Textile Computer Systems, Inc. v. Broadway National Bank

CourtDistrict Court, W.D. Texas
DecidedAugust 5, 2022
Docket6:21-cv-01050
StatusUnknown

This text of Textile Computer Systems, Inc. v. Broadway National Bank (Textile Computer Systems, Inc. v. Broadway National Bank) is published on Counsel Stack Legal Research, covering District Court, W.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Textile Computer Systems, Inc. v. Broadway National Bank, (W.D. Tex. 2022).

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION

TEXTILE COMPUTER SYSTEMS, INC.,

Plaintiff, Civil Action No. 6:21-cv-1050-ADA v. JURY TRIAL DEMANDED BROADWAY NATIONAL BANK D/B/A BROADWAY BANK,

Defendant.

ORDER GRANTING-IN-PART AND DENYING-IN-PART DEFENDANT’S MOTION TO DISMISS

Before the Court is Defendant Broadway National Bank’s (“Broadway”) Motion to Dismiss under Federal Rule of Civil Procedure Rule 12(b)(6). ECF No. 20. Plaintiff Textile Computer Systems, Inc. (“Textile”) filed an Opposition. ECF No. 28. Broadway then filed its Reply. ECF No. 31. After careful consideration of the parties’ briefs and the applicable law, the Court GRANTS-IN-PART and DENIES-IN-PART Broadway’s Motion to Dismiss for Failure to State a Claim. I. FACTUAL BACKGROUND Plaintiff Textile filed this lawsuit accusing Defendant Broadway of infringing on U.S. Patent Nos. 8,505,079 (“the ’079 patent”), 8,533,802 (“the ’802 patent”), 9,584,499 (“the ’499 patent”), 10,148,659 (“the ’659 patent”) and 10,560,454 (“the ’454 patent”) (collectively, the “Asserted Patents”). ECF No. 1 ¶ 14. The Asserted Patents “generally pertain to payment authorization technology used in payment networks” that process transactions, such as debit or credit card transactions. Id. ¶ 11. Textile alleges that Broadway uses a card authentication system

(the “Accused Instrumentality”) for its debit and/or credit cards that verifies the identity of a Broadway cardholder. Id. ¶ 23. II. LEGAL STANDARD A 12(b)(6) motion asserts a “purely procedural question not pertaining to patent law.” McZeal v. Sprint Nextel Corp., 501 F.3d 1354, 1356 (Fed. Cir. 2007). When deciding a 12(b)(6) motion for failure to state a claim, the court “accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205

(5th Cir. 2007) (quotation marks omitted). To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 500 U.S. 544, 547 (2007). This standard does not require “detailed factual allegations;” however, this standard does not permit accusations that are completely devoid of factual support. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). The plausibility standard requires the plaintiff to plead “enough facts to raise a reasonable expectation that discovery will reveal evidence of [the claim].” Twombly, 500 U.S. at 545. Therefore, a patentee must only “plead facts sufficient to place the alleged infringer on notice as to what he must defend.” McZeal, 501 F.3d at 1356; see also 13B Fed. Proc. Forms § 52.351 (updated June 2022) (modeling a sample complaint for patent infringement that only contains: (1)

an allegation of jurisdiction; (2) the plaintiff’s statement of patent ownership; (3) the assertion that the defendant has infringed on the patent “by making, selling, and using” the patented product; (4) the plaintiff’s statement that he notified defendant of such infringement; and (5) a demand for relief). III. ANALYSIS

Broadway moves to dismiss Textile’s direct, indirect, and willful infringement claims in its Complaint. The Court considers those arguments below. A. Direct Infringement Broadway first moves to dismiss Textile’s direct infringement claims. Direct infringement occurs when “whoever without authority makes, uses, offers to sell, or sells any patented invention,

within the United States or imports into the United States any patented invention during the term of the patent therefor.” 35 U.S.C. § 271(a). The Federal Circuit’s latest guidance on pleading standards for direct infringement comes from Bot M8 LLC v. Sony Corporation of America, 4 F.4th 1342 (Fed. Cir. 2021). The Bot M8 Court affirmed-in-part and reversed-in-part an order dismissing direct infringement claims on four patents for failure to sufficiently plead. See id. at 1358.

Critically, the opinion denounced a “blanket element-by-element pleading standard for patent infringement,” favoring instead a flexible inquiry into “whether the factual allegations in the complaint are sufficient to show that the plaintiff has a plausible claim for relief.” Id. at 1352. The level of detail required to meet that standard depends on multiple factors, not limited to “the complexity of the technology, the materiality of any given element to practicing the asserted

claim(s), and the nature of the allegedly infringing device.” Id. at 1353. Under any standard, however, the complaint must support its entitlement to relief with “factual content,” not just conclusory allegations that the accused product(s) meet every claim limitation. Id. 1. Textile sufficiently states a claim for direct infringement. The product at issue in this dispute is an advanced electronic payment processing system.

ECF No. 20 at 4. Textile accuses Broadway of directly infringing Claim 1 of ’079 Patent, Claim 1 of the ’802 Patent, Claim 3 of the ’499 Patent, Claim 9 of the ’659 Patent, and Claim 8 of the ’454 Patent. ECF No. 1 ¶¶ 31–33, 35, 58–60, 62, 86–88, 90, 110–112, 114, 134–136, 138, 147. Broadway argues that the direct infringement allegations fail “because they require acts performed by third parties.” ECF No. 20 at 4. For instance, Broadway contends that third-party credit card

companies perform many of the acts underlying Textile’s claims. Id. These credit card companies act as Token Service Providers. Id. at 6. From the Complaint, it appears that Broadway uses tokens to facilitate electronic transactions. ECF No. 1 at 8–9. In response, Textile points out that the Complaint pleads that the electronic payment processing system is “hosted directly by Broadway.” ECF No. 1 ¶¶ 25–27, 51–53, 78–83, 103–08,

127–32 (identifying the accused authentication/authorization system that is implemented with EMVCo compliant tokens and enables Broadway to offer services like the Apple Pay®, Samsung Pay®, and the Google Pay® service as specific instrumentalities that were used by Broadway to infringe Claim). In the alternative, Textile’s Complaint asserts that these third-party credit card agents act as agents under contract to act as Token Service Providers on behalf of Broadway. ECF

No. 1 ¶¶ 25–27, 51–53, 78–83, 103–08, 127–32; ECF No. 20 at 6. The Court finds that Textile adequately pleads direct infringement. First, Textile’s Complaint plausibly alleges that Broadway itself infringes on the Asserted Patents through use of its own equipment. Contrary to Broadway’s argument, the claim elements likely do not require that anyone other than Broadway to practice the limitations. Textile pleads that each of the claim elements may be hosted by Broadway directly. ECF No. 1 ¶¶ 25, 26, 27, 51, 52, 53, 78, 79, 80, 81, 82, 83, 103, 104, 105, 106, 107, 108, 127, 128, 129, 130, 131, 132. The U.S. Payments Forum

document in the Complaint gives the inference that Broadway itself implements and/or uses the payment authorization system itself. ECF No. 28 at 5.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Ashcroft v. Iqbal
556 U.S. 662 (Supreme Court, 2009)
Vita-Mix Corp. v. Basic Holding, Inc.
581 F.3d 1317 (Federal Circuit, 2009)
McZeal v. Sprint Nextel Corp.
501 F.3d 1354 (Federal Circuit, 2007)
In Re Katrina Canal Breaches Litigation
495 F.3d 191 (Fifth Circuit, 2007)
Microsoft Corporation v. Datatern, Inc.
755 F.3d 899 (Federal Circuit, 2014)
Halo Electronics, Inc. v. Pulse Electronics, Inc.
579 U.S. 93 (Supreme Court, 2016)
Lyda v. CBS Corporation
838 F.3d 1331 (Federal Circuit, 2016)
Georgetown Rail Equipment Co. v. Holland L.P.
867 F.3d 1229 (Federal Circuit, 2017)
Lifetime Industries, Inc. v. Trim-Lok, Inc.
869 F.3d 1372 (Federal Circuit, 2017)
Nalco Company v. Chem-Mod, LLC
883 F.3d 1337 (Federal Circuit, 2018)
Bot M8 LLC v. Sony Corporation of America
4 F.4th 1342 (Federal Circuit, 2021)

Cite This Page — Counsel Stack

Bluebook (online)
Textile Computer Systems, Inc. v. Broadway National Bank, Counsel Stack Legal Research, https://law.counselstack.com/opinion/textile-computer-systems-inc-v-broadway-national-bank-txwd-2022.