Factor2 Multimedia Systems LLC v. BROADWAY Bancshares Inc

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Factor 2 Multimedia Systems, LLC (Virginia)
  • Defendant: Broadway Bancshares, Inc. dba Broadway National Bank (Texas)
  • Plaintiff’s Counsel: DNL Zito
• Case Identification: 5:25-cv-00183, W.D. Tex., 02/19/2025
• Venue Allegations: Plaintiff alleges venue is proper because Defendant maintains a regular and established place of business in the Western District of Texas and has committed the alleged acts of infringement within the district.
• 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, single-use codes generated by a trusted or centralized entity.
• Technical Context: The technology at issue addresses secure user authentication in online environments, a critical function for financial institutions and e-commerce platforms to prevent fraud and identity theft.
• Key Procedural History: The complaint states that all six patents-in-suit are members of the same patent family. No other significant procedural events, such as prior litigation or administrative challenges to the patents, are mentioned in the complaint.

Case Timeline

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

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

The Invention Explained

• Problem Addressed: The patent’s background section describes the security risks inherent in e-commerce, where customers must release confidential personal and financial information to multiple businesses, noting that this type of identification is “not only unsafe but also it is not fool proof that the user is really the person he says he is” (’297 Patent, col. 2:40-51).
• The Patented Solution: The invention proposes a "Central-Entity" that securely stores a user's information and, upon request, generates a "dynamic, non-predictable and time dependent SecureCode" for the user (’297 Patent, Abstract; col. 2:48-52). The user provides this SecureCode to an "External-Entity" (e.g., a merchant), which then contacts the Central-Entity to verify the code and authenticate the user without the External-Entity ever handling the user's underlying sensitive data (’297 Patent, col. 3:1-16).
• Technical Importance: This centralized model aims to enhance online security by minimizing the distribution of static personal and financial information across numerous websites, thereby reducing the risk of fraud from data breaches at third-party merchants (’297 Patent, col. 3:56-62).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claims 2-29 (Compl. ¶52).
• The essential elements of independent claim 1 include:
  • An authentication system comprising computing devices configured to perform operations.
  • Electronically receiving a request for a "SecureCode" from a user's computing device.
  • Generating the "SecureCode".
  • Electronically providing the "SecureCode" to the user, where the code is invalid after a predetermined time, after one use, and is only valid for authenticating that user.
  • Electronically receiving a digital authentication request from an online computer system, where the request includes the "SecureCode" as part of the user's digital identity.
  • Authenticating the user by evaluating the validity of the "SecureCode" included in the request.

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

The Invention Explained

• Problem Addressed: The patent addresses the problem of identity theft that arises from authentication processes based on supposedly secret personal information (e.g., SSN) that is often compromised (’129 Patent, col. 2:1-20). The patent critiques prior academic proposals for being potentially burdensome or requiring new government bureaucracies (’129 Patent, col. 3:7-15, col. 3:50-57).
• The Patented Solution: The invention describes a "two-factor" authentication method leveraging a "trusted authenticator," defined as an entity with a pre-existing trusted relationship with an individual, such as a bank (’129 Patent, col. 4:42-53). An individual provides both a static key (something known) and a temporary "dynamic code" (something received on-demand from the trusted authenticator) to an entity (e.g., a business). The entity then sends an authentication request with both keys to the trusted authenticator for verification (’129 Patent, Abstract; Fig. 2a).
• Technical Importance: The claimed solution utilizes existing commercial trust relationships and infrastructure, such as those within the financial services community, to implement stronger, two-factor authentication without requiring users to manage separate hardware tokens for every service (’129 Patent, col. 4:56-62).

Key Claims at a Glance

• The complaint asserts independent claim 1 and dependent claims 2-52 (Compl. ¶32).
• The essential elements of independent claim 1 include:
  • A computer-implemented method performed by a "trusted-authenticator's computer".
  • Receiving a request for a "dynamic code" from an individual.
  • Calculating the "dynamic code", which is valid for a predefined time and becomes invalid after use.
  • Sending the "dynamic code" to the individual.
  • Receiving an authentication request from an entity, which includes user information and the "dynamic code".
  • Authenticating the individual's identity based on the user information and the "dynamic code", and providing the result to the entity.

Multi-Patent Capsule Summaries

• 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, related to the ’129 Patent, describes a method for a trusted authentication system to enhance network security. It claims a process where a user obtains a temporary, single-use "dynamic code" from a trusted authenticator to conduct an electronic transaction with a separate computer system, which then verifies the code with the trusted authenticator (Compl. ¶14; ’938 Patent, Abstract).
  • Asserted Claims: Claims 1-26 (Compl. ¶36).
  • Accused Features: The complaint alleges infringement by the “Broadway System” generally, without mapping allegations to specific features (Compl. ¶36).

• 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, related to the ’297 Patent, describes an authentication computer system that serves a plurality of users and transaction computer systems. It claims a system that generates non-predictable digital codes for users to provide to transaction systems, which are then validated by the central authentication system (Compl. ¶15; ’864 Patent, Abstract).
  • Asserted Claims: Claims 1-15 (Compl. ¶40).
  • Accused Features: The complaint alleges infringement by the “Broadway System” generally, without mapping allegations to specific features (Compl. ¶40).

• 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 for enhancing computer network security. It claims a process where a computing device receives a time-limited, single-use "SecureCode" from an authentication system and uses it to authenticate a user with an online entity (Compl. ¶16; ’453 Patent, Abstract).
  • Asserted Claims: Claims 1-26 (Compl. ¶44).
  • Accused Features: The complaint alleges infringement by the “Broadway System” generally, without mapping allegations to specific features (Compl. ¶44).

• 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 25, 2018.
  • Technology Synopsis: This patent claims a method for enhancing user authentication with an online system. It describes a process of receiving user-authentication information including a "user-authentication code", sending a request to an authentication system to validate it, and proceeding with user access based on the response (Compl. ¶17; ’285 Patent, Abstract).
  • Asserted Claims: Claims 1-30 (Compl. ¶48).
  • Accused Features: The complaint alleges infringement by the “Broadway System” generally, without mapping allegations to specific features (Compl. ¶48).

III. The Accused Instrumentality

Product Identification

The accused instrumentality is the "Broadway System" (Compl. ¶3).

Functionality and Market Context

The complaint defines the Broadway System as encompassing the Broadway Bank mobile application for iOS and Android, the website at broadway.bank, and the associated back-end systems that provide access, distribute content, and authenticate users (Compl. ¶22). The complaint alleges that this system uses a method for authentication that infringes the patents-in-suit (Compl. ¶12). No further technical details regarding the operation of the authentication system are provided. No probative visual evidence provided in complaint.

IV. Analysis of Infringement Allegations

The complaint references an "exemplary claim chart" attached as Exhibit G, which purports to show the correspondence of the Broadway System with claim 1 of the '297 Patent (Compl. ¶26). This exhibit was not included with the provided complaint. The complaint does not otherwise provide a narrative description of how the accused Broadway System meets the specific limitations of any asserted claim. The infringement allegations are conclusory, stating that the Broadway System "satisfies the elements of at least one claim of each of the asserted patents" (Compl. ¶25). As such, a claim chart summary cannot be constructed from the facts alleged in the complaint.

Identified Points of Contention

Given the lack of specific factual allegations mapping product features to claim limitations, the initial points of contention are likely to be broad and foundational.

• Evidentiary Questions: A primary question is what evidence exists that the Broadway System performs the core claimed functions. For example, does the system generate a code that is verifiably "invalid after a predetermined time passes" and "invalid after one use" as required by claim 1 of the ’297 Patent? The complaint does not allege facts to answer such technical questions.
• Scope Questions: A likely area of dispute will be whether the architecture of the Broadway System maps to the claimed architectures. For instance, does Broadway's own system perform the role of the "trusted-authenticator's computer" in the ’129 Patent, or does it rely on a third-party service? The answer may affect how the claim limitations are read onto the accused instrumentality.

V. Key Claim Terms for Construction

• The Term: "SecureCode" (’297 Patent) / "dynamic code" (’129 Patent)

  • Context and Importance: These terms are central to the inventions, representing the temporary, on-demand credential that provides the second factor of authentication. The outcome of the case may depend on whether the token, password, or code used in the Broadway System meets the specific functional limitations ascribed to these terms in the claims, such as being single-use and time-limited.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The specification of the related ’285 Patent defines "dynamic key" as "a key or information that is variable" and can be an "alphanumeric code," suggesting a broad category of non-static identifiers (’285 Patent, col. 8:52-58).
    • Evidence for a Narrower Interpretation: The bodies of the asserted independent claims explicitly add functional limitations, requiring the code to be "invalid after a predetermined time passes" and "invalid after one use" (’297 Patent, Claim 1; ’129 Patent, Claim 1). These express limitations recited directly in the claims will be argued to define and narrow the scope of the terms.

• The Term: "trusted-authenticator's computer" (’129 Patent)

  • Context and Importance: This term defines the entity that performs the core steps of generating, sending, and validating the dynamic code. Infringement of the method claims will hinge on identifying which computer system performs these actions and whether it qualifies as a "trusted-authenticator" as understood in the patent.
  • Intrinsic Evidence for Interpretation:
    • Evidence for a Broader Interpretation: The specification provides a functional definition, stating a trusted authenticator is "an entity that already knows the individual, maintains personal information about that individual, and has established a trusted relationship with that person" (’129 Patent, col. 4:42-46).
    • Evidence for a Narrower Interpretation: The specification repeatedly offers a "bank or other financial institution" as a "reasonable candidate" for a trusted authenticator (’129 Patent, col. 4:48-49). A party could argue that this repeated emphasis limits the scope of the term to entities within the financial services industry, rather than any entity that meets the broader functional definition.

VI. Other Allegations

• Indirect Infringement: The complaint makes a conclusory allegation that the Broadway System indirectly infringes "when used according to Defendant's instructions for operation" (Compl. ¶24). It does not, however, allege any specific facts to support the knowledge and intent elements of indirect infringement, such as quoting from user manuals or help documentation.
• Willful Infringement: The complaint does not contain a specific count for willful infringement or allege any facts regarding pre- or post-suit knowledge of the patents. The prayer for relief includes requests for enhanced damages and a finding that the case is exceptional, which are remedies associated with willfulness, but the complaint's factual section does not provide a basis for these requests beyond the conclusory allegation that Defendant has "no good faith defense" (Compl. ¶29; Compl. p. 11, ¶¶ C, E).

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

• A central issue will be evidentiary: The complaint provides minimal factual detail about the accused system's operation. A threshold question will be whether the plaintiff, through discovery, can produce evidence demonstrating that the Broadway System's authentication process technically mirrors the specific, multi-step methods claimed in the patents, particularly concerning the generation and single-use, time-limited nature of its authentication codes.
• The case may also turn on a question of definitional scope: The construction of key terms like "SecureCode" and "trusted-authenticator" will be critical. The court's interpretation of these terms will establish the boundaries of the claimed invention and determine whether the technical specifics of Defendant's banking platform, once revealed, fall within them.