Small Company Sues Big Banks, Wins Big in Check 21 Technology Cases

In a move that could have widespread implications for the fledgling business of check-image exchange, a small, privately held company holding patents on key elements of check imaging and processing filed patent-infringement suits today against four major banks. The federal suit, filed by Melville, N.Y.-based DataTreasury Corp. against Bank of America Corp., Citigroup Inc., Wachovia Corp., and Wells Fargo & Co., follows by five days a settlement the company reached with J.P. Morgan Chase & Co. in a similar case. As part of the settlement, the big bank recognized the validity and enforceability of DataTreasury's patents and agreed to license its technology worldwide. Founded in 1998, DataTreasury in 1999 and 2000 received two patents (numbers 5,910,988 and 6,032,137) covering document imaging, centralized processing, and electronic storage?the underpinnings of what the company calls its global repository platform. With the passage in 2003 of the Check Clearing for the 21st Century Act (Check 21), which encourages banks to swap electronic images of checks, the financial industry's interest in check imaging and image-exchange networks took off, and at least four national networks have begun operation in the past year. With paper check volumes declining, banks see image exchange and the remote deposit capture capability it makes possible as a means to cut costs on check processing and boost revenues on corporate treasury services. At the same time, DataTreasury in 2002 began filing a series of patent-infringement suits against vendors and financial institutions it saw as trying to cash in on Check 21 using technology it owned. The suits, culminating in the one filed today, have involved some 16 defendants, including Electronic Data Systems Corp., First Data Corp., Groupe Ingenico, MagTek Inc., NCR Corp., SVPCo., and Viewpointe Archive Services LLC. Bank One Corp. was also a defendant before its merger with J.P. Morgan Chase, with this action being settled at the same time as the Chase settlement. Besides Chase, three vendors earlier settled with DataTreasury and agreed to license its technology or work with the company on future business opportunities. These include RDM Corp., Affiliated Computer Services Inc., and NetDeposit Inc., which settled only last month. Viewpointe, a massive electronic check-storage facility and image exchange owned by several big banks, remains a defendant with respect to parties it is involved with other than Chase, a spokesman for DataTreasury says. The most recent case was filed in U.S. District Court for the Eastern District of Texas.