<em>USAA v. PNC Bank</em> Federal Circuit Decision Discussion

This article analyzes the Federal Circuit’s decision in USAA v. PNC Bank, which invalidated PNC’s  mobile check-deposit patent under 35 U.S.C. § 101. It examines the ‘638 patent, PNC’s competing mobile check-deposit technology, and procedural history, focusing on the application of the Alice/Mayo test to determine the patent eligibility of financial technology innovations.

The line between financial innovation and technological invention has blurred as financial technology has rapidly expanded. As the financial technology industry grows, some may interpret the judgment of courts as unpredictable in determining whether a patented product solves a technological problem or simply automates a business or financial process. See Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, 1346 (Fed. Cir. 2016); Elec. Power Grp., LLC v. Alstom S.A., 830 F.3d 1350, 1356 (Fed. Cir. 2016). The Alice/Mayo test determines whether a patent is valid by first checking if it claims an abstract idea, and if so, whether it adds an “inventive concept” that makes it more than just that abstract idea. Alice Corp. Pty. v. CLS Bank Int'l, 573 U.S. 208, 217 (U.S. 2014). If a patent doesn’t add an inventive concept, the patent is invalid. Id. Under the Alice/Mayo test, courts must distinguish between abstract ideas and genuine technological innovations. Id. Overturning a $218 million jury verdict, the Federal Circuit’s decision in United Services Automobile Association (USAA) v. PNC Bank affirms its narrow reading of patent eligibility in the financial sector. United Servs. Auto. Ass'n v. PNC Bank N.A., 139 F.4th 1332, 1340 (Fed. Cir. 2025). The decision in USAA v. PNC Bank not only illustrates the court’s preference for maintaining open access to new banking technologies for the sake of fair competition, but also quietly removes a method of protection for businesses seeking to protect their innovations. Megan M. La Belle & Heidi M. Schooner, Fintech: New Battle Lines in the Patent Wars?, 42 Cardozo L. Rev. 277, 316 (2020). This ruling will likely push financial institutions to use patents less and to pursue alternative paths for protecting their innovations. Id. at 286.

Under 35 U.S.C. § 101 (“§ 101”), a patent can be granted to whomever “invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof. . .  subject to the conditions and requirements of this title.” 35 U.S.C.A. § 101 (West). The Alice/Mayo test instructs courts to first inquire whether a patent is an abstract idea. Alice Corp. Pty., 573 U.S. at 217. If the patent  is in  an abstract idea,  the courts must ask themselves whether the abstract idea is an inventive concept. Id. The Alice/Mayo test comes from the 2014 case, Alice Corp. v. CLS Bank International, and the 2012 case, Mayo Collaborative Services v. Prometheus Laboratories. Id.; Mayo Collaborative Services v. Prometheus Laboratories, 566 U.S. 66, 72 (U.S. 2012). This two-step test distinguishes between patents that disproportionately risk “tying up the use of the underlying ideas” and those that “integrate the building blocks into something more.” Alice Corp. Pty., 573 U.S. at 217.

USAA was founded in 1922 by twenty-five U.S. Army officers in San Antonio who came together to insure each other’s automobiles. USAA Company History, USAA (last visited Oct. 20, 2025), https://www.usaa.com/inet/wc/about_usaa_corporate_overview_history. As USAA continued to grow, it expanded its reach to other branches of the military banking, investing, and insurance. Id. In the 1940s, USAA became an early adopter of new technology through automated office machines and, to this day, stands at the forefront of innovation in the insurance industry. Id. In collaboration with Mitek Systems in 2009, USAA was the first banking institution to offer remote check deposit capabilities, allowing users to deposit checks using their phone cameras. USAA Bank and Mitek Systems Earn Top Honors in Inaugural BAI MobileLink Awards, PYMNTS (Oct. 20, 2010), https://www.pymnts.com/news/2010/usaa-bank-and-mitek-systems-earn-top-honors-in-inaugural-bai-mobilelink-awards. PNC Bank, a major U.S. bank headquartered in Pittsburgh, offering retail banking, commercial banking, wealth management, and other financial services, launched its mobile check deposit feature in 2011. PNC Financial Services, Wikipedia (last visited Oct. 20, 2025), https://en.wikipedia.org/wiki/PNC_Financial_Services. PNC’s mobile check deposit app operates similarly to USAA’s mobile check deposit service. A user photographs the front and back of a check and enters the monetary amounts, and the money will be added to their account within the next business day. PNC Makes Banking Easier With Mobile App to Deposit Checks Via iPhone, PNC Mediaroom (last visited Oct. 20, 2025), https://pnc.mediaroom.com/index.php?item=74422&s=3473. Mobile deposits became a trend for financial institutions in the 2000s and 2010s as they moved toward more modern banking practices. Mitek’s Mobile Deposit® Enables Consumers to Snap Their Way to More Than $40 Billion in Deposits, MITEK (Mar. 18, 2013), https://www.miteksystems.com/press-releases/miteks-mobile-depositr-enables-consumers-to-snap-their-way-to-more-than-40-billion. After PNC Bank released its mobile check deposit feature, it has become one of USAA’s many targets to enforce its mobile check deposit patent.  See United Servs. Auto. Ass'n v. Wells Fargo Bank, 414 F. Supp. 3d 947, 950 (E.D. Tex. 2019); United Servs. Auto. Ass’n v. Truist Bank, 2023 WL 2871060 *1. Because stechnological developments in mobile check deposit apps, U.S. Patent No. 10,402,638 (“Patent ‘638”) is at issue. United Servs. Auto. Ass'n, 139 F.4th at 1334.

In 2019, Patent ‘638 was issued to USAA. Id. The patented system improves the accuracy and reliability of mobile check deposits by incorporating real-time error-checking steps and optical character recognition (“OCR”) to ensure the image is valid for processing. Id. at 1335. Claim 20, the only claim on Patent ‘638, describes a system that allows a customer to deposit a check. At the same time, the app guides the user through the process by instructing them to take a photo of the check and transmitting the image wirelessly to a bank. Id. USAA asserted that PNC Bank used a similar process, including guiding users through the check picture phase and using OCR-based validation. Id. PNC Bank disputed USAA’s claims, arguing that Patent ‘638 covered abstract ideas rather than new technological improvements under § 101. Id. 

Under the Alice/Mayo test, USAA claimed that its mobile checking deposit invention addressed technological problems rather than abstract financial methods. United Servs. Auto. Ass'n, 139 F.4th at 1335. Specifically, USAA claimed that Patent ‘638 addressed the  lack of high-quality image capture for checks while also implementing image verification and fraud detection. Id. USAA framed their claims as non-routine and more than simply automating existing financial processes, and relied upon “the development of extremely non-obvious algorithms.” Id. at 1338. 

PNC Bank argued that Patent ‘638 was not about solving a technological issue but rather computerizing a long-standing banking practice traditionally done by bank tellers, like reviewing, verifying, and storing check data. See Content Extraction & Transmission LLC v. Wells Fargo Bank, Nat. Ass’n, 776 F.3d 1343, 1348 (Fed. Cir. 2014) (“And banks have, for some time, reviewed checks, recognized relevant data such as the amount, account number, and identity of account holder, and stored that information in their records.”). Under the Alice/Mayo test, PNC Bank claims that the patent would fail the second step of patentability, which is to “determine whether it contains an ‘inventive concept’ sufficient to ‘transform’ the claimed abstract idea into a patent-eligible application.” Alice Corp. Pty., 573 U.S. at 221. PNC Bank contended that Patent ‘638 did not improve the functionality of mobile devices, nor did it offer a new image-processing technique. United Servs. Auto. Ass'n, 139 F.4th at 1337. Instead, PNC Bank claims that the patent merely used mobile devices to perform a standard banking task more conveniently. Id. 

The Federal Circuit court, focusing on Patent ‘638, reversed the Eastern District of Texas jury verdict and held the claim ineligible under § 101. United Servs. Auto. Ass'n, 139 F.4th at 1340. Under the Alice/Mayo test, the district court found that the claim was not directed to an abstract idea, therefore, it did not proceed to step two. Id. at 1338. However, the Federal Circuit court found that USAA’s claim was an abstract idea, thus satisfying step one. Id. First, the court reasoned that the claims were directed to the abstract concepts of depositing a check, image verification, and fraud detection on a mobile device, rather than a technological improvement. Id. The algorithm did not qualify as an inventive concept that would support patent eligibility. Id. at 1339. The patent only recites routine image capture, OCR, and data processing steps, “all of which are well-known and routine.” Id. The court compared United Services Automobile Association v. PNC Bank to the facts in Content Extraction and reaffirmed that the mere automation of standard banking practices is insufficient. 776 F.3d at 1347–48 (holding invalidated patents on a document-scanning system because the practice of reading and recording data did not add an inventive concept worthy of patent).

In 2020, USAA filed a patent infringement suit against PNC Bank in the Eastern District of Texas, alleging infringement of four patents related to mobile check deposit technology. United Servs. Auto. Ass'n v. PNC Bank N.A., 622 F. Supp. 3d at 337, 348 (E.D. Tex. 2022). The court awarded USAA $218.45 million. $218.45M Jury Verdict for USAA, Irell & Manella LLP (May 2022),  https://www.irell.com/ourwork-recent-matters-322. PNC appealed to the U.S. Court of Appeals for the Federal Circuit, challenging the validity of USAA’s patents. United Servs. Auto. Ass'n, 139 F.4th at 1334. On June 12, 2025, the verdict was reversed, and the patents were held invalid under § 101. Id. at 1340. Finally, USAA petitioned the Supreme Court for review, but the Court denied certiorari, leaving the Federal Circuit’s decision as the final ruling. Sup. Ct. of the U.S., Case No. 25-149, Docket (filed 2025), https://www.supremecourt.gov/search.aspx?filename=%2Fdocket%2Fdocketfiles%2Fhtml%2Fpublic%2F 25-149.html.

The decision in United Services Automobile Association v. PNC Bank struck down Patent ‘638 and is likely to make financial technology companies more cautious about relying on patents to protect their innovations. Megan M. La Belle & Heidi M. Schooner, Fintech: New Battle Lines in the Patent Wars?, 42 Cardozo L. Rev. 277, 316 (2020). Many fintech companies will likely continue to spotlight trade secrets as the main path to protecting intellectual property, while further prioritizing cross-licensing arrangements and patent pools as another avenue. Megan M. La Belle & Heidi M. Schooner, Fintech: New Battle Lines in the Patent Wars?, 42 Cardozo L. Rev. 277, 344 (2020).