matter." (Citing Alice).

5. Lack of Specificity/Technological Improvement: The claim is "drafted in a result-oriented fashion, without the requisite specificity needed to provide a non-abstract technological solution." While USAA argued about "extremely non-obvious algorithms," the court stated, "But those algorithms are not found within the claim or the specification—the claim merely recites a system that is ‘configured to’ ‘authenticate the customer,’ ‘check for errors,’ and ‘confirm that the mobile check deposit can go forward’ without providing how the system is configured."

6. Distinction from Prior Cases (e.g., McRO): Unlike McRO, where claims were found eligible due to "specific features of defined rules as claim limitations" for automating 3-D animation, the '638 patent lacks a "clear description of how these processes are performed."

7. User Experience vs. Computer Functionality: "improving a user’s experience while using a computer application is not, without more, sufficient to render the claims directed to an improvement in computer functionality." The claimed steps "do not improve the way in which the handheld mobile device functions; the device is merely a tool to perform the conventional steps associated with check depositing."
   

B. Alice Step Two: Does the Claim Contain an Inventive Concept?

1. Court's Finding: The Federal Circuit concluded that the claim lacks an inventive concept sufficient to transform the abstract idea into a patent-eligible application.

2. Rationale:Routine and Conventional Activity: "computer-mediated implementation of routine or conventional activity is not enough to provide an inventive concept."

3. Well-Known Technologies: The claim recites "nothing more than routine image capture, OCR, and data processing steps—all of which were well-known and routine." The court cited Content Extraction again, noting that "use of a scanner or other digitizing device to extract data from a document was well-known at the time of filing, as was the ability of computers to translate the shapes on a physical page into typeface characters." The patent itself acknowledges the use of "electronics that today’s customers actually own or can easily acquire, such as a general purpose computer, a scanner, and a digital camera."

4. Generic Hardware: The inclusion of a handheld mobile device does not add an inventive concept, as it is a "piece of generic hardware" and its use "does 'no more than claim[] the abstract idea itself.'"

5. No Fundamental Change to Computer Function: Unlike cases where claims "fundamentally changed or improved how a computer functions" (Bascom or DDR Holdings), here "there is no technological improvement—though the claim recites a system that makes the remote check deposit process easier and more convenient for bank customers, there is no fundamental change to how any of the technology functions, because it is all operating in a conventional way."

6. No Genuine Dispute of Material Fact: USAA's argument that elements like OCR, remote deposit applications, and cameras were not conventional was rejected, as "ample evidence in the record and in our caselaw" showed otherwise.
   

IV. Conclusion and Implications

The Federal Circuit's decision reinforces a strict interpretation of patent eligibility for software-implemented business methods, particularly those involving routine activities performed on generic computing devices. Key takeaways include:

• Generic Computer Implementation is Insufficient: Merely automating a traditional process on a computer, even a mobile device, does not confer patent eligibility without a specific technological improvement to the computer's functionality.

• Specificity Required: Claims must describe how a technological improvement is achieved, not just the desired result. Vague recitations of "configured to" perform functions are insufficient.

• Inventive Concept Beyond the Abstract Idea: To be eligible, claims must contain an "inventive concept" that transforms the abstract idea, rather than simply applying it or limiting it to a particular field. The inventive concept must go beyond the routine and conventional application of well-known technology.

• Collateral Estoppel: The ruling also highlights the significant impact of inter partes review decisions, as prior findings of unpatentability under § 103 mooted the § 101 analysis for two of USAA's patents.

• Impact on Damages: With the underlying patent found ineligible, USAA's cross-appeal regarding damages testimony was mooted, as there were "no longer any valid patents to support the jury verdict."
  

This decision is a significant setback for USAA in its patent dispute with PNC Bank regarding mobile check deposit technology, demonstrating the ongoing challenges of patenting abstract ideas in the software and financial technology sectors.