Factor2 Multimedia Systems LLC v. Jefferson Bank

I. Executive Summary and Procedural Information

• Parties & Counsel:
  • Plaintiff: Factor 2 Multimedia Systems, LLC (Virginia)
  • Defendant: Jefferson Bank (Texas)
  • Plaintiff’s Counsel: DNL Zito
• Case Identification: 5:25-cv-00262, W.D. Tex., 03/10/2025
• Venue Allegations: Venue is alleged to be proper as Defendant is headquartered in San Antonio, Texas, maintains a regular and established place of business in the district, and has allegedly committed acts of infringement there.
• Core Dispute: Plaintiff alleges that Defendant’s online and mobile banking platforms infringe six patents related to systems and methods for user authentication using dynamic, single-use, or time-limited security codes.
• Technical Context: The patents address methods for enhancing computer network security by moving beyond static passwords to dynamic, two-factor authentication, a critical technology in the financial services industry for preventing fraud and identity theft.
• Key Procedural History: The complaint notes that all six Patents-in-Suit are members of the same patent family, which may suggest a common technical disclosure and priority basis that could streamline claim construction and validity analyses across the asserted patents.

Case Timeline

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

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 September 8, 2020.

The Invention Explained

• Problem Addressed: The patent describes the problem of users needing to release confidential personal and financial information to multiple businesses to engage in e-commerce, which is noted as being "not only unsafe but also it is not fool proof that the user is really the person he says he is" (’297 Patent, col. 1:40-51).
• The Patented Solution: The invention proposes a system with a "Central-Entity" that securely stores a user's information and issues a dynamic, non-predictable, and time-dependent "SecureCode" upon request (’297 Patent, col. 2:23-28). To authenticate with a third-party "External-Entity" (e.g., a merchant), the user provides this SecureCode instead of static credentials. The External-Entity then passes the SecureCode to the Central-Entity for verification, thus authenticating the transaction without exposing the user's underlying financial information to the merchant (’297 Patent, Fig. 2; col. 3:30-38).
• Technical Importance: This centralized architecture was designed to reduce the distribution and risk of compromise of sensitive user data across the internet by replacing static, reusable credentials with temporary, single-use codes for individual transactions (’297 Patent, col. 2:5-15).

Key Claims at a Glance

• The complaint asserts independent Claim 1 and dependent claims 2-29 (Compl. ¶52).
• Independent Claim 1 recites an authentication system comprising computing devices configured to perform operations including:
  • Electronically receiving a request for a "SecureCode";
  • Generating the SecureCode;
  • Electronically providing the SecureCode to the user, wherein the SecureCode is invalid after a predetermined time, invalid after one use, and only valid for authenticating that user;
  • Electronically receiving a digital authentication request that includes the SecureCode; and
  • Authenticating the user by evaluating the validity of the SecureCode in the request.

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 identifies the core problem of identity theft as stemming from two flawed societal assumptions: first, that knowledge of a person’s private financial information proves identity, and second, that such information can be kept secret (’129 Patent, col. 2:1-8).
• The Patented Solution: The invention describes a "two-factor" authentication method that leverages existing trust relationships, such as that between a customer and their bank (a "trusted authenticator") (’129 Patent, col. 4:5-12). To authenticate with an "entity" (e.g., a merchant), an individual provides both a static key (something they know) and a "dynamic key" (something they receive for that transaction). The individual requests and receives the dynamic key from their trusted-authenticator, and the entity then contacts the trusted-authenticator to verify both keys (’129 Patent, col. 6:46-57).
• Technical Importance: This system proposed a decentralized security framework that utilizes existing financial institutions as authenticators, avoiding the need to create a new, central government-run identity system while still providing robust two-factor security (’129 Patent, col. 4:36-54).

Key Claims at a Glance

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

U.S. Patent No. 9,703,938 - "Direct Authentication System and Method Via Trusted Authenticators"

• 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, like the ’129 Patent, describes a two-factor authentication method. It focuses on a user engaging in an electronic transaction with a computer system and using a "trusted authentication system" to obtain and validate a dynamic code to enhance security (’938 Patent, col. 13:1-12). The method involves the trusted system generating a dynamic code for a user, who provides it to the transacting computer system, which then sends an authentication request back to the trusted system for verification (’938 Patent, Abstract).

Asserted Claims

Claims 1-26 (Compl. ¶36).

Accused Features

The Jefferson System's overall authentication framework used for its online and mobile banking services (Compl. ¶12, ¶22).

U.S. Patent No. 9,727,864 - "Centralized Identification and Authentication System and Method"

• Patent Identification: U.S. Patent No. 9,727,864, "Centralized Identification and Authentication System and Method," issued July 19, 2017.

Technology Synopsis

This patent, similar to the ’297 Patent, discloses a centralized authentication system. A "Central-Entity" provides a "SecureCode" to a user, who then presents it as part of a "digital identity" to an "External-Entity" to authenticate a transaction or access a service (’864 Patent, Abstract). The External-Entity relies on the Central-Entity to perform the actual identification and authentication of the user (’864 Patent, col. 2:48-67).

Asserted Claims

Claims 1-15 (Compl. ¶40).

Accused Features

The Jefferson System's overall authentication framework used for its online and mobile banking services (Compl. ¶12, ¶22).

U.S. Patent No. 9,870,453 - "Direct Authentication System and Method Via Trusted Authenticators"

• 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, like the ’129 and ’938 patents, relates to a two-factor authentication method. A user engaging in an electronic communication receives a "SecureCode" from an authentication system, which is then provided to an online system as part of a user-authentication process (’453 Patent, Abstract). The claims focus on the online system receiving the code, sending an authentication request to the authentication system, and receiving a response confirming or denying the user's identity (’453 Patent, col. 13:1-62).

Asserted Claims

Claims 1-26 (Compl. ¶44).

Accused Features

The Jefferson System's overall authentication framework used for its online and mobile banking services (Compl. ¶12, ¶22).

U.S. Patent No. 10,083,285 - "Direct Authentication System and Method Via Trusted Authenticators"

• 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, also in the "trusted authenticator" line, describes a method for enhancing authentication for a user attempting to access an online system. The method involves the online system receiving "user-authentication information" that includes a time-limited and single-use "user-authentication code" provided by a separate authentication system (’285 Patent, col. 13:1-44). The online system sends a request to the authentication system to validate the code and confirm the user's identity (’285 Patent, Abstract).

Asserted Claims

Claims 1-30 (Compl. ¶48).

Accused Features

The Jefferson System's overall authentication framework used for its online and mobile banking services (Compl. ¶12, ¶22).

III. The Accused Instrumentality

Product Identification

The accused instrumentality is identified as the "Jefferson System and Apparatus" or "Accused Product" (Compl. ¶22).

Functionality and Market Context

The Jefferson System is alleged to include at least the Jefferson Bank mobile application for iOS and Android, its public-facing website (jeffersonbank.com), and the associated back-end systems that provide functionality and authenticate users (Compl. ¶22). The complaint alleges that this system uses a method for authentication that infringes the patents-in-suit (Compl. ¶12). As a banking platform, the system's function is to provide customers with secure access to their financial accounts and services.
No probative visual evidence provided in complaint.

IV. Analysis of Infringement Allegations

The complaint references an exemplary claim chart for the ’297 Patent as Exhibit G but does not provide the exhibit (Compl. ¶26). The infringement theory is therefore summarized from the complaint's narrative allegations.

The core infringement allegation is that the authentication process for the Jefferson System satisfies the elements of the asserted claims (Compl. ¶25). For the ’297 Patent, the narrative suggests that Jefferson Bank's back-end systems act as the claimed "authentication system." When a user logs in, these systems allegedly receive a request for a security code (the "SecureCode"), generate and provide it to the user, and then authenticate the user by receiving and evaluating the validity of that code after the user enters it (Compl. ¶20, ¶22). For the ’129 Patent, the narrative suggests that Jefferson Bank acts as both the "trusted-authenticator" for its customers and the "entity" providing the online service. The system allegedly calculates and sends a "dynamic code" to the user, receives it back with user information, and authenticates the user’s identity based on both factors (Compl. ¶21, ¶22).

• Identified Points of Contention:
  • Scope Questions: The infringement theory for the '129 Patent family raises the question of whether the claim terms "entity" and "trusted-authenticator" can read on a single party (Jefferson Bank) authenticating a user for its own services. The patent specification often illustrates these as distinct parties, which may support an argument that the claims require a three-party architecture not present in the accused scenario (’129 Patent, Fig. 1a-1b).
  • Technical Questions: The complaint alleges that the security codes used by the Jefferson System meet specific claim limitations, such as being "invalid after a predetermined time" and "invalid after one use" (’297 Patent, Claim 1; ’129 Patent, Claim 1). What evidence the complaint provides that the accused system’s codes function in this precise manner, as opposed to merely being temporary, will be a central technical question for discovery.

V. Key Claim Terms for Construction

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

• Context and Importance: These terms are central to the claimed inventions. The infringement analysis will depend on whether the temporary authentication codes used by the Jefferson System meet the specific functional limitations recited in the claims, such as being "invalid after one use" and "invalid after a predetermined time." Practitioners may focus on whether these limitations are inherent to the definition of the term itself or are merely functional requirements of the surrounding method steps.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The ’297 Patent specification defines "SecureCode" broadly as "any dynamic, non-predictable and time dependent alphanumeric code, secret code, PIN or other code" (’297 Patent, col. 2:48-52).
  • Evidence for a Narrower Interpretation: The claims themselves explicitly recite that the code "becomes invalid after being used" (’129 Patent, col. 12:50-51) or "is invalid after one use" (’297 Patent, col. 6:12-13), which may be argued as essential, defining characteristics of the claimed code.

• The Term: "entity" and "trusted-authenticator" (’129 Patent).

• Context and Importance: The plaintiff's infringement theory appears to map both roles onto the defendant, Jefferson Bank. The viability of this theory hinges on whether these terms can refer to the same party or if they must be distinct. Practitioners may focus on this distinction because the patent's background describes authenticating a user to other entities, not just to the authenticator itself.

• Intrinsic Evidence for Interpretation:

  • Evidence for a Broader Interpretation: The claims do not contain express language requiring the "entity" and the "trusted-authenticator" to be separate legal or corporate entities.
  • Evidence for a Narrower Interpretation: The specification describes a system to address flaws in the "credit granting process" and discusses interactions between creditors and individuals via a trusted third party (’129 Patent, col. 3:57-61). Figures 1a and 1b depict "Business" (20) and "Trusted-Authenticator" (30, 40) as separate components, which may suggest they are intended to be distinct actors.

VI. Other Allegations

• Indirect Infringement: The complaint alleges inducement and contributory infringement "when used according to Defendant's instructions for operation" (Compl. ¶24). No specific facts, such as references to user manuals or marketing materials that instruct on the infringing use, are provided to support this allegation.
• Willful Infringement: The complaint makes a conclusory allegation that Defendant "has no good faith defense" (Compl. ¶29) and requests enhanced damages in its prayer for relief (Prayer for Relief ¶E). However, it does not plead any facts suggesting Defendant had pre-suit knowledge of the patents-in-suit. Any claim for willfulness may therefore depend on conduct occurring after the filing of the complaint.

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

• A core issue will be one of architectural scope: can the patented frameworks, which often describe a three-party system (a user, an entity, and a separate trusted authenticator), be construed to cover a two-party scenario where a single organization, Jefferson Bank, serves as both the "entity" and the "trusted-authenticator" for its own online services?
• A key evidentiary question will be one of functional specificity: does the Jefferson System’s security code functionality meet the precise invalidation requirements of the claims (e.g., "invalid after one use" and "invalid after a predetermined time")? The general nature of the complaint’s allegations suggests that establishing a technical match will be a central focus of discovery and expert testimony.