The US Court of Appeals for the Federal Circuit affirmed a district court’s dismissal of a declaratory judgment action, explaining that declaratory judgment jurisdiction does not “arise merely on the basis that a party learns of the existence of a patent owned by another or even perceives such a patent to pose a risk of infringement, without some affirmative act by the patentee.” Mitek Sys., Inc. v. United Servs. Auto. Ass’n, Case No. 23-1687 (Fed. Cir. June 12, 2025) (Taranto, Schall, Chen, JJ.)
Mitek develops a mobile image capture software development kit called MiSnap. United Services Automobile Association (USAA) sent letters to and filed infringement claims against several of Mitek’s bank customers. Mitek sought a declaratory judgment that it and its customers did not infringe four USAA patents related to mobile check deposits, arguing that it had standing based on a reasonable apprehension of suit and indemnity demands from its customers. The district court dismissed the declaratory judgment action, which Mitek appealed. The Federal Circuit vacated and remanded the district court’s dismissal, finding that the decision lacked adequate explanation and support.
On remand, the district court again analyzed Mitek’s two jurisdictional bases for its declaratory judgment action: potential liability for infringement and alleged demands for indemnity made by licensees after USAA sent letters seeking to license USAA patents. The district court again dismissed the case, determining that Mitek could not establish a case or controversy between USAA and Mitek as to infringement, and determining that indemnification agreements and USAA’s letters to Mitek customers did not create a reasonable potential for Mitek’s indemnification liability. Even if it had jurisdiction, the district court stated that it would exercise its discretion to decline jurisdiction, because the best means by which Mitek could defend the MiSnap software used by the banks was to intervene in a future litigation brought by USAA against a Mitek customer regarding the asserted patents. Mitek again appealed.
The threshold question for declaratory judgment jurisdiction is “whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.”
Regarding Mitek’s infringement basis, the Federal Circuit found that Mitek did not establish a reasonable potential of the suit for infringement. The Court’s consideration also included post-filing events, including settlements of related customer suits and Patent & Trial Appeal Board decisions invalidating asserted patent claims. These developments further undermined any ongoing controversy. The Court then addressed the allegations of direct infringement, induced infringement, and contributory infringement:
- Direct Infringement. Mitek admitted that MiSnap alone did not perform all elements of any asserted claim. USAA also never accused MiSnap of satisfying every limitation of an asserted claim. Instead, MiSnap’s “unadulterated” software implemented by third-party banks failed to meet certain elements of the asserted claims. And although Mitek stated that it evaluated the complete mobile deposit system, Mitek could not have had a reasonable apprehension of suit based on testing its complete mobile deposit system. This was never alleged in the complaint, and USAA asserted it was unaware of Mitek’s alleged testing of the complete mobile deposit system.
- Induced Infringement. The Federal Circuit found that USAA had not alleged that Mitek encouraged or instructed customers to infringe. Mitek’s reliance on USAA’s allegations at a Mitek customer’s trial was insufficient to establish a reasonable potential for inducement claims. Suits against customers do not automatically give rise to case or controversy regarding induced infringement. USAA never alleged that MiSnap met every element of every asserted claim, nor did it cite to Mitek documentation in its claim charts as evidence of the same.
- Contributory Infringement. USAA expressly stated that MiSnap had substantial non-infringing uses, such as customizing features in a non-infringing manner to have manual image capture instead of auto-capture. The Federal Circuit emphasized that substantial non-infringing use defeats contributory infringement claims.
Regarding Mitek’s indemnification basis, the Federal Circuit found that Mitek could not establish a reasonable potential of indemnification liability. The Court explained that a software supplier does not have a right to bring a declaratory judgment action solely due to a suit brought against customers. The Court distinguished a situation where a supplier would have standing to bring suit if the supplier had an obligation to indemnify customers, because the supplier had a legal obligation to indemnify and would stand in the shoes of the customers and represent their interests. The Court explained that each Mitek agreement contained carve-outs that precluded this reasonable potential for indemnification liability. Many involved third-party service providers that had separate indemnification agreements with end-user banks, and Mitek did not establish a case or controversy between these services providers (the indemnitees) and USAA.
Finally, the Federal Circuit saw no abuse in the district court’s discretionary dismissal. The Court disagreed with Mitek’s arguments that the district court failed to address certain issues related to whether Mitek could intervene in such actions and if intervention would provide adequate relief. The Court explained that Mitek would have an opportunity to file a motion to intervene on a permissive basis at a minimum in a future lawsuit against a Mitek customer similarly alleging that MiSnap meets certain patent claim limitations.
Shraddha Khirwadkar, a summer associate in the New York office, also contributed to this case note.
