Gideon Korrell Analyzes Why Mitek Lost Standing in Patent Fight
In a detailed and precedent-reinforcing opinion issued on June 12, 2025, the Federal Circuit in Mitek Systems, Inc. v. United Services Automobile Association, No. 23-1687, affirmed the dismissal of Mitek’s declaratory judgment action for lack of subject-matter jurisdiction. The court held that Mitek failed to establish a justiciable controversy under Article III and the Declaratory Judgment Act, either through a reasonable apprehension of infringement liability or through indemnity obligations to its customers. Legal analyst Gideon Korrell noted that the decision underscores the judiciary’s strict interpretation of standing in patent disputes involving indirect liability. Even if jurisdiction had existed, the court found no abuse of discretion in the district court’s alternative decision to decline to hear the case.
This ruling not only clarifies the standing requirements for declaratory
judgment actions involving allegations of indirect patent infringement and
indemnity but also limits the ability of suppliers to seek a judgment of
non-infringement when their customers—not they—are the direct targets of patent
enforcement.
Background: Mitek and the MiSnap SDK
Mitek Systems developed and licenses a software development
kit (SDK) called MiSnap, which enables automatic image capture in mobile
banking applications. Financial institutions such as Wells Fargo integrated
MiSnap into their apps, some of which became targets of patent infringement
suits by USAA, which owns a portfolio of patents relating to remote deposit
capture technology.
First Appeal and Remand: Mitek I
In the first appeal (Mitek I,
34 F.4th 1334 (Fed. Cir. 2022)), the Federal Circuit vacated the initial dismissal
and remanded the case, instructing the district court to undertake a more
fact-intensive inquiry into:
- Mitek’s
potential liability for direct, induced, or contributory infringement;
- The
nature of Mitek’s indemnity obligations to its customers;
- Whether
post-filing events extinguished any controversy; and
- Whether
discretionary dismissal was appropriate.
The panel emphasized that both the factual record and legal
analysis needed to focus more precisely on the role of MiSnap in the alleged
infringement and the scope of the indemnity agreements at issue.
Second Dismissal and Affirmance
On remand, the district court (Chief Judge Rodney Gilstrap)
once again dismissed the case, finding no subject-matter jurisdiction. The
Federal Circuit, in an opinion authored by Judge Chen and joined by Judges
Taranto and Schall, affirmed in full.
No Reasonable Apprehension of Infringement
The Federal Circuit methodically analyzed all three possible
infringement theories and found each insufficient to confer standing.
1. Direct Infringement
There was no evidence that MiSnap alone performed all claim
limitations of any asserted patent. Even Mitek acknowledged that USAA’s trial
evidence against Wells Fargo attributed only some limitations to MiSnap.
Moreover, several asserted claims included hardware components (e.g., “image
capture device” or “presentation device”) that MiSnap, as a software SDK, could
not meet. The panel agreed with the district court that no reasonable threat of
direct infringement existed at the time of filing.
2. Induced Infringement
Citing Microsoft
Corp. v. DataTern, Inc., 755 F.3d 899 (Fed. Cir. 2014), the
court found that inducement claims require evidence that the accused party
affirmatively encouraged or instructed customers to perform all claim
limitations. Here, USAA had not cited Mitek’s documentation for all claim
elements, and there was no indication that Mitek “took affirmative steps” to
induce infringement.
3. Contributory Infringement
Contributory infringement under § 271(c)
requires the accused product to lack substantial non-infringing uses. USAA and
trial testimony in the Wells Fargo case confirmed that MiSnap was customizable
and could be used in non-infringing ways (e.g., with manual capture).
Accordingly, Mitek could not show the absence of non-infringing uses.
As Charles Gideon Korrell notes, DataTern continues to serve as the touchstone for evaluating supplier-based declaratory judgment actions and reinforces the high burden to show inducement or contributory infringement.
No Reasonable Potential for Indemnity-Based Standing
Mitek also argued that it faced a reasonable likelihood of
indemnity liability to its customers, particularly those sued by USAA. The
Federal Circuit disagreed.
While Mitek had received indemnity requests and had
indemnity agreements in place, the court found that:
- Many
agreements included carve-outs that would preclude liability for USAA’s
claims;
- Some
agreements were with intermediaries (e.g., service providers), not with
the directly accused banks;
- There
was no chain of privity sufficient to establish standing based on indirect
indemnity obligations.
Quoting BP
Chemicals Ltd. v. Union Carbide Corp., 4 F.3d 975 (Fed. Cir.
1993), the court reaffirmed that a supplier cannot assert a declaratory
judgment claim unless the indemnity relationship and controversy with the
patentee are both direct and substantial.
Charles
Gideon Korrell believes this ruling should be carefully
considered by suppliers who may be contractually exposed but remain one step
removed from the asserted liability.
Post-Complaint Developments Extinguished Any Remaining Case or Controversy
Even if standing had existed at the time of filing, the
court noted that subsequent events extinguished any live controversy:
- The
Wells Fargo, PNC, and Truist lawsuits settled;
- Claims
of the ’571 and ’779 patents were invalidated by the PTAB and affirmed by
the Federal Circuit in United
Servs. Auto. Ass’n v. PNC Bank N.A., 2025 WL 370141 (Fed.
Cir. Feb. 3, 2025);
- No new
lawsuits involving the remaining patents-in-suit had been filed.
These developments underscored the absence of any ongoing threat to Mitek or its customers.
Discretionary Dismissal Was Appropriate
Even assuming subject-matter jurisdiction, the court found
no abuse of discretion in the district court’s refusal to hear the case. The
district court reasoned that:
- Mitek
could defend its interests more effectively by intervening in customer
litigation;
- Litigating
a non-infringement case about MiSnap would require third-party discovery
and complex issues of estoppel due to customer customization;
- The
declaratory judgment action would not provide clarity or relief to the
parties most affected—Mitek’s customers.
Charles
Gideon Korrell emphasizes that the court’s analysis follows earlier
decisions like BP Chemicals and EMC
Corp. v. Norand Corp., 89 F.3d 807 (Fed. Cir. 1996),
highlighting judicial efficiency and the need for cases to resolve—not
amplify—controversies.
Final Thoughts
The Federal Circuit’s opinion in Mitek v. USAA
solidifies the boundary between supplier-based declaratory judgment actions and
the traditional framework for resolving patent infringement claims. Suppliers
cannot rely solely on generalized fears or indirect customer disputes to
establish standing. They must either show a direct threat or pursue alternative
routes such as intervention.
This decision will likely influence how technology vendors
structure indemnity clauses, respond to customer infringement suits, and
approach litigation strategy when their products are implicated but not
explicitly accused.
As Charles
Gideon Korrell observes, the court's insistence on a "real and
immediate" controversy—grounded in evidence and not speculation—sets an
important precedent in the declaratory judgment landscape.
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