Dismissal of Declaratory Judgment Action Incomplete

District Court needed to provide further explanation for dismissal of complaint against mobile banking patents

United Services Automobile Association (USAA) owns patents that address the use of a mobile device to capture an image of a bank check and to transmit it for deposit. Mitek created its MiSnap™ software product for mobile check capture that provides automatic image capture technology enabling the instant capture of quality images with a mobile or desktop device. Mitek licenses the software in the form of a development kit to financial institutions. The financial institutions may modify the software provided by Mitek during development.

USAA sued Wells Fargo for patent infringement and, during a trial of that action, Mitek filed for declaratory judgment against USAA. It did so based on allegations in the Wells Fargo action and USAA’s patent licensing campaign, where it sent over 1,000 letters to financial institutions, including Mitek’s customers. The district court dismissed Mitek’s complaint for lack of a case or controversy. It also stated it would have dismissed the complaint as a matter of discretion.

The Federal Circuit vacated, finding that the district court did not provide sufficient analysis of the circumstances that could give rise to declaratory judgment jurisdiction. The Federal Circuit concluded that the issues raised by Mitek’s asserted bases of jurisdiction required finer parsing and more particularized determinations. Also, the Federal Circuit was unclear about whether the district court treated the dismissal motion as a facial challenge (based on allegations in the complaint or undisputed facts) or as a factual challenge (where the district court decided disputed facts). In particular, the Federal Circuit felt the district court should have examined more closely the customization performed by the financial institutions, different bases of infringement, and the character of the indemnity demands received and the precise scope of the corresponding indemnity agreements.

Concerning discretionary dismissal of a declaratory judgment complaint, the Federal Circuit reversed that as well, noting that district courts have wide latitude in making such findings, but the district court did not give reasons independent of its reasons for its jurisdictional dismissal.