November 20, 2019

NAFCU's Hunt provides CUs with RDC update; New Compliance Blog tackles issue

lAWNAFCU's Carrie Hunt updated credit unions and discussed unresolved legal questions relating to remote deposit capture (RDC) patent litigation in an email sent Tuesday to members. Earlier this month, a jury in Texas determined that Wells Fargo had intentionally infringed on USAA's mobile RDC patents, resulting in $200 million in damages to be paid by Wells Fargo to USAA. 

In late 2017, credit unions – as well as other financial institutions – began receiving letters from a firm alleging that the credit union's RDC function infringed on USAA's patents.

"As patent infringement claims are highly complex and technical in nature, it is difficult to predict the outcome of any given claim," noted Hunt, NAFCU's executive vice president of government affairs and general counsel.

USAA's second claim against Wells Fargo is set to be heard in January.  In a separate case, a California federal court is expected to determine whether the vendor that provides Wells Fargo, and numerous other financial institutions, with RDC technology infringes on USAA's patents.

"Oftentimes, credit unions offer RDC to members through a vendor or third-party’s software," wrote Hunt. "We continue to encourage credit unions to review the contracts to determine how indemnity is addressed by each vendor or third-party in the event of a lawsuit regarding the software."

In a new post on the Compliance Blog, NAFCU Vice President of Regulatory Compliance Brandy Bruyere also provides an update on RDC litigation. Bruyere goes into more specific detail on the USAA case and reminds credit unions how to handle letters from USAA or other parties.

"[..K]eep in mind that vendor agreements may also contain requirements to provide notice to the vendor of potential patent disputes," advises Bruyere. "In some cases, not meeting contractual notice requirements could negatively impact issues like indemnification rights."

For more on RDC litigation, read Bruyere's blog post. NAFCU also has a previous Compliance Blog post that details steps credit unions that receive such a letter can take and will monitor for any implications stemming from this jury trial.

NAFCU will continue to keep credit unions updated on these issues and monitor changes in litigation risk.