IP Law Daily, PATENT—Fed. Cir.: Banking system patent claims properly invalidated, suits against City National and HSBC dismissed, (May 19, 2026)

By Saurabh Kashyap, B.A., M.A., LL.B., LL.M.

Obviousness ruling and deficient infringement pleadings defeated companion actions against financial institutions.

A banking technology developer’s patent infringement suits against two financial institutions failed after the U.S. Court of Appeals for the Federal Circuit affirmed the dismissal of both actions, holding in one appeal that the asserted patent claims were invalid as obvious and, in the companion appeal, that the invalidity ruling barred further assertion of the same claims. The appellate court also upheld dismissal for failure to plausibly plead infringement and reversed the district court’s award of attorney fees and sanctions, finding no exceptional conduct or bad faith (mCom IP, LLC v. City National Bank of Florida, No. 24-2089 (Fed. Cir. May 15, 2026); mCom IP, LLC v. HSBC Bank USA, N.A., No. 24-1828 (Fed. Cir. May 15, 2026)).

Infringement allegations. Patent owner mCom IP, LLC is an intellectual property holding entity that owns U.S. Patent No. 8,862,508 (the ’508 patent), directed to a “unified electronic banking system.” The accused entities, City National Bank of Florida and HSBC Bank USA, N.A., are financial institutions offering online and mobile banking services, including digital interfaces that integrate various customer touchpoints. mCom filed separate lawsuits in different jurisdictions, alleging that these banking platforms infringed claim 17 of the ’508 patent, which was the only claim pursued on appeal.

The ’508 patent is titled “System and Method for Unifying e-Banking Touch Points and Providing Personalized Financial Services.” It describes a system that integrates multiple electronic banking channels, such as ATMs, websites, kiosks, and mobile devices, through a central multi-channel server. The system enables real-time monitoring of user activity and delivery of targeted content based on user preferences. Claim 17, which depends on claim 13, requires, among other things, (i) real-time monitoring and transmission of content during an active session and (ii) provision of a “common point of control” for financial institutions over their banking functions.

The litigation unfolded against the backdrop of earlier Patent Trial and Appeal Board (PTAB) proceedings. In 2023, the PTAB held most claims of the ’508 patent unpatentable as obvious in an inter partes review, leaving only a handful of claims, including claim 17, untouched. Thereafter, mCom initiated fresh infringement actions asserting those remaining claims against multiple financial institutions.

In the Florida case, mCom sued City National, alleging infringement of four claims, including claim 17. The district court dismissed the complaint with prejudice, holding that the asserted claims were invalid as obvious because they did not add patentable substance over claims already held unpatentable in the PTAB proceeding. The court also found that the complaint failed to plausibly allege infringement. Additionally, the district court awarded attorney fees under 35 U.S.C. § 285 and imposed sanctions against mCom’s counsel under 28 U.S.C. § 1927.

In the New York case, mCom brought a similar action against HSBC. The district court dismissed the complaint with prejudice for failure to state a claim, finding that the allegations did not plausibly establish that HSBC practiced key claim limitations. mCom appealed both decisions.

Invalidity analysis. In the City National appeal, the Federal Circuit affirmed the district court’s determination that the asserted claims, including claim 17, were invalid as obvious under 35 U.S.C. § 103. The appellate court emphasized that mCom failed to present any meaningful challenge to the district court’s invalidity reasoning. The district court had concluded that claim 17 “does not add patentable substance” beyond claim 13 and other claims already held unpatentable by the PTAB.

The Federal Circuit rejected mCom’s argument that the district court had not actually invalidated claim 17, observing that the district court’s analysis clearly rested on obviousness grounds corresponding to those applied in the IPR proceeding. It further held that mCom’s argument regarding subject-matter eligibility under 35 U.S.C. § 101 was irrelevant, as the district court’s ruling was based on obviousness under § 103. Because mCom failed to challenge that basis, the appellate court affirmed the invalidity ruling.

Pleading deficiencies. The Federal Circuit also agreed that the complaints failed to plausibly allege infringement. In the HSBC appeal, the court conducted a detailed analysis of the pleading requirements under Federal Rule of Civil Procedure 12(b)(6), applying the standards articulated in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), and Bot M8 LLC v. Sony Corp., 4 F.4th 1342 (Fed. Cir. 2021).

The court found that mCom’s allegations of “real-time” monitoring were insufficient because they relied on cookies across multiple user sessions. The complaint described a process in which user preferences were stored during one session and used in subsequent visits. However, the asserted claims required real-time monitoring, selection, and transmission of content within a single active session. The court held that the pled facts did not plausibly support such an inference.

Similarly, the court rejected mCom’s allegations regarding the “common point of control” limitation. The complaint asserted that HSBC provided a unified user interface allowing customers to access banking services through a single login and navigation menu. The Federal Circuit held that these allegations did not plausibly establish that HSBC maintained the claimed backend system control required by the patent. The court emphasized that user-facing consistency does not equate to the claimed system architecture.

Issue preclusion. In the HSBC appeal, the Federal Circuit held that its affirmance of invalidity in the City National case had a preclusive effect. Citing XY, LLC v. Trans Ova Genetics, 890 F.3d 1282 (Fed. Cir. 2018), and related authorities, the court concluded that once claim 17 had been adjudicated invalid, mCom was barred from asserting that claim in subsequent litigation.

The court explained that issue preclusion applies when a patent claim has been finally held invalid, preventing the patentee from relitigating the same issue against other defendants. Because none of the recognized exceptions to preclusion applied, the invalidity ruling independently required dismissal of the HSBC action.

Fees and sanctions. The Federal Circuit reversed the district court’s award of attorney fees and sanctions in the City National case. Applying the standard outlined in Octane Fitness, LLC v. ICON Health & Fitness, Inc., 572 U.S. 545 (2014), the court held that the case was not “exceptional” within the meaning of 35 U.S.C. § 285.

The appellate court explained that the mere invalidity of a patent claim does not render a case exceptional. Instead, there must be evidence that the patentee’s position was unusually weak or that the litigation was conducted unreasonably. The court found that City National had not demonstrated that mCom’s claims were exceptionally weak, or that mCom acted in bad faith.

The court also rejected the district court’s reliance on an alleged license defense, noting that there was no finding that a license actually existed or that mCom could have discovered it through reasonable diligence. Additionally, the court found no evidentiary support for allegations that mCom pursued nuisance-value settlements in prior litigation.

With respect to sanctions under 28 U.S.C. § 1927, the Federal Circuit held that the record did not establish the level of bad faith or vexatious conduct required. The court concluded that mCom’s counsel did not engage in conduct tantamount to bad faith and that continuing to litigate the case until dismissal did not warrant sanctions.

Disposition. Thus, the Federal Circuit affirmed dismissal of both actions, upheld the invalidity of the asserted claim in the City National case, applied issue preclusion to bar the HSBC action, and reversed the award of attorney fees and sanctions. The parties were ordered to bear their own costs, bringing the parallel litigation to a close in favor of the defendant financial institutions.

The Case is No. 24-2089.

Judge: Taranto, R.

Attorneys: William Peterson Ramey, III (Ramey LLP) for mCom IP, LLC. Michael I. Santucci (500Law) for City National Bank of Florida.

Companies: mCom IP, LLC; City National Bank of Florida; HSBC Bank USA

Cases: Patent FedCirNews TechnologyInternet GCNNews