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U.S. Bancorp Challenges DataTreasury Patents on Check Imaging
 
March 15 (Bloomberg) -- U.S. Bancorp, Minnesota's largest bank, is challenging DataTreasury Corp.'s patents in an effort to avoid paying more than $200 million over technology related to digital checks.

The trial of patent-infringement claims brought by closely held DataTreasury is the first of three that may lead to more than $1 billion in damages against the banking industry,including $868.7 million sought from Bank of America Corp., the largest U.S. bank by assets, and $100 million from Wells Fargo & Co., the biggest U.S. home lender.

"DataTreasury's primary business is filing lawsuits,"
U.S. Bancorp lawyer Joe W. Redden Jr. told the jury in opening arguments today before U.S. District Judge David Folsom in Marshall, Texas. "U.S. Bank will not be intimidated."

The patents relate to the imaging of checks, their transmission and storage in a central repository. More than 3.9 billion check images were shared or exchanged in 2009, according to Viewpointe, a New York-based company that processes and stores the digital images for banks. Creating a digital image saves banks the cost of transporting and storing large quantities of paper checks.

"U.S. Bank is trespassing on DataTreasury's property, and they are doing it intentionally," DataTreasury lawyer Anthony Kyle Bruster told the jury.

DataTreasury is seeking $202 million from Minneapolis-based U.S. Bancorp, equal to about 2 cents for every check. The bank denies infringing the patents and is challenging their validity.

Viewpointe and The Clearing House, a 150-year-old firm that handles payment services, are defendants in the trial as well. U.S. Bancorp is part owner of both companies.

Engineer's Startup

DataTreasury was started by New Yorker Claudio Ballard, a computer engineer who said he came up with the idea after talking with a Long Island restaurant owner about the storage of credit-card receipts, according to information on DataTreasury's Web site.
"In the 1990s it cost banks billions of dollars every year to move paper checks around the country," Bruster told the jury. "In 1994, Claudio Ballard’s invention solved their problem. He developed an integrated computer system that allows banks to send images electronically. This could save a lot of people a lot of money." Ballard raised more than $20 million from investors as part of a proposed venture with Chase Manhattan, which eventually became part of JPMorgan Chase & Co., according to DataTreasury. That venture never went through.

‘Done It First’

“Other companies had already developed imaging systems that did exactly what Mr. Ballard’s invention did,’” Redden said. “Other people had already done it first.”

DataTreasury is based in Plano, Texas, and the trial is in nearby Marshall, in a court district known for handling patent litigation and considered friendly to patent owners. Trials against other banks will be held later this year, including against Wells Fargo in August and Bank of America in October.

DataTreasury has settled claims against banks including JPMorgan, PNC Financial Services Group Inc., BB&T Corp. and First Horizon National Corp. In 2008, as part of a failed patent law proposal, the U.S. Senate considered a provision that would have insulated banks from paying damages in any patent suit over a “check collection system.”

The proposal was withdrawn after the Congressional Budget Office said the provision would constitute a taking of property and would cost the government $1 billion to reimburse the company.

The case is DataTreasury Corp. v. Wells Fargo & Co.,
05cv72, U.S. District Court, Eastern District of Texas
(Marshall).
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