DatRec LLC v. Paychex Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: DatRec, LLC (Texas)
  • Defendant: Paychex, Inc. (Delaware)
  • Plaintiff’s Counsel: Ramey LLP
• Case Identification: 3:25-cv-02252, N.D. Tex., 08/21/2025
• Venue Allegations: Plaintiff alleges venue is proper in the Northern District of Texas because Defendant maintains a regular and established place of business in Irving, Texas, and has committed alleged acts of infringement in the district.
• Core Dispute: Plaintiff alleges that Defendant’s systems and methods for online services infringe a patent related to secure communication and user identity verification over a public network.
• Technical Context: The technology at issue addresses the need for trust and security in online communications by creating a database of verified user identities, where verification is based on cross-referencing data submitted by multiple, related individuals.
• Key Procedural History: The complaint states that Plaintiff is a non-practicing entity and that it and its predecessors-in-interest have entered into settlement licenses with other entities concerning its patents. The complaint also notes that Plaintiff may limit its claims to method claims to obviate any potential patent marking requirements.

Case Timeline

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

U.S. Patent No. 8,381,309 - "Methods and Systems for Secure Communication Over a Public Network"

• Patent Identification: U.S. Patent No. 8,381,309, "Methods and Systems for Secure Communication Over a Public Network," issued February 19, 2013 (’309 Patent).

The Invention Explained

• Problem Addressed: The patent's background section identifies the risk of connecting with "unreliable or falsely-identified senders" in modern internet communications and notes a "need in the art for communication channels over public networks with a high level of security" (’309 Patent, col. 1:21-25, col. 2:43-45).
• The Patented Solution: The invention proposes a system to improve confidence in a user's identity by creating a database of verified data (’309 Patent, col. 2:62-64). This is achieved by allowing multiple users, particularly those with a pre-existing relationship (e.g., family), to submit identifying information about an individual (’309 Patent, col. 2:26-35). The system then compares the data submitted by these different sources; a high degree of similarity or "correspondence" between the data points results in a higher "level of reliability" or confidence in the individual's identity (’309 Patent, col. 2:36-41; Fig. 3A). This verified identity database is then used to define and control the "levels of permitted communication" between users on the network (’309 Patent, Abstract).
• Technical Importance: The patented approach provides a method for establishing trusted digital identities through a model of crowdsourced or socially-vetted information, aiming to enhance security in online interactions (’309 Patent, col. 2:4-7).

Key Claims at a Glance

• The complaint asserts infringement of claims 1-17, which include independent method claims 1 and 11 and independent system claims 8 and 9 (Compl. ¶9).
• Independent Claim 1, a method claim, includes the following essential elements:
  • Providing a database with verified data relating to an individual's identity.
  • Constructing the database by:
    • Permitting multiple individuals "related to the said individual" to enter data, where the data includes a personal identifier and "relationship data indicative of a family tree."
    • Generating an "individual-associated data set (IDS)" from the submitted data.
    • "Verifying the IDS" by determining a "level of reliability based on a degree of similarity between data on the individual entered by different individuals."
  • Compiling the data sets to construct the database.
  • Defining "one or more levels of permitted communication" between individuals based on the verification.
• The complaint reserves the right to assert dependent claims (Compl. ¶9).

III. The Accused Instrumentality

Product Identification

• The complaint identifies the accused instrumentality as "a system and method for secure communication over a public network" that Defendant "maintains, operates, and administers" (Compl. ¶9). It is associated with Defendant's website, and related systems (Compl. ¶12).

Functionality and Market Context

• The complaint does not provide specific technical details about the operation of the accused Paychex systems. It makes a general allegation that Defendant provides products and services that "perform infringing methods or processes" (Compl. ¶2). The only functional description offered relates to inducement, alleging Defendant instructs customers on "discovering information in a text content and extracting and presenting the information" (Compl. ¶11). No specific Paychex product or service is named or described.

No probative visual evidence provided in complaint.

IV. Analysis of Infringement Allegations

The complaint alleges that Defendant's systems and methods infringe one or more of claims 1-17 of the ’309 Patent (Compl. ¶9). However, the complaint states that detailed support for these allegations is contained in a "preliminary exemplary table attached as Exhibit B," which was not filed with the public complaint (Compl. ¶10). The body of the complaint offers only conclusory statements that Defendant "maintains, operates, and administers a system and method for secure communication over a public network that infringes" the patent (Compl. ¶9). Without access to Exhibit B or more detailed factual allegations, a substantive analysis of the infringement theory is not possible.

• Identified Points of Contention:
  • Evidentiary Questions: The primary point of contention will likely be factual and evidentiary. A key question for the court will be whether Plaintiff can produce evidence that Defendant’s accused systems—which appear to be related to enterprise human resources and payroll services—actually perform the specific, multi-step method recited in the claims. The complaint does not specify how the accused systems are alleged to perform claim limitations such as permitting "a plurality of individuals related to the said individual to each enter data" or "verifying...by determining the level of reliability based on a degree of similarity between data...entered by different individuals."
  • Scope Questions: The dispute may turn on whether the patent’s claims, which describe a verification process rooted in social relationships ("family tree"), can be construed to cover the identity verification methods used in a corporate or commercial context. This raises the question of whether standard enterprise data validation processes fall within the scope of the patent's specific crowdsourcing-based verification method.

V. Key Claim Terms for Construction

• The Term: "verifying the IDS for the individual by determining the level of reliability based on a degree of similarity between data on the individual entered by different individuals" (from Claim 1).

• Context and Importance: This limitation appears to be the central inventive concept. The definition of this term is critical because infringement will depend on whether Defendant's accused system performs this specific type of comparison-based verification using data from multiple sources. Practitioners may focus on this term to determine if it is limited to the social-verification context of the patent's embodiments or if it can read more broadly on other forms of data cross-referencing.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The specification describes the process more generally as determining reliability "based on correspondence between data on the individual entered by different users" (’309 Patent, col. 4:4-6). A party could argue this language supports a construction that covers any system that compares data about a person from more than one distinct source to establish authenticity.
  • Evidence for a Narrower Interpretation: The claim language itself requires that the data be entered by "a plurality of individuals related to the said individual" and that the data comprises "relationship data indicative of a family tree" (’309 Patent, col. 19:15-20). The specification's detailed examples focus on comparing "family trees" and data provided by relatives (’309 Patent, col. 10:57-65; Fig. 3B). This may support a narrower construction limiting the verification method to a social or familial data-gathering context.

VI. Other Allegations

• Indirect Infringement: The complaint alleges inducement based on Defendant encouraging or instructing customers on "how to use its products and services" (Compl. ¶11). It alleges contributory infringement on the basis that Defendant instructs customers on "the use of the review platforms," that the product is not a staple commercial product, and that Defendant had reason to believe its customers' use would be infringing (Compl. ¶12).
• Willful Infringement: Willfulness allegations are based on Defendant's alleged knowledge of the ’309 Patent "from at least the filing date of the lawsuit" (Compl. ¶11, ¶12). This pleading appears to primarily support a claim for post-filing willfulness.

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

• A core issue will be one of evidentiary proof: Can the Plaintiff demonstrate, through discovery, that the accused Paychex enterprise platform performs the specific method of identity verification claimed in the ’309 Patent, which involves compiling and comparing crowdsourced data from multiple "related" individuals to generate a "level of reliability"? The complaint itself does not provide a factual basis for this connection.
• The case will also likely involve a central question of definitional scope: Is the patent's core verification method, which is heavily described in the context of social and familial relationships ("family tree"), limited to that context, or can its claims be construed broadly enough to cover the different types of identity and data validation processes typically used in commercial and enterprise software systems?