PNC Bank 2015 Annual Report Download - page 219

is not expected to be material to PNC. The court granted
preliminary approval of the settlement in September 2015 and
has scheduled a hearing with respect to final approval of the
settlement for March 2016.
Patent Infringement Litigation
In June 2013, a lawsuit (Intellectual Ventures I LLC and
Intellectual Ventures II LLC vs. PNC Financial Services
Group, Inc., and PNC Bank, NA, (Case No. 2:13-cv-00740-
AJS)(IV 1)) was filed in the U.S. District Court for the
Western District of Pennsylvania against PNC and PNC Bank
for patent infringement. The plaintiffs allege that multiple
systems by which PNC and PNC Bank provide online banking
services and other services via electronic means infringe five
patents owned by the plaintiffs. The plaintiffs seek, among
other things, a declaration that PNC and PNC Bank are
infringing each of the patents, damages for past and future
infringement, and attorneys’ fees. In July 2013, we filed an
answer with counterclaims, denying liability and seeking
declarations that the asserted patents are invalid and that PNC
has not infringed them. In November 2013, PNC filed
Covered Business Method/Post Grant Review petitions in the
U.S. Patent & Trademark Office (PTO) seeking to invalidate
all five of the patents. In December 2013, the court dismissed
the plaintiffs’ claims as to two of the patents and entered a
stay of the lawsuit pending the PTO’s consideration of PNC’s
review petitions, including any appeals from decisions of the
PTO. The PTO instituted review proceedings in May 2014 on
four of the five patents at issue, finding that the subject matter
of those patents was “more likely than not” unpatentable. The
court had previously dismissed the plaintiffs’ claims with
respect to the one patent not selected for review by the PTO.
In separate decisions issued in April and May 2015, the PTO
invalidated all claims with respect to the patents that were still
at issue in IV 1. In July 2015, in an appeal arising out of
proceedings against a different defendant relating to some of
the same patents, the U.S. Court of Appeals for the Federal
Circuit affirmed the invalidity of the two patents at issue in
both IV 1 and the Federal Circuit appeal. As a result, all of the
patents at issue in IV 1 not subject to the prior dismissal have
been invalidated. In October 2015, the plaintiffs moved to
dismiss with prejudice their claims arising from the patents
that had not been subject to prior dismissal in IV 1, which the
court granted.
In June 2014, Intellectual Ventures filed a second lawsuit
(Intellectual Ventures I LLC and Intellectual Ventures II LLC
v. PNC Bank Financial Services Group, Inc., PNC Bank NA,
and PNC Merchant Services Company, LP (Case No. 2:14-cv-
00832-AKS)(IV 2)) in the same court as IV 1. This lawsuit
alleges that PNC defendants infringed five patents, including
the patent dismissed in IV 1 that is not subject to PTO review,
and relates generally to the same technology and subject
matter as the first lawsuit. The court has stayed this case,
which was consolidated with IV 1 in August 2014, pending the
PTO’s consideration of various review petitions of the patents
at issue in this case, as well as the review of the patents at
issue in IV 1 and the appeals from any PTO decisions. In April
2015, the PTO, in a proceeding brought by another defendant,
upheld the patentability of one of the patents at issue in IV 2.
That decision was appealed to the Federal Circuit, which, in
February 2016, affirmed it. After decisions adverse to the
patent holder in the PTO and several U.S. District Courts on
three of the remaining patents, in October 2015, the plaintiffs
voluntarily dismissed without prejudice their claims with
respect to those three patents, leaving two patents at issue in
this lawsuit. The plaintiffs moved to deconsolidate IV 1 and IV
2and to lift the stay. The court denied this motion in October
2015, continuing the stay until certain court proceedings
against other defendants related to the same patents are
resolved.
Mortgage Repurchase Litigation
In December 2013, Residential Funding Company, LLC
(RFC) filed a lawsuit in the U.S. District Court for the District
of Minnesota against PNC Bank, N.A., as alleged successor in
interest to National City Mortgage Co., NCMC Newco, Inc.,
and North Central Financial Corporation (Residential Funding
Company, LLC v. PNC Bank, N.A., et al. (Civil No. 13-3498-
JRT-JSM)). In its complaint, RFC alleges that PNC Bank
(through predecessors) sold $6.5 billion worth of residential
mortgage loans to RFC during the timeframe at issue
(approximately May 2006 through September 2008), a portion
of which were allegedly materially defective, resulting in
damages and losses to RFC. RFC alleges that PNC Bank
breached representations and warranties made under seller
contracts in connection with these sales. The complaint asserts
claims for breach of contract and indemnification. RFC seeks,
among other things, monetary damages, costs, and attorney’s
fees. In March 2014, we filed a motion to dismiss the
complaint. RFC then filed an amended complaint, as well as a
motion to transfer the lawsuit to the U.S. Bankruptcy Court
for the Southern District of New York. In April 2014, we
moved to dismiss the amended complaint. In June 2014, RFC
withdrew its motion to transfer the lawsuit. In October 2014,
the court granted our motion to dismiss with prejudice the
breach of contract claims in the complaint with respect to
loans sold before May 14, 2006 and otherwise denied our
motion to dismiss. In January 2015, the lawsuit was
consolidated for pre-trial purposes with other lawsuits pending
in the District of Minnesota filed by RFC against other
originators of mortgage loans that it had purchased. The
consolidated action is captioned In Re: RFC and RESCAP
Liquidating Trust Litigation, (Civil File No. 13-cv-3451
(SRN/JJK/HB)). In September 2015, RFC filed a motion for
leave to file a second amended complaint to add claims based
on an asserted principle that loan sellers had a continuing
contractual obligation to provide notice of loan defects, which
RFC claims should allow it to assert contract claims as to pre-
May 14, 2006 loans notwithstanding the prior dismissal of
those claims with prejudice. In November 2015, the court
granted RFC’s motion, and RFC filed its second amended
complaint thereafter.
The PNC Financial Services Group, Inc. – Form 10-K 201