DCT

6:20-cv-00353

Q2 Software Inc v. Lighthouse Consulting Group LLC

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I. Executive Summary and Procedural Information

  • Parties & Counsel:
  • Case Identification: 6:20-cv-00353, W.D. Tex., 04/30/2020
  • Venue Allegations: Plaintiff asserts that venue is proper as it is a resident of the district (Austin, TX), Defendant has previously filed infringement lawsuits concerning the patents-in-suit in the district, and Plaintiff's customers use the accused products within the district.
  • Core Dispute: Plaintiff seeks a declaratory judgment that its financial software products do not infringe Defendant’s patents related to remote check deposit technology and that those patents are invalid.
  • Technical Context: The technology concerns systems and methods for capturing and processing images of checks for remote deposit using general-purpose imaging devices rather than specialized bank scanners.
  • Key Procedural History: The complaint was filed in response to infringement allegations made by Lighthouse, including a prior lawsuit filed by Lighthouse against a customer of Q2, Independent Financial, Inc., in the Eastern District of Texas. Subsequent to the filing of this complaint, both patents-in-suit were the subject of Inter Partes Review (IPR) proceedings before the U.S. Patent and Trademark Office. In two separate proceedings (IPR2020-00194 and IPR2020-00759), all claims of both the '940 Patent and the reissued '698 Patent were found unpatentable and cancelled.

Case Timeline

Date Event
2005-10-17 Priority Date for '698 and '940 Patents
2011-05-31 '698 Patent Issued
2013-06-11 '698 Patent Reissued as RE 44,274
2013-11-26 '940 Patent Issued
2019-11-15 Lighthouse files suit against Q2 customer (Lighthouse Consulting Group LLC v. Independent Financial)
2019-12-13 IPR Petition Filed against '940 Patent
2020-04-02 IPR Petition Filed against RE 44,274 Patent
2020-04-30 Complaint for Declaratory Judgment Filed
2021-05-14 IPR Certificate Issued Cancelling All Claims of '940 Patent
2021-05-18 IPR Certificate Issued Cancelling All Claims of RE 44,274 Patent

II. Technology and Patent(s)-in-Suit Analysis

U.S. Patent No. 8,590,940 - "Ubiquitous Imaging Device Based Check Image Capture," Issued Nov. 26, 2013

The Invention Explained

  • Problem Addressed: The patent describes a market environment where remote check deposit was typically offered using dedicated, and therefore costly, check scanners, creating a barrier for low-volume users like individuals and small businesses (’940 Patent, col. 1:57-67).
  • The Patented Solution: The invention proposes a system that allows these users to leverage "ubiquitous imaging devices" they already own, such as a fax machine or a flatbed scanner, for remote deposit (’940 Patent, col. 2:16-24). The system relies on a physical "carrier" that holds the check(s) and includes features like alignment marks and a unique identifier to ensure a usable image is captured and can be correctly processed by a remote banking system, which then pairs the separately captured front and back images (’940 Patent, Fig. 2; col. 4:41-51).
  • Technical Importance: This approach was intended to expand the accessibility and lower the cost of remote deposit capture by eliminating the need for customers to acquire specialized hardware (’940 Patent, col. 2:25-30).

Key Claims at a Glance

  • The complaint asserts that one or more claims are not infringed (Compl. ¶13). At the time of filing, the independent claims were 1 and 6. (Note: All claims were subsequently cancelled in an IPR proceeding).
  • Independent Claim 1 (System):
    • a carrier for receiving negotiable instruments, having a unique identifier
    • an imaging device for separately generating and transmitting a front and back image of the carrier (with instruments) and the identifier
    • a link for communication to a remote location
    • a receiving unit with software to break down the images and pair the front image of each instrument with its corresponding back image using the unique identifier
  • Independent Claim 6 (System):
    • a carrier for receiving negotiable instruments, having a unique identifier and a surface area for deposit information
    • an imaging device for separately generating and transmitting a front and back image of the carrier (with instruments) and the identifier
    • a link for communication to a remote location
    • a receiving unit with software to break down the images and pair the front image of each instrument with its corresponding back image using the unique identifier

U.S. Patent No. 7,950,698 (Reissued as RE 44,274) - "Ubiquitous Imaging Device Based Check Image Capture," Issued May 31, 2011

The Invention Explained

  • Problem Addressed: As the parent of the '940 Patent, this patent addresses the identical problem: the lack of a low-cost method for individuals and small businesses to utilize remote check deposit services without investing in dedicated scanning equipment (’698 Patent, col. 1:57-67).
  • The Patented Solution: The invention claims a method for remote deposit that involves providing a physical "carrier" with a unique identifier to hold a negotiable instrument (’698 Patent, col. 4:42-49). The user then creates electronic images of the front and back of the instrument using a general-purpose device (e.g., a fax machine) and transmits them to a remote location, where a system pairs the front and back images using the unique identifier to create a complete record for deposit (’698 Patent, col. 5:4-15).
  • Technical Importance: The method sought to make remote deposit capture economically viable for a broader customer base by leveraging existing, non-specialized imaging hardware (’698 Patent, col. 2:21-27).

Key Claims at a Glance

  • The complaint asserts that one or more claims are not infringed (Compl. ¶13). At the time of filing, the independent claims of the reissued patent were 1 and 9. (Note: All claims were subsequently cancelled in an IPR proceeding).
  • Independent Claim 1 (Method):
    • providing a carrier designed to permit front and back images of a negotiable instrument to be generated
    • securing the negotiable instrument to the carrier
    • creating a unique identifier on the front and back of the carrier
    • generating an electronic image of the front and back of the instrument and the identifier
    • transmitting the electronic image and identifier to a remote location
    • pairing, at the remote location, the front image with a "separately received corresponding back image" using the identifier
  • Independent Claim 9 (Method):
    • providing a carrier with a surface area for deposit information
    • generating a unique identifier for the carrier
    • securing the negotiable instrument to the carrier
    • transmitting the electronic image of the front and back of the carrier and instrument
    • pairing, at the remote location, the front image with a "separately received corresponding back image" using the identifier

III. The Accused Instrumentality

Product Identification

  • The "Accused Q2 Products" (Compl. ¶6).

Functionality and Market Context

  • The complaint does not provide sufficient detail to describe the specific functionality of the "Accused Q2 Products." It states only that they are software products offered by Q2 and that Lighthouse has accused them of infringement in a separate litigation involving a Q2 customer (Compl. ¶11). No probative visual evidence provided in complaint.

IV. Analysis of Infringement Allegations

The complaint, being a declaratory judgment action for non-infringement, does not provide infringement allegations or a claim chart. It makes only the conclusory statement that the "Accused Q2 Products" do not infringe any valid claim of the patents-in-suit, either directly or through the doctrine of equivalents (Compl. ¶14). As such, a detailed analysis of the infringement theory is not possible based on the complaint.

  • Identified Points of Contention: Based on the patent language and the likely nature of Q2's products (modern mobile deposit software), the infringement analysis would have centered on the following questions:
    • Scope Questions: The patents claim methods and systems requiring a physical "carrier" to hold a check for imaging by devices like fax machines or flatbed scanners (’698 Patent, col. 4:42-49). A primary point of contention would be whether a modern software application—which guides a user to capture an image with a smartphone camera without a physical sleeve—can be said to use a "carrier" within the meaning of the claims.
    • Technical Questions: The claims require a remote system to pair a front image with a "separately received corresponding back image" (’698 Patent, claim 1). This language appears to contemplate reconciliation of two distinct transmissions, such as separate faxes (’698 Patent, col. 6:4-7). A key technical question is whether a modern system, which may capture and transmit front and back images in a single, integrated user session, performs this specific "pairing" of "separately received" images as required by the claims.

V. Key Claim Terms for Construction

  • The Term: "carrier" (in all independent claims of both patents)

    • Context and Importance: This term is a cornerstone of every asserted independent claim. Its construction is critical because if it is construed to require a physical object, modern mobile remote deposit capture applications that lack such a component would likely not infringe.
    • Intrinsic Evidence for a Broader Interpretation: A party arguing for a broader definition might point to claim language defining the carrier functionally, as a component "designed to permit a front image and a back image... to be generated" (’698 Patent, claim 1), suggesting that any software guide or template that accomplishes this could suffice.
    • Intrinsic Evidence for a Narrower Interpretation: The specifications of both patents heavily support a narrower construction limited to a physical object. They repeatedly describe how a user "inserted into or attached to a carrier" negotiable instruments, and every illustrative figure (e.g., '940 Patent, Figs. 3-8) depicts a physical sheet or sleeve.

  • The Term: "pairing, at the remote location, the front image... to a separately received corresponding back image" (in claims 1 and 9 of the '698 Patent)

    • Context and Importance: This limitation defines a core function of the claimed backend processing. Whether a modern, integrated data transmission meets this "separately received" requirement is central to the infringement question.
    • Intrinsic Evidence for a Broader Interpretation: An argument for a broader reading could be that any time two distinct image files (front and back) arrive at a server and are algorithmically associated, they have been "separately received" and paired, regardless of whether they were sent in the same transmission session.
    • Intrinsic Evidence for a Narrower Interpretation: The specification provides strong context suggesting this limitation was intended to solve the problem of matching images from distinct transmissions. It notes that with the invention, "even if the front and back of the check are sent as separate fax transmissions at different times, it would still be possible to match" them (’698 Patent, col. 6:4-7). This suggests "separately received" implies a greater degree of separation than two files sent within a single communication from a mobile app.

VI. Other Allegations

  • Indirect Infringement: Plaintiff Q2 expressly denies that it induces or contributes to the infringement of the patents-in-suit (Compl. ¶15). The complaint establishes the basis for the declaratory judgment action by noting that Lighthouse has accused Q2’s customers of infringement and that Q2 has a contractual obligation to defend them (Compl. ¶7, ¶11).
  • Willful Infringement: The complaint does not address willfulness, as it was filed by the accused infringer. However, it establishes Q2’s knowledge of the patents-in-suit as of at least November 15, 2019, the filing date of the related lawsuit Lighthouse brought against a Q2 customer (Compl. ¶11). This fact would have been relevant to any subsequent willfulness claim by Lighthouse.

VII. Analyst’s Conclusion: Key Questions for the Case

  1. Mootness in Light of IPRs: The most significant issue in this case arises from events that occurred after the complaint was filed. As detailed in the procedural history, all asserted claims of both patents-in-suit have been cancelled in IPR proceedings. The central question for the court would be whether this cancellation renders the entire declaratory judgment action moot, as there are no longer any valid patent claims to infringe or invalidate.

  2. Definitional Scope of "Carrier": Had the claims survived, a dispositive issue would have been one of definitional scope: can the term "carrier," which is rooted in the patents' descriptions of a physical sleeve for use with legacy imaging devices like fax machines, be construed to cover the software-based graphical user interface of a modern mobile remote deposit capture application? The answer would likely determine infringement for a vast category of current technology.

  3. Patent-Eligibility under § 101: Plaintiff raises a strong challenge to validity based on 35 U.S.C. § 101, arguing the patents claim nothing more than the abstract idea of "capturing and transmitting data for deposit processing" using conventional components (Compl. ¶20). A key question for the court would have been one of patent eligibility: does the claimed combination of a physical carrier and a ubiquitous scanner represent a patent-eligible application of an idea, or is it an unpatentable instruction to perform a fundamental economic practice with off-the-shelf technology?