Background
MCOM IP, LLC holds United States Patent Number eight million eight hundred sixty-two thousand five hundred eight, which covers a unified electronic banking system. In 2023, the Patent and Trademark Office held most claims of the patent unpatentable for obviousness in an inter partes review. MCOM then sued City National Bank of Florida for infringement of the four remaining claims. The district court dismissed the complaint with prejudice, ruling the claims invalid for obviousness and that the complaint failed to plausibly allege infringement. The district court also awarded attorneys fees and costs to the bank under Section twenty-eight five and imposed a sanction on MCOM’s counsel under Section one thousand nine hundred twenty-seven.
The court’s reasoning
The Federal Circuit affirmed the dismissal because MCOM failed to challenge the invalidity ruling, which was based on obviousness grounds consistent with the prior inter partes review. The court reversed the fees award under Section twenty-eight five, explaining that a case is not exceptional merely because the patent claims are invalid; there must be unusually weak claims or unreasonable litigation conduct. The record did not support findings that MCOM’s position was exceptionally weak or that the bank had a proven licensure defense. The court also reversed the sanction against counsel under Section one thousand nine hundred twenty-seven, noting that the district court found no bad faith or needlessly obstructive conduct, only a lack of diligence in investigating a potential license defense.
What it means going forward
Patent holders may no longer rely solely on the invalidity of their claims to justify an award of attorneys fees or sanctions against opposing counsel. Courts must find unusually weak litigating positions or objectively reckless conduct to deem a case exceptional or to sanction counsel under Section one thousand nine hundred twenty-seven.
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