On March 26, a federal jury in Marshall, Texas, awarded DataTreasury Corp. $27 million in damages against U.S. Bank and two other companies in the first of DTC's suits to go to trial over alleged infringement of its patents covering technology used to process checks. But the amount of damages could go higher.
A Baker Botts lawyer who practices intellectual property law representing plaintiffs and defendants says the interesting thing about the verdict is the finding of willful infringement against two of the defendants.
Nelson Roach, DTC's lead attorney and a partner in Nix, Patterson & Roach in Daingerfield, Texas, says federal patent law allows a district judge to tack on enhanced damages when a jury finds willful infringement of patents.
As noted on the verdict form, the jury in DataTreasury Corp. v. U.S. Bank, et al. validated Plano, Texas-based DTC's two patents being litigated, found that U.S. Bank and Viewpointe Archive Services jointly infringed on those patents, and determined their infringement was willful. Under the verdict, U.S. Bank and Viewpointe are liable for $26.6 million in damages.
Because the jury found willful infringement of the patents, Eastern District of Texas Chief Judge David Folsom, who presides over the suit, could triple that award, Roach says.
According to the verdict form, the jury also found U.S. Bank and The Clearing House Payments Co. jointly infringed on the DTC patents but that their infringement was not willful. The jury awarded $394,000 in damages against U.S. Bank and The Clearing House.
Roach says the technology covered by DTC's patents involves remote image capture with centralized processing, storage and retrieval. The process takes a paper document at the early point in the payment process and turns it into a digital image in the computer world, he says.
Eric Wetzel, a public relations consultant for DTC, says The Clearing House and Viewpointe operate as networks to exchange bank images.
In 2002, DTC filed its first suit against financial companies over alleged infringement of its patents. That suit, DataTreasury Corp. v. J.P. Morgan Chase and Co., settled. Under a consent order Folsom signed on July 1, 2005, J.P. Morgan Chase agreed it had infringed on one or more claims of the DTC patents and recognized the patents as valid and enforceable.
Wetzel says DTC has filed patent infringement suits against more than 70 banks and service providers and has reached settlements in 45 cases. It filed suits against U.S. Bank, Viewpoint and The Clearing House and 26 other companies in February 2006.
Teri Charest, spokeswoman for U.S. Bank, writes in an e-mail, "We are disappointed with the jury's verdict, but remain confident that U.S. Bank did not infringe the patents at issue and that the patents will ultimately be held invalid. U.S. Bank intends to pursue all avenues to protect its rights in further proceedings before Judge Folsom and on appeal if necessary."
Phillip Philbin, Viewpointe's lead attorney and a partner in Haynes and Boone in Dallas, says a number of post-verdict matters are pending before Folsom, including motions for judgment as a matter of law. He declines further comment.
James H. Carter, an attorney representing The Clearing House and a partner in Sullivan & Cromwell in New York City, says, "My client has no comment."
Folsom has set trial dates for two other groups of financial companies named as defendants in the suits DTC filed in 2006. Under Folsom's Jan. 19 order, jury selection in DTC's suit against Wells Fargo & Co., Wachovia Corp. and BancorpSouth Inc. is set to begin Aug. 1. The order sets jury selection to begin Oct. 5 in DTC's suit against Bank of America Corp., LaSalle Bank, SunTrust Bank and KeyBank.
Bart Showalter, a partner in Baker Botts in Dallas and firmwide chairman of its intellectual property department, says the U.S. Bank jury's findings for DTC that its patents are valid and enforceable and have been infringed "puts wind in their sails."
Showalter, who is not involved in DTC's suits against the financial companies, says the verdict is interesting because of the finding of willfulness against U.S. Bank and Viewpointe. Under the U.S. Court of Appeals for the Federal Circuit's decision in In Re: Seagate Technology, findings of willfulness in patent infringement suits have become rare, he says.
In its 2007 en banc ruling in Seagate, the Federal Circuit held that willful-infringement enhanced damages require "at least a showing of objective recklessness." The decision overruled the Federal Circuit holding in 1983's Underwater Devices Inc. v. Morrison-Knudsen Co. that if a potential infringer has notice of someone's patent rights, he has an affirmative duty of due care to determine if he is infringing. Under Seagate, Showalter says, "you don't have an obligation to investigate when you find somebody has a patent."