Federal Circuit reverses fee award and sanctions based on broad scope of what is purely lack of merit

Context: mCom asserted a banking-system patent against multiple financial institutions after most related patent claims had already been invalidated in Patent Trial and Appeal Board (PTAB) inter partes review (IPR) proceedings initiated by Unified Patents. In parallel actions against City National Bank of Florida and HSBC, different district courts dismissed the complaints based on invalidity and/or failure to plausibly allege infringement. In the Florida case, the district court additionally awarded attorney fees and imposed sanctions against counsel, concluding that the case was sufficiently exceptional to justify fee-shifting and sanctions.

What’s new: The Federal Circuit affirmed dismissal of mCom’s banking patent suits and upheld invalidity findings against the remaining asserted claims, but reversed both the attorney-fee award and sanctions imposed against counsel in the Florida litigation. In a companion nonprecedential ruling involving HSBC, the court further held that the affirmed invalidity ruling precluded mCom from continuing to assert the same claims in parallel litigation.

Direct impact: The Federal Circuit’s rulings effectively end both appeals in favor of City National and HSBC on the underlying infringement claims. While the court affirmed dismissal and invalidity findings against mCom’s asserted claims, it reversed the attorneys’ fees award and sanctions imposed in the Florida litigation. Importantly, the panel also declined to remand for additional proceedings that could have allowed City National to further develop its fee-shifting and sanctions arguments, signaling a desire to bring the dispute to a close absent a highly unlikely Supreme Court appeal.

Wider ramifications: The precedential ruling reinforces the high bar for fee-shifting and sanctions in U.S. patent litigation, particularly where asserted claims were not themselves invalidated in prior PTAB proceedings and still retain a presumption of validity. The decision also suggests that allegations of nuisance-value litigation and unresolved licensing defenses require a substantially stronger evidentiary and procedural record before they can support exceptional-case findings or sanctions against counsel.