Factor2 Multimedia Systems LLC v. Guaranty Bank & Trust NA

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Factor 2 Multimedia Systems, LLC (Virginia)
  • Defendant: Guaranty Bank & Trust, N.A. (Texas)
  • Plaintiff’s Counsel: DNL Zito
• Case Identification: 5:25-cv-00027, E.D. Tex., 03/10/2025
• Venue Allegations: Venue is alleged to be proper because Defendant maintains a regular and established place of business within the Eastern District of Texas.
• Core Dispute: Plaintiff alleges that Defendant’s online and mobile banking platform infringes six patents related to systems and methods for user authentication using dynamic, temporary codes.
• Technical Context: The technology at issue involves multi-factor authentication, primarily using temporary or one-time passcodes to enhance security for online transactions and access to sensitive information.
• Key Procedural History: The complaint states that all six Patents-in-Suit are members of the same patent family. No other prior litigation, licensing history, or post-grant proceedings are mentioned in the complaint.

Case Timeline

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

U.S. Patent No. 8,281,129 - "Direct Authentication System and Method Via Trusted Authenticators"

• Patent Identification: U.S. Patent No. 8,281,129, "Direct Authentication System and Method Via Trusted Authenticators," issued October 2, 2012.

The Invention Explained

• Problem Addressed: The patent’s background section describes the problem of fraud and identity theft stemming from the reliance on static, supposedly confidential information (like a Social Security Number) to authenticate individuals for credit applications and other transactions. It notes that this information is often not secret, and the assumption that the person possessing the information is the legitimate individual is a fundamental flaw in existing security models (’129 Patent, col. 1:49-2:48).
• The Patented Solution: The invention proposes a two-factor authentication method that moves beyond simple knowledge-based verification. It introduces a "trusted authenticator" (e.g., the user's bank) that provides a "dynamic key" (a temporary code) to the user for a specific transaction. To be authenticated by a third-party "entity" (e.g., a merchant), the user provides both a "static key" (something they know, like a password) and the newly received dynamic key. The entity then sends an authentication request to the trusted authenticator, which verifies both keys before confirming the user's identity to the entity (’129 Patent, Abstract; col. 7:42-8:16).
• Technical Importance: This approach aims to create a more secure authentication framework by combining something a user knows with something a user receives for a specific transaction, thereby defeating fraudsters who may have stolen only the static information (’129 Patent, col. 5:21-6:6).

Key Claims at a Glance

• The complaint asserts infringement of claims 1-52 (Compl. ¶32). Independent claim 1 is recited in the complaint and its essential elements include:
  • receiving electronically a request for a dynamic code for the individual...from the individual by a trusted-authenticators computer;
  • calculating by the trusted-authenticators computer the dynamic code...wherein the dynamic code is valid for a predefined time and becomes invalid after being used;
  • sending by the trusted-authenticator's computer electronically the dynamic code to the individual;
  • receiving by the trusted-authenticator's computer electronically an authentication request from the entity to authenticate the individual based on a user information and the dynamic code; and
  • authenticating by the trusted-authenticator's computer an identity of the individual based on the user information and the dynamic code...wherein the result of the authentication is provided to the entity.
• The complaint also asserts dependent claims 2-52.

U.S. Patent No. 10,769,297 - "Centralized Identification and Authentication System and Method"

• Patent Identification: U.S. Patent No. 10,769,297, "Centralized Identification and Authentication System and Method," issued August 19, 2020.

The Invention Explained

• Problem Addressed: The patent describes the security risks inherent in e-commerce, where users must frequently provide confidential personal and financial information to various online businesses, creating multiple points of potential failure and theft (’297 Patent, col. 1:40-51).
• The Patented Solution: The invention discloses a centralized authentication model managed by a "Central-Entity." This entity provides users with a dynamic, non-predictable, and time-dependent "SecureCode." When a user interacts with an "External-Entity" (e.g., a merchant website), the user provides their username and the SecureCode as a form of "digital identity." The External-Entity forwards this digital identity to the Central-Entity, which validates the SecureCode and confirms the user's identity back to the External-Entity, completing the transaction without the user having to share underlying financial details with the merchant (’297 Patent, Abstract; col. 3:1-38).
• Technical Importance: This system is designed to increase e-commerce security by centralizing sensitive information and using a transient digital identity for authorization, thereby preventing the distribution of a user's core personal and financial data across multiple vendors (’297 Patent, col. 3:52-57).

Key Claims at a Glance

• The complaint asserts infringement of claims 1-29 (Compl. ¶52). Independent claim 1 is recited in the complaint and its essential elements include:
  • An authentication system...comprising one or more computing devices configured to perform operations comprising:
  • electronically receiving a request for a SecureCode;
  • generating the SecureCode;
  • electronically providing to the user the SecureCode, wherein the SecureCode is invalid after a predetermined time, invalid after one use, and only valid for authenticating the user;
  • electronically receiving...a digital authentication request...wherein the digital authentication request comprises a digital identity of the user, and the digital identity includes the SecureCode; and
  • authenticating the user by evaluating a validity of the SecureCode.
• The complaint also asserts dependent claims 2-29.

Multi-Patent Capsule: U.S. Patent No. 9,703,938

• Patent Identification: U.S. Patent No. 9,703,938, "Direct Authentication System and Method Via Trusted Authenticators," issued July 11, 2017.
• Technology Synopsis: This patent, sharing a title with the ’129 Patent, describes a method for enhancing network security by using a "trusted authenticator" to generate and validate a dynamic code for a user during an electronic transaction with another computer system (’938 Patent, Abstract). The system authenticates the user based on user-specific information, the received dynamic code, and the current time.
• Asserted Claims: Claims 1-26 (Compl. ¶36).
• Accused Features: The complaint accuses the "Guaranty System" generally of infringing these claims through its user authentication functionalities (Compl. ¶¶12, 25).

Multi-Patent Capsule: U.S. Patent No. 9,727,864

• Patent Identification: U.S. Patent No. 9,727,864, "Centralized Identification and Authentication System and Method," issued July 19, 2017.
• Technology Synopsis: This patent, sharing a title with the ’297 Patent, describes a centralized system where a "Central-Entity" provides a user with a dynamic and time-dependent "SecureCode." The user provides this code as part of a digital identity to an "External-Entity," which relies on the Central-Entity to perform the identification and authentication (’864 Patent, Abstract).
• Asserted Claims: Claims 1-15 (Compl. ¶40).
• Accused Features: The complaint accuses the "Guaranty System" generally of infringing these claims through its user authentication functionalities (Compl. ¶¶12, 25).

Multi-Patent Capsule: U.S. Patent No. 9,870,453

• Patent Identification: U.S. Patent No. 9,870,453, "Direct Authentication System and Method Via Trusted Authenticators," issued December 27, 2017.
• Technology Synopsis: This patent describes an authentication method where an "online entity" receives a "SecureCode" from a user that was generated by a separate "authentication system." The online entity then sends a request with the SecureCode and user identification to the authentication system, which validates the information and confirms or denies the user's identity (’453 Patent, Abstract).
• Asserted Claims: Claims 1-26 (Compl. ¶44).
• Accused Features: The complaint accuses the "Guaranty System" generally of infringing these claims through its user authentication functionalities (Compl. ¶¶12, 25).

Multi-Patent Capsule: U.S. Patent No. 10,083,285

• Patent Identification: U.S. Patent No. 10,083,285, "Direct Authentication System and Method Via Trusted Authenticators," issued September 5, 2018.
• Technology Synopsis: This patent describes a two-factor authentication method where a business requires an individual to provide both a static key (something they know) and a dynamic key (something they receive from a trusted authenticator). The business communicates with the trusted authenticator to verify both keys before validating the individual's identity (’285 Patent, Abstract).
• Asserted Claims: Claims 1-30 (Compl. ¶48).
• Accused Features: The complaint accuses the "Guaranty System" generally of infringing these claims through its user authentication functionalities (Compl. ¶¶12, 25).

III. The Accused Instrumentality

• Product Identification: The accused instrumentality is the "Guaranty System and Apparatus" (Compl. ¶22). This is alleged to include at least the Guaranty mobile application for iOS and Android, the internet website located at https://www.gnty.com/, and associated back-end systems and infrastructure (Compl. ¶22).
• Functionality and Market Context: The complaint alleges that the accused Guaranty System "provides access and functionality to Guaranty and distributes content and authenticates users on Guaranty systems" (Compl. ¶22). The core accused functionality is the "system and method for authentication" used by the platform (Compl. ¶12). The complaint does not provide sufficient detail for analysis of the specific technical implementation of this authentication feature or its market positioning beyond its use in Defendant's banking services.

IV. Analysis of Infringement Allegations

No probative visual evidence provided in complaint.

The complaint states that an exemplary claim chart for claim 1 of the ’297 Patent is attached as Exhibit G, but this exhibit was not included with the public filing (Compl. ¶26). In lieu of a chart, the infringement theory is summarized below based on the complaint's narrative allegations.

• ’129 Patent Infringement Allegations
  The complaint alleges that the Guaranty System infringes the method claims of the ’129 Patent (Compl. ¶21, ¶25). The theory suggests that when a user attempts to log in or perform a sensitive transaction, the Guaranty System (acting as the "trusted-authenticators computer") receives a request for and then calculates and sends a dynamic code to the user's device. When the user enters this code, the Guaranty System (acting as "the entity") receives it along with other user information and then performs the final authentication step by validating the code (Compl. ¶21).

• ’297 Patent Infringement Allegations
  The complaint alleges that the Guaranty System is an infringing "authentication system" under the claims of the ’297 Patent (Compl. ¶20, ¶25). The narrative theory is that the Guaranty System's back-end servers (the "online computer system") are connected to a user's mobile device or computer via a network. These servers receive a request for a "SecureCode," generate one with the claimed properties (e.g., time-limited, one-time-use), provide it to the user, and then authenticate the user by receiving and validating that same SecureCode as part of a "digital identity" (Compl. ¶20).

• Identified Points of Contention:

  • Architectural Scope Question: A primary question for the ’129 Patent and related family members may be whether the claimed architecture, which distinguishes between "an entity" and a "trusted-authenticators computer," reads on a system where a single business (Guaranty Bank) allegedly performs both roles with its own integrated platform. The defense may argue that the claims require three distinct parties (user, entity/merchant, and authenticator), whereas the accused system involves only two (user and bank).
  • Technical Functionality Question: For the ’297 Patent, a key factual question will be whether the temporary codes used by the Guaranty System meet all the specific negative limitations recited in claim 1. For example, the complaint does not provide evidence that the accused codes are "invalid after one use" and "invalid after a predetermined time passes," as required by the claim (Compl. ¶20). The analysis may turn on whether the accused functionality matches this precise combination of invalidating conditions.

V. Key Claim Terms for Construction

• The Term: "trusted-authenticators computer" (’129 Patent, Claim 1)

• Context and Importance: This term is central to the architecture of the claimed method in the ’129 Patent family. Its construction will be critical to determining if a single, integrated system operated by one party (like the accused bank) can infringe a claim that textually separates the "entity" conducting a transaction from the "trusted-authenticator" performing the verification. Practitioners may focus on this term because it appears to create a tripartite system.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The specification defines a "trusted-authenticator" as "an entity that already knows the individual, maintains personal information about that individual, and has established a trusted relationship," with a "bank or other financial institution" given as a "reasonable candidate" (’129 Patent, col. 4:41-52). This could support Plaintiff’s view that Guaranty Bank itself is the trusted authenticator.
  • Evidence for a Narrower Interpretation: Figures 1b and 2b depict the "Business" (the entity) and the "Trusted-Authenticator" as distinct functional blocks that communicate with each other over a network (’129 Patent, Fig. 1b, Fig. 2b). This visual separation may support an argument that they must be separate and distinct systems or actors.

• The Term: "SecureCode" (’297 Patent, Claim 1)

• Context and Importance: The definition and properties of the "SecureCode" are the technical core of the ’297 Patent's claims. The infringement analysis will depend on whether the temporary passcodes used by the Guaranty System possess all the specific functional attributes required by the claim language.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The specification of a related patent in the same family defines "dynamic key" (interchangeable with SecureCode) broadly as "a key or information that is variable and is provided to the individual...at the time it is needed for authentication" (’285 Patent, col. 8:51-56).
  • Evidence for a Narrower Interpretation: Claim 1 of the ’297 Patent itself provides a specific, multi-part definition, stating the SecureCode has three distinct properties: it "is invalid after a predetermined time passes," it "is invalid after one use," and it "is only valid for authenticating the user" (Compl. ¶20). This explicit language in the claim itself may be used to argue for a narrow construction that requires all three properties to be present.

VI. Other Allegations

• Indirect Infringement: The complaint alleges inducement infringement based on Defendant providing instructions for the operation of the Guaranty System (Compl. ¶24). No specific documents, such as user manuals or marketing materials, are cited as evidence of such instructions.
• Willful Infringement: The complaint includes a prayer for enhanced damages under 35 U.S.C. § 284 but does not allege specific facts to support a claim of willful infringement, such as pre-suit knowledge of the patents or a failure to investigate after receiving notice (Compl., Prayer for Relief ¶E). The complaint makes a conclusory allegation that Defendant has "no good faith defense" (Compl. ¶29).

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

• A core issue will be one of architectural mapping: Can the claims of the ’129 patent family, which appear to describe a three-party system (user, entity, and a separate trusted authenticator), be construed to cover the two-party architecture of an integrated banking platform where the bank itself allegedly performs the roles of both the "entity" and the "trusted authenticator"?
• A key evidentiary question will be one of functional equivalence: Does the accused banking platform's temporary passcode system perform all of the specific, multi-part functions required by claims like claim 1 of the ’297 Patent (e.g., invalidation after both one use and a set time), or does a fundamental mismatch in technical operation exist?
• A third question will be the sufficiency of the pleadings: The complaint makes broad allegations against the "Guaranty System" without mapping specific features of the accused mobile applications or website to individual claim limitations. The case will likely require Plaintiff to substantiate these general allegations with detailed evidence of the system's precise operation.