Mere Invalidity of Asserted Claims Does Not Render Patent Infringement Case Exceptional or Warrant Sanctions

In mCom IP, LLC v. City Nat’l Bank of Fla., No. 24-2089 (Fed. Cir. May 15, 2026), the Federal Circuit reversed the district court’s award of attorneys’ fees and costs to City National Bank and sanctions against mCom’s counsel.

mCom sued City National for infringement of its patent directed to a unified electronic banking system. All but four of the patent’s claims had previously been found invalid in an IPR. The district court granted City National’s motion to dismiss, finding the four remaining claims were also invalid under the same grounds asserted in the IPR. The court awarded City National attorneys’ fees and costs, finding that the case was “exceptional” under 35 U.S.C. § 285, and sanctioned mCom’s counsel under 28 U.S.C. § 1927, finding that its lack of diligence in investigating the case constituted bad faith.

The Federal Circuit reversed the fee award, clarifying that the mere invalidity of asserted claims does not make a case “exceptional.” Instead, the relevant standard is whether the patentee’s case is “exceptionally substantively weak or unreasonably litigated.” The Federal Circuit found that mCom could have reasonably believed the asserted claims were materially different than the invalidated claims, noting the higher burden of persuasion required for obviousness at the district court. The Federal Circuit also reversed the sanctions, finding that the alleged lack of diligence did not rise to the level of bad faith.