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. 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.
USAA’s litigation campaign included high-profile cases against banks such as Wells Fargo, PNC, and Truist, but USAA never directly sued Mitek. Nevertheless, during the Wells Fargo litigation, USAA relied on evidence involving MiSnap functionality and cited Mitek’s documentation in claim charts for some—but not all—limitations of the asserted claims. In response, Mitek filed a declaratory judgment action in the Eastern District of Texas, seeking a declaration that MiSnap does not infringe any valid claim of four USAA patents: U.S. Patent Nos. 8,699,779; 9,336,517; 9,818,090; and 8,977,571.
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.
Leave a Reply