The Federal Circuit’s recent decision in mCom IP, LLC v. City National Bank of Florida , Case No. 24-2089 (Fed. Cir. May 15, 2026),offers an important reminder that losing a patent case, even badly, does not automatically make a case “exceptional” under 35 U.S.C. § 285. The opinion also reinforces that sanctions against counsel under 28 U.S.C. § 1927 require more than weak pleadings or imperfect litigation strategy.
The case sits at the intersection of several recurring issues in modern patent litigation: the effect of inter partes review proceedings on surviving patent claims, the continuing force of the statutory presumption of validity, and the growing tendency of accused infringers to seek attorney’s fees after early dismissals.
The Federal Circuit ultimately affirmed dismissal of mCom’s infringement suit, but reversed both the district court’s exceptional-case fee award and the sanctions imposed against counsel. In doing so, the court emphasized that courts must distinguish between a losing patent claim and an objectively unreasonable one.
For patent litigators and companies defending infringement suits, the opinion provides meaningful guidance on the limits of fee-shifting after an IPR. For patent owners, the decision confirms that surviving claims continue to enjoy the statutory presumption of validity even where related claims have already been invalidated at the PTAB.
The Banking Patent at Issue
The dispute arose from U.S. Patent No. 8,862,508, directed to a “unified electronic banking system” intended to integrate various electronic banking “touch points,” including ATMs, online banking systems, kiosks, and mobile devices.
The patent generally proposed using a “multi-channel server” to unify banking interactions and permit personalized services and targeted marketing across banking platforms.
Before the present litigation, most of the patent’s claims had already been challenged in an inter partes review brought by Unified Patents. In February 2023, the PTAB held the challenged claims unpatentable for obviousness. Notably, however, four claims were never challenged in the IPR: claims 2, 8, 14, and 17. mCom later asserted those surviving claims against City National Bank of Florida.
District Court Dismissal and Fee Award
The district court dismissed the complaint with prejudice. It concluded that the asserted claims were invalid because they were not “patentably distinct” from the claims invalidated in the IPR and also found that the infringement allegations were inadequately pleaded.
The district court then went further. It awarded attorney’s fees against mCom under § 285 and imposed separate sanctions against mCom’s counsel under § 1927.
On appeal, the Federal Circuit affirmed the dismissal but reversed both fee-related rulings.
The Federal Circuit Affirms Invalidity
The affirmance of invalidity was relatively straightforward. The Federal Circuit noted that mCom’s appellate briefing largely failed to engage with the district court’s actual obviousness ruling. Instead, mCom focused primarily on patent eligibility arguments under § 101.
That strategy proved ineffective because the district court had not invalidated the claims under § 101. Rather, the dismissal rested on obviousness under § 103. The Federal Circuit explained that eligibility and obviousness are distinct inquiries, citing Diamond v. Diehr for the principle that subject matter eligibility does not immunize claims from obviousness challenges.
As a result, the court had little difficulty affirming dismissal of the complaint itself.
Mere Invalidity Is Not Enough for § 285
The more consequential aspect of the opinion concerns the reversal of the fee award and sanctions.
The district court had concluded that the case was exceptional for several reasons: the asserted claims were invalid, the pleadings were deficient, mCom allegedly failed to investigate a potential license defense arising from a prior NCR settlement agreement, and mCom purportedly engaged in a pattern of filing suits designed to obtain nuisance-value settlements.
The Federal Circuit rejected each rationale.
First, the court emphasized that “mere invalidity is not legally sufficient to find a case exceptional.” Under Octane Fitness, the question is not simply whether the patentee lost, but whether the litigating position was unusually weak or unreasonable. The panel explained that a patent infringement suit becomes exceptional only when the claims are “unusually or extraordinarily weak.”
That distinction mattered here because the asserted claims had never been adjudicated in the IPR. They still enjoyed the statutory presumption of validity under 35 U.S.C. § 282.
This aspect of the opinion may become particularly important in future post-IPR litigation. The Federal Circuit effectively recognized that surviving claims are not automatically doomed merely because related claims were invalidated earlier.
Charles Gideon Korrell notes that this portion of the opinion reinforces an important structural feature of patent law: each claim is presumed valid independently. Even after a sweeping PTAB loss, unchallenged claims do not simply inherit invalidity findings by association.
The Court Emphasizes Differences Between IPRs and District Court Litigation
The court also highlighted a procedural nuance that practitioners should not overlook. The Federal Circuit observed that obviousness in district court may involve different burdens and evidentiary considerations than in an IPR proceeding. The panel cited both Kroy IP Holdings v. Groupon and ParkerVision v. Qualcomm in recognizing those distinctions.
This portion of the decision is particularly significant because accused infringers increasingly attempt to use PTAB outcomes as a shortcut to invalidate related claims in district court litigation. The Federal Circuit signaled that the analysis remains claim-specific and context-dependent.
Charles Gideon Korrell believes that litigants should view this decision as a warning against overreading PTAB rulings when unchallenged claims remain in force.
Pleading Deficiencies Alone Do Not Create an Exceptional Case
The Federal Circuit similarly rejected reliance on pleading deficiencies as a basis for exceptionality. The district court had previously struck the original complaint as a “shotgun pleading” because it improperly combined multiple theories of infringement into a single count. But the Federal Circuit characterized this as merely a formal pleading problem, not evidence of substantive bad faith or exceptionally weak claims.
That distinction matters because district courts increasingly confront poorly structured patent complaints following the continued tightening of pleading standards after Twombly and Iqbal. The Federal Circuit’s opinion suggests that pleading deficiencies alone generally should not justify fee shifting absent something more egregious.
The NCR License Defense Failed to Support Fees
The treatment of the NCR license issue is also notable.
City National argued that mCom should have discovered before filing suit that City National allegedly enjoyed protection under a prior settlement and license agreement between mCom and NCR. But the Federal Circuit found the record insufficient to support that theory. The panel noted that the district court never actually found that City National possessed a valid license covering the accused conduct.
Indeed, City National conceded at oral argument that the issue remained unadjudicated.
The Federal Circuit further emphasized that license and release are affirmative defenses under Rule 8(c). The opinion strongly suggests that patentees generally are not obligated to negate every possible affirmative defense before filing suit.
Charles Gideon Korrell believes that this portion of the opinion may prove particularly useful in resisting future fee motions based on undeveloped licensing theories. The court appeared unwilling to permit fee shifting based on defenses that themselves had never been conclusively established.
The Federal Circuit Rejects the “Nuisance Settlement” Narrative
The court also dismantled City National’s “nuisance settlement” narrative.
City National had argued that mCom repeatedly filed patent suits that settled before adjudication, supposedly demonstrating a strategy of extracting nuisance-value settlements. But the Federal Circuit found virtually no evidentiary support for that assertion.
Critically, City National failed to provide evidence regarding settlement values or whether the other cases even involved the same patent.
The Federal Circuit’s skepticism here is important. Accused infringers frequently attempt to characterize non-practicing entities or repeat plaintiffs as pursuing nuisance settlements. This opinion indicates that generalized accusations and litigation statistics alone may not suffice.
Sanctions Under § 1927 Require More Than Weak Litigation Conduct
The reversal of the § 1927 sanctions against counsel followed naturally from the court’s rejection of the exceptional-case determination.
Under Eleventh Circuit law, § 1927 sanctions require conduct “tantamount to bad faith.” The Federal Circuit emphasized that the district court never expressly found the case frivolous.
Instead, the district court essentially faulted counsel for insufficient diligence and for continuing the litigation. But because the claims were not frivolous, litigating the case through a Rule 12(b)(6) ruling was not sanctionable conduct.
Charles Gideon Korrell notes that the opinion draws an important line between weak lawyering and sanctionable bad faith. The Federal Circuit made clear that imperfect litigation judgment, without more, does not satisfy § 1927’s demanding standard.
The Court Rejects a “Second Major Litigation” Over Fees
The opinion closes with another subtle but significant point. Rather than remanding for additional proceedings on fees, the Federal Circuit reversed outright, citing Fox v. Vice and cautioning that fee litigation should not become “a second major litigation.”
That directive may discourage defendants from pursuing speculative fee motions unsupported by a developed factual record. Courts increasingly appear concerned about satellite litigation over attorney’s fees consuming disproportionate resources after merits proceedings have already concluded.
Key Takeaways
Ultimately, mCom v. City National reflects a broader trend in Federal Circuit jurisprudence: while district courts retain substantial discretion under Octane Fitness, that discretion still has meaningful limits. Patent cases are not exceptional merely because the plaintiff loses, survives only briefly, or asserts claims related to others invalidated in an IPR.
The decision also reinforces the continuing importance of the statutory presumption of validity, even in the shadow of prior PTAB losses. Surviving claims remain entitled to individualized treatment, and courts cannot simply collapse them into previously invalidated claims without careful analysis.
Charles Gideon Korrell believes the decision will likely become a frequently cited authority in future disputes over post-IPR fee shifting, particularly where surviving claims continue to carry the presumption of validity despite the cancellation of related claims.
Leave a Reply