DALLAS – A judge’s ruling in a suit challenging patent rights for Check 21 technology could bring Bank of America and other major defendants in the case to the negotiating table, just as an additional trial in the case commences.
A federal judge last week doubled a judgment against U.S. Bank and two leading players in the image exchange market, Viewpointe Exchange Archives and The Clearing House of New York, to $54 million in a patent infringement suit brought by DataTreasury Corp., a tiny firm which holds the patent on a certain Check 21 technology.
The verdict is the first one delivered in a four-year patent infringement suit that has seen dozens of banks agree to license the technology through DataTreasury, rather than go to court. Bank of America took the dock this week in the next stage of the trial, which has been split into three parts because of its complexity.
“Bank of America and the other defendants set for trial in October need to take notice [of the court’s ruling], because this decision by the court could set potential damages in that case of somewhere between $2 billion and $3 billion,” said Eric Wetzel, spokesman for DataTreasury.
Court filings indicate that Bank of America has the most to lose in the dispute with DataTreasury. It faces about 55% of the alleged damages – $868.7 million – and handles about 62% of the alleged check volume.
U.S. Bank said it will appeal the judgment. “We are disappointed with the court’s recent rulings, but remain confident that U.S. Bank did not infringe the patents at issue and that the patents will ultimately be held invalid,” spokesman Steve Dale said Tuesday in a prepared statement. “U.S. Bank will pursue all avenues to protect its rights and will appeal.”
Banks including J.P. Morgan Chase, Wells Fargo, PNC Financial and BB&T Corp. have already settled with DataTreasury, which sued more than two dozen banks in 2006.
Both Chase and U.S. Bank are among a handful of big banks that own Viewpointe and the Clearing House, as well as SVPCO, which are among a handful of dominant image exchange networks.
While no credit unions have been named as defendants, the case could have major implications for credit unions, which readily use the Viewpoint and Clearing House image and check exchange services.
When DataTreasury was started in the late 1990s by inventor Claudio Ballard, it discussed a joint venture with Chase Manhattan Bank, now known as J.P. Morgan Chase, according to court documents. Ballard, who owns patents for image capture, centralized processing, and electronic storage of document and check information, said he got the idea for a check-processing system after seeing the proprietor of a restaurant he was eating at keeping customers’ credit card receipts in a shoebox. So he invented and patented a system for digitizing paper information and storing and exchanging those images. But the banking giant instead helped start competitors Small Value Payments Co., now known as SVPCO, and Viewpointe, which together process most of the nation's checks.
DataTreasury alleged that J.P. Morgan Chase re-engineered its technology to avoid licensing fees. The bank admitted the infringement and settled with the company in 2005 and now pays licensing fees. In 2006, DataTreasury sued dozens of other financial institutions, many of which have settled with company. The company is purported to earn as much as $350 million in licensing fees a year on its Check 21 patents.
