United States Court of Appeals
for the Federal Circuit
______________________
MOLON MOTOR AND COIL CORPORATION,
Plaintiff-Appellant
v.
NIDEC MOTOR CORPORATION,
Defendant-Appellee
______________________
2019-1071
______________________
Appeal from the United States District Court for the
Northern District of Illinois in No. 1:16-cv-03545, Judge
Edmond E. Chang.
______________________
Decided: January 10, 2020
______________________
RAYMOND P. NIRO, JR., Niro McAndrews LLC, Chicago,
IL, argued for plaintiff-appellant. Also represented by
KYLE WALLENBERG.
RUDOLPH A. TELSCHER, JR., Husch Blackwell LLP, St.
Louis, MO, argued for defendant-appellee. Also repre-
sented by KARA RENEE FUSSNER, STEVEN E. HOLTSHOUSER,
BRENDAN G. MCDERMOTT.
______________________
Before LOURIE, REYNA, and HUGHES, Circuit Judges.
2 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
Opinion for the court filed by Circuit Judge LOURIE.
Dissenting opinion filed by Circuit Judge REYNA.
LOURIE, Circuit Judge.
Molon Motor and Coil Corporation (“Molon”) appeals
from the judgment of the U.S. District Court for the North-
ern District of Illinois in favor of Nidec Motor Corporation
(“Nidec”) on Molon’s claim for infringement of U.S. Patent
6,465,915 (“the ’915 patent”). The district court granted
summary judgment that Molon is barred from enforcing
the ’915 patent against Nidec pursuant to a covenant not
to sue that Molon granted in 2006 (“the 2006 Covenant”).
Molon argues that the 2006 Covenant was extinguished by
a clause in a Settlement, License and Release Agreement
that the parties entered into in 2007 (“the 2007 Settle-
ment”). The clause at issue in the 2007 Settlement states
that all prior covenants “concerning the subject matter
hereof” are “merged” and “of no further force or effect.” Be-
cause we agree with the district court that the two agree-
ments concern different subject matter and therefore do
not merge, we affirm.
BACKGROUND
Molon and Nidec are competitors in the electric motor
market. In 2004, Molon filed suit in the Northern District
of Illinois against Nidec’s predecessor, Merkle-Korff Indus-
tries, Inc. (“Merkle-Korff”), for infringement of U.S. Patent
6,054,785 (“the ’785 patent”). J.A. 76–78 (“the ’5134 litiga-
tion”). Merkle-Korff filed counterclaims, including for de-
claratory judgment of noninfringement, invalidity, and
unenforceability with respect to two other patents owned
by Molon—the ’915 patent and U.S. Patent 6,617,726 (“the
’726 patent”). J.A. 90–100. Molon moved to dismiss
Merkle-Korff’s counterclaims involving the ’915 and ’716
patents, and Merkle-Korff opposed the motion. On Febru-
ary 2, 2006, Molon unilaterally provided Merkle-Korff with
the 2006 Covenant, which states:
MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 3
Molon hereby forever covenants not to sue Merkle-
Korff for patent infringement (whether direct, con-
tributory, or by inducement thereof) under either
the ’915 patent or the ’726 patent with respect to
any and all products previously or presently made,
used or sold by Merkle-Korff in the United States.
This covenant extends directly to Merkle-Korff as
well as any individual or entity to which Merkle-
Korff previously or presently supplies products by
way of the manufacture and/or sale thereof in the
United States.
J.A. 27. Molon then represented to the court that “[t]his
covenant divests the Court of subject matter jurisdiction
over Merkle-Korff’s declaratory judgment counterclaims
involving the ’915 and the ’726 patents, and such claims
must accordingly be dismissed.” J.A. 28. After dismissal
of those counterclaims, the ’5134 litigation continued with
respect to only the ’785 patent.
In early 2007, Molon and Merkle-Korff entered into the
2007 Settlement, after which the parties jointly filed a stip-
ulation of dismissal in the ’5134 litigation. J.A. 30–37. In
the 2007 Settlement, Merkle-Korff agreed to pay Molon a
lump sum payment in exchange for an exclusive license to
more than a dozen of Molon’s United States and foreign pa-
tents and patent applications—including the ’785, ’915,
and ’726 patents—within a narrowly defined exclusive
market:
Grant. Molon hereby grants each of the Merkle-
Korff Affiliates an exclusive, fully paid-up, royalty
free, worldwide, perpetual, irrevocable, retroactive,
current and future right and license of all Patent
Rights to make, have made, use, sell, offer to sell,
lease, import, export, or otherwise commercialize
products and/or systems for resale or other trans-
fer: (i) to any of the other Merkle-Korff Affiliates;
and/or (ii) to [a third-party company and its
4 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
affiliates] (such persons and entities in (i) and (ii)
above, collectively the “Kinetek Exclusive Mar-
ket”). Under said license, the sale, offer to sell,
lease, importation, exportation, commercialization
and/or other transfer of products and/or systems
between two Merkle-Korff Affiliates (as expressly
set forth in (i) above), shall in no way permit the
transferee Merkle-Korff Affiliate (i.e., the receiving
Merkle-Korff Affiliate) to make, have made, use,
sell, offer to sell, lease, import, export, or otherwise
commercialize such products and/or systems for re-
sale or other transfer to any person or entity out-
side of the Kinetek Exclusive Market.
JA 31. In addition to the exclusive license rights within the
Kinetek Exclusive Market, the 2007 Settlement granted
Merkle-Korff in certain instances “the right, but not the
duty, to pursue an infringement claim”—i.e., the right to
exclude others from using the patents within the Kinetek
Exclusive Market. J.A. 32.
The 2007 Settlement contains a “merger” or “integra-
tion” clause1:
Entire Agreement. This Agreement is an inte-
grated Agreement and constitutes the entire agree-
ment and understanding between and among the
Parties with regard to the matters set forth herein
and shall be binding upon and inure to the benefit
of the administrators, agents, personal representa-
tives, successors, and assigns of each. There are no
1 The terms “merger clause” and “integration clause”
may be used interchangeably to describe a clause in a writ-
ten contract that states that there are no representations,
promises, or agreements between the parties except those
found in the written contract. See Restatement (Second) of
Contracts § 216 cmt. e (1981).
MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 5
representations, promises, or agreements pertain-
ing to the terms or subject matter of this Agree-
ment, whether express or implied, that are not set
forth in this Agreement. All prior and contempora-
neous conversations, negotiations, possible and al-
leged agreements, representations and covenants
concerning the subject matter hereof, are merged
herein and shall be of no further force or effect.
J.A. 35. The 2007 Settlement also expresses the parties’
agreement that they cooperated in drafting the agreement,
it is not to be interpreted for or against either of them, and
it is to be governed by the laws of the State of Illinois. J.A.
34–35.
Merkle-Korff later merged with Nidec. Whether that
merger immunizes Nidec from liability that it might have
otherwise had prior to the merger raises the issue that is
at the heart of this appeal. In the present suit Molon al-
leges that Nidec is practicing and/or inducing others to
practice the ’915 patent outside the licensed Kinetek Ex-
clusive Market. See J.A. 58–64.
Nidec moved for partial summary judgment on Molon’s
infringement claim, arguing that Molon is barred from en-
forcing the ’915 patent against Nidec under the 2006 Cov-
enant. Molon responded that the 2006 Covenant was
extinguished by the merger clause in the 2007 Settlement.
Applying Illinois contract law, the district court granted
partial summary judgment in favor of Nidec on Molon’s
claim for infringement of the ’915 patent. J.A. 1–12. Be-
cause the merger clause in the 2007 Settlement pertains
only to covenants “concerning the subject matter hereof,”
the court compared the subject matter of the 2006 Cove-
nant to the subject matter of the 2007 Settlement. The
court found that the 2006 Covenant gives Nidec a right to
avoid suit for patent infringement on two patents, one of
which is the ’915 patent. J.A 9. In contrast, the 2007 Set-
tlement is in some ways broader—it is an exclusive license,
6 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
it includes more than a dozen patents and applications, and
it provides Nidec with some enforcement rights—and in
other ways narrower—it is limited to a defined market of
customers—than the 2006 Covenant. J.A. 9. Thus, the
court concluded, the 2006 Covenant remains in effect be-
cause it does not concern the same subject matter as the
2007 Settlement.
After granting Nidec’s motion for partial summary
judgment, the Court entered final judgment on Molon’s pa-
tent infringement claim pursuant to Federal Rule of Civil
Procedure 54(b). Molon appealed the court’s judgment. We
have jurisdiction under 28 U.S.C. § 1295(a)(1).
DISCUSSION
We review a district court’s grant of summary judg-
ment according to the law of the regional circuit. Kaneka
Corp. v. Xiamen Kingdomway Grp. Co., 790 F.3d 1298,
1303 (Fed. Cir. 2015) (citing Halo Elecs., Inc. v. Pulse El-
ecs., Inc., 769 F.3d 1371, 1377 (Fed. Cir. 2014)). In the Sev-
enth Circuit, a grant of summary judgment is reviewed de
novo. Edwards v. Briggs & Stratton Ret. Plan, 639 F.3d
355, 359 (7th Cir. 2011). Summary judgment is appropri-
ate when “there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56.
In this case, the question before us is whether the
2007 Settlement should be interpreted to have revoked or
extinguished the 2006 Covenant. Contract interpretation
is a question of state law. See Volt Info. Sci., Inc. v. Bd. Of
Tr. Of Leland Stanford Junior Univ., 489 U.S. 468, 474
(1989). The 2007 Settlement contains a choice-of-law pro-
vision requiring that it “be governed and construed in ac-
cordance with the laws of the State of Illinois as to all
matters of interpretation and remedy.” J.A. 35. Therefore,
we apply Illinois state law to interpret the 2007 Settlement
de novo. Erlenbush v. Largent, 819 N.E.2d 1186, 1189 (Ill.
MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 7
App. Ct. 2012) (“[W]e interpret the contract independently,
without deference to the trial court.”).
Traditional contract interpretation principles in Illi-
nois require application of the “four corners” rule. Air
Safety, Inc. v. Teachers Realty Corp., 706 N.E.2d 882, 884
(Ill. 1999). In applying this rule, “[a] court must initially
look to the language of a contract alone, as the language,
given its plain and ordinary meaning, is the best indication
of the parties’ intent.” Gallagher v. Lenart, 874 N.E.2d 43,
58 (Ill. 2007); Rakowski v. Lucente, 472 N.E.2d 791, 794 (Ill.
1984) (“Where a written agreement is clear and explicit, a
court must enforce the agreement as written. Both the
meaning of the instrument, and the intention of the parties
must be gathered from the face of the document without
the assistance of parol evidence or any other extrinsic
aids.”).
We must therefore look to the language of the 2007 Set-
tlement. The merger clause states in relevant part:
All prior and contemporaneous conversations, ne-
gotiations, possible and alleged agreements, repre-
sentations and covenants concerning the subject
matter hereof, are merged herein and shall be of no
further force or effect.
J.A. 35 (emphasis added). The parties have not argued
that the merger clause is ambiguous or that it requires ex-
trinsic evidence to interpret what the parties intended.
The clause, on its face, only pertains to covenants “concern-
ing the subject matter” of the 2007 Settlement.
Molon argues that the language of this clause in the
2007 Settlement expressly extinguished the 2006 Cove-
nant because the two agreements concern the same subject
matter. Intermingled with that argument, Molon also sug-
gests more generally that the existence of the merger
clause within the 2007 Settlement is itself evidence of the
8 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
parties’ intent to extinguish the 2006 Covenant. We ad-
dress these arguments below.
I
We first address the language of the merger clause in
the 2007 Settlement, which limits its application to cove-
nants “concerning the subject matter hereof.” We consider
whether the subject matter of the 2006 Covenant and the
2007 Settlement is the same, such that the 2006 Covenant
was expressly merged into the 2007 Settlement.
In comparing the subject matter of contracts, Illinois
courts have cautioned against defining subject matter too
broadly or too narrowly. For example, in Ill. Concrete-
I.C.I., Inc. v. Storefitters, Inc., the court rejected the broad
view that two contracts had the same subject matter
simply because both involved “using trucks.” 922 N.E.2d
542, 546 (Ill. App. Ct. 2010). On the other hand, in Midwest
Builder Distrib., Inc. v. Lord & Essex, Inc., the court re-
jected an “extremely narrow view” of two contracts as hav-
ing subject matter limited to “the specifications of the
products to be delivered.” 891 N.E.2d 1, 20 (Ill. App. Ct.
2007).
Molon argues that the subject matter of both agree-
ments in this case is the right to practice the ’915 patent.
See Appellant’s Br. 18 (“Both the 2006 Covenant Not to Sue
and the 2007 Settlement Agreement operate as licenses to
the ’915 Patent.”). Molon asserts that a “patentee can only
divest [it]self of one thing, the right to exclude,” and there-
fore that right to exclude must be the subject matter of both
agreements. See Appellant’s Br. 14 (citing TransCore, LP
v. Elec. Transaction Consultants Corp., 563 F.3d 1271,
(Fed. Cir. 2003)). According to Molon, the 2007 Settlement
“stands in direct contrast” to the 2006 Covenant with re-
spect to the right to exclude under the ’915 patent, which
indicates that the 2007 Settlement was intended to replace
the 2006 Covenant. See Appellant’s Br. 16.
MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 9
Nidec responds that the mere fact that two agreements
cover rights under the same patent does not necessarily
mean they concern the same subject matter. Appellee’s
Br. 13. Nidec relies on the district court’s analysis of the
different rights granted under each agreement as defining
the subject matter. Id. For example, Nidec argues that the
district court properly compared the subject matter of the
two agreements by considering the differences between the
types of license, the number of patents, and the products
included in each agreement. Id.
We agree with Nidec and the district court that it is
incorrect to define the subject matter of both agreements
as the right to practice the ’915 patent. Rather, to deter-
mine the subject matter of each agreement, we must exam-
ine the actual language of the agreements themselves. We
must consider how the language of each agreement conveys
the substantive rights and obligations exchanged between
the parties.
First, we look at the subject matter of the 2006 Cove-
nant, which is a one-paragraph unilateral covenant not to
sue on two patents—the ’915 patent and the ’726 patent.
J.A. 27. The 2006 Covenant covers “any and all products
previously or presently made, used or sold by Merkle-Korff”
and it extends geographically to “the United States.” Id.
It contains no restrictions on the market for sales of li-
censed products.
Next, we look at the subject matter of the 2007 Settle-
ment, which is an eight-page bilateral contract, in which
Merkle-Korff agreed to pay monetary consideration to Mo-
lon in exchange for an exclusive license covering more than
a dozen United States and foreign patents and patent ap-
plications. J.A. 30–37. The 2007 Settlement is not limited
to any specific products or geographical area, but it is lim-
ited to the Kinetek Exclusive Market. J.A. 31. Addition-
ally, the 2007 Settlement gives Merkle-Korff a right to sue
third parties for infringement of the licensed patents
10 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
within the Kinetek Exclusive Market 2 in the event that
Molon declines to do so.
A covenant not to sue is equivalent to a nonexclusive or
“bare” license, see Ortho Pharm. Corp. v. Genetics Inst.,
Inc., 52 F.3d 1026, 1032 (Fed. Cir. 1995), which is a promise
by the patent owner not to sue the licensee for practicing
the patented invention, and under which the patent owner
impliedly reserves the right to grant similar nonexclusive
licenses to other entities. See Intellectual Prop. Dev., Inc.
v. TCI Cablevision of Cal., Inc., 248 F.3d 1333, 1345 (Fed.
Cir. 2001). In contrast, an exclusive license is a license to
practice the patented invention “accompanied by the pa-
tent owner’s promise that others shall be excluded from
practicing it within the field of use wherein the licensee is
given leave.” Textile Prods., Inc. v. Mead Corp., 134 F.3d
1481, 1484 (Fed. Cir. 1998) (quoting Western Elec. Co. v.
Pacent Reproducer Corp., 42 F.2d 116, 118 (2d Cir. 1930)).
We have characterized an exclusive licensee as “shar[ing]
the property rights represented by a patent.” Rite-Hite
Corp. v. Kelly Co., 56 F.3d 1538, 1553 (Fed. Cir. 1995)
(quoting Weiner v. Rollform, 744 F.2d 797, 807 (Fed. Cir.
1984)).
There are fundamental differences between an exclu-
sive license and a nonexclusive license, particularly in the
context of standing to assert a claim for patent infringe-
ment. See Rite-Hite, 56 F.3d at 1552 (citing Independent
2 The district court noted a hypothetical “strange re-
sult” regarding Merkle-Korff’s right to sue for infringement
of the ’915 patent. J.A. 10. We see nothing “strange” about
a market-limited exclusive licensee being both empowered
to sue for infringement within the licensed market and also
subject to being sued by the licensor for infringement out-
side of that market. See J.A. 10. Because the observation
was not determinative of the district court’s decision, how-
ever, any error in the court’s reasoning was harmless.
MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 11
Wireless Tel. Co. v. Radio Corp. of Am., 269 U.S. 459, 468–
69 (1926)). In essence, an exclusive licensee has an interest
in the patent sufficient to establish an injury when a third
party infringes, akin to an ownership interest, while a non-
exclusive licensee has no such interest in the patent and
merely enjoys freedom from suit. See id. Under this frame-
work, it cannot be said that an exclusive license and a non-
exclusive license necessarily concern the same subject
matter, even though both licenses include the same patent.
We thus find that there are important substantive dif-
ferences between the subject matter of the 2006 Covenant
and the 2007 Settlement. The 2006 Covenant is a unilat-
eral promise by Molon not to sue Merkle-Korff (or its suc-
cessor, Nidec) for infringement of two patents, one of which
is the ’915 patent. The 2007 Settlement, in contrast, is a
bilateral contract through which Molon transferred to
Merkle-Korff a share in the existing and potential exclu-
sionary rights under more than a dozen listed patents and
applications, one of which is the ’915 patent. Moreover, the
2006 Covenant is limited to products existing at the time
of its execution, while the 2007 Settlement includes both
existing and future products. And the 2006 Covenant is
not limited to any specific market, while the 2007 Settle-
ment is limited to the Kinetek Exclusive Market.
Molon criticizes the district court for allegedly requir-
ing perfect congruity between the contracts. Appellant’s
Br. 19. But the district court properly considered the sub-
stantive differences between the agreements. Like the dis-
trict court, we reject Molon’s argument that we should
disregard those differences and instead focus entirely on
the fact that the ’915 patent appears in both agreements.
And we find no legal support for the sweeping proposition
that an overlapping patent is sufficient to render two
agreements the same subject matter.
Based on the substantial differences between the
agreements, we conclude that the 2006 Covenant is not
12 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
“concerning the subject matter” of the 2007 Settlement.
We therefore conclude that the language of the merger
clause in the 2007 Settlement did not expressly extinguish
the 2006 Covenant.
II
Having concluded that the 2007 Settlement did not ex-
pressly extinguish the 2006 Covenant, we next consider
Molon’s more general suggestion that the existence of the
merger clause is itself evidence that the parties intended
the 2007 Settlement to extinguish the 2006 Covenant. To
address that argument, we look at the merger clause in the
context of the overall 2007 Settlement. Gallagher v. Le-
nart, 874 N.E.2d 43, 58 (Ill. 2007) (“The intent of the par-
ties is not to be gathered from detached portions of a
contract or from any clause or provision standing by it-
self.”).
“Merger occurs when a contract supersedes and incor-
porates all or part of an earlier agreement.” Am. Nat. Bank
& Trust Co. of Chicago v. Bentley, 512 N.E.2d 12, 13 (Ill.
App. Ct. 1987). However, the scope of merger “does not ex-
tend infinitely to any and all dealings that might have oc-
curred between the parties.” Midwest Builder, 891 N.E.2d
at 19.
Molon argues that, by including a merger clause in the
2007 Settlement, the parties manifested their intent to
have the 2007 Settlement override all other agreements
pertaining to rights under the ’915 patent. Appellant’s
Br. 10–13. According to Molon, the 2007 Settlement “spells
out Merkle-Korff’s complete rights with respect to the ’915
patent,” and those rights stand “in direct contrast” to the
rights granted under the 2006 Covenant. Appellant’s
Br. 16. Molon contends that, because Merkle-Korff already
had a right to practice the ’915 patent under the 2006 Cov-
enant, under the district court’s reading, “the grants and
carve-outs associated with the ’915 Patent . . . in the 2007
Settlement Agreement are superfluous at best.” Id. And
MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 13
Molon further argues that, to the extent the merger clause
did not apply to the 2006 Covenant, the merger clause itself
would have been superfluous because there were no other
agreements between the parties. Appellant’s Br. 17–18.
Nidec responds that, whereas merger clauses are in-
tended to integrate negotiations into the final written con-
tract, they do not merge separate agreements that were not
part of the negotiations. Appellee’s Br. 16 (citing Air
Safety, 706 N.E.2d at 885–86). Thus, Nidec argues, the
merger clause here is not superfluous because it merged
the negotiations that led to the 2007 Settlement, but it did
not merge the 2006 Covenant, which is a “wholly separate
commitment by Molon relating to only two patents.” Ap-
pellee’s Br. 17.
We agree with Nidec that the 2006 Covenant is a sep-
arate agreement that was not merged with the 2007 Set-
tlement. It is telling that Molon’s appeal relies on a clause
that both parties repeatedly refer to as a “merger” or “inte-
gration” clause. Yet, neither party has invoked the merger
doctrine in its traditional form as a doctrine of contract in-
terpretation. See Schweickhardt v. Chessen, 161 N.E. 118,
122 (Ill. 1928) (“The rule is, that when parties reduce their
agreement to writing, all prior negotiations leading up to
the execution of the contract are merged therein, and parol
evidence is not admissible to explain, contradict, enlarge,
or modify the writing as it existed when executed.”). The
effect of the merger doctrine is to “preclude[] evidence of
understandings, not reflected in a writing, reached before
or at the time of its execution which would vary or modify
its terms.” J & B Steel Contractors, Inc. v. C. Iber & Sons,
Inc., 642 N.E.2d 1215, 1217 (Ill. 1994); see also Fuchs &
Lang Mfg. Co. v. R.J. Kittredge & Co., 146 Ill. App. 350, 364
(Ill. App. Ct. 1909) (“It follows legally that this [written con-
tract] merged all prior negotiations, letters and telegrams
in the written agreement thus formulated and signed; and
all extrinsic evidence of oral or written negotiations be-
came incompetent, immaterial and irrelevant for the
14 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
purpose of contradicting or modifying the written agree-
ment.”). But here, neither Nidec nor Molon has argued
that the 2006 Covenant was part of the negotiations for the
2007 Settlement and is thus relevant to interpret that later
agreement. On the contrary, Nidec’s position is that the
2006 Covenant is an entirely separate agreement unre-
lated to the 2007 Settlement, and Molon’s position is that
the 2006 Covenant should be considered extinguished.
These positions reflect the parties’ apparent concession
that the 2006 Covenant was a separate agreement from the
2007 Settlement, and therefore outside the scope of what a
merger clause is intended to cover.
We also disagree with Molon that the terms of the 2007
Settlement are in conflict with, or are rendered superfluous
by, the 2006 Covenant. Under Illinois law, the doctrine of
merger only applies when a later contract “relates to the
same subject matter and embraces the same terms” as an
earlier contract. Kraft v. No. 2 Galesburg Crown Fin.
Corp., 420 N.E.2d 865, 870 (Ill. App. Ct. 1981).
The 2007 Settlement contains different terms that
granted additional separate rights under the ’915 patent
beyond the rights that Merkle-Korff already had under the
2006 Covenant. Specifically, Merkle-Korff previously had
a right to practice the ’915 patent only with respect to ex-
isting products but then acquired the additional right to
practice that patent for all products. Merkle-Korff previ-
ously had a nonexclusive right to practice the ’915 patent
and was then given exclusivity, i.e., meaning that Molon
could not grant rights to any other third party to practice
the patent within the Kinetek Exclusive Market. And
Merkle-Korff also acquired the right to sue to enforce that
exclusivity within the Kinetek Exclusive Market. Those
additional rights do not conflict with the rights granted in
the 2006 Covenant, nor are they superfluous.
Molon argues that the 2007 Settlement “provided no
authorization beyond the ‘Kinetek Exclusive Market.’”
MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 15
Appellant’s Br. 15–16. To support that position, Molon
points to language in the 2007 Settlement that merely clar-
ifies that a sale to a “receiving Merkle-Korff Affiliate”
would not immunize otherwise-infringing activity outside
the Kinetek Exclusive Market. Id. (citing J.A. 31). That
portion of the agreement, however, does not indicate that
Merkle-Korff intended to forfeit the separate rights that it
had already been granted to practice the ’915 patent out-
side the Kinetek Exclusive Market. In reality, the 2007
Settlement is silent with respect to Merkle-Korff’s pre-ex-
isting rights under the 2006 Covenant to practice the pa-
tent nonexclusively in all other markets. Although Molon
urges us to interpret that silence as an indication that the
parties intended to replace those pre-existing rights with
the rights granted in the 2007 Settlement, the law supports
Nidec’s position that the two agreements are separate
agreements that did not merge.
Molon relies heavily on Midwest Builder, a case in
which the court found that the payment obligations from
one party to another were the central component of two
agreements, and therefore the parties intended a merger
clause to override conflicting provisions regarding those ob-
ligations. Midwest Builder, 891 N.E.2d at 19–20. But here,
while the right to practice the ’915 patent is common to
both the 2006 Covenant and the 2007 Settlement, the two
agreements do not conflict with each other regarding that
right, and there are numerous additional rights granted in
the 2007 Settlement.
Nidec correctly points out that the 2006 Covenant
states that it applies “forever,” and Molon explicitly stated
its intention for the 2006 Covenant to divest the court of
jurisdiction over claims involving the ’915 patent in the
’5134 litigation. To achieve that purpose, it was essential
that the 2006 Covenant is irrevocable. See ArcelorMittal v.
AK Steel Corp., 856 F.3d 1365, 1370 (Fed. Cir. 2017). Alt-
hough Molon argues that the 2006 Covenant was only ir-
revocable unilaterally by Molon, we agree with the district
16 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
court that the absence of any reference to the 2006 Cove-
nant in the 2007 Settlement, though not dispositive, is an
indication that Nidec did not intend to assent to its revoca-
tion. See J.A. 11–12.
For these reasons, we find that the merger clause in
the 2007 Settlement does not indicate that the parties in-
tended to revoke the 2006 Covenant. The 2006 Covenant
remains operable, and it bars Molon’s suit against Nidec
for infringement of the ’915 patent.
III
Lastly, we turn to Nidec’s motion to strike portions of
Molon’s reply brief. Nidec argues that Molon’s reply brief
raises two new arguments for denial of summary judgment
that were not raised before the district court: (1) that the
2006 Covenant did not transfer from Merkle-Korff to
Nidec; and (2) that the 2006 Covenant does not cover some
of the accused products. Molon responds that those factual
assertions are intended only to support its position that the
2006 Covenant was not broad, which is a central issue
raised in this appeal. We limit our consideration of the al-
legedly new arguments solely to the purpose for which Mo-
lon raises them, and we find that neither compels a finding
that the subject matter of the 2006 Covenant and the 2007
Settlement is the same. Accordingly, Nidec’s motion is de-
nied as moot.
CONCLUSION
We have considered Molon’s remaining arguments, but
we find them to be unpersuasive. Accordingly, the judg-
ment of the district court is affirmed. Nidec’s motion to
strike portions of the reply brief is denied as moot.
AFFIRMED
United States Court of Appeals
for the Federal Circuit
______________________
MOLON MOTOR AND COIL CORPORATION,
Plaintiff-Appellant
v.
NIDEC MOTOR CORPORATION,
Defendant-Appellee
______________________
2019-1071
______________________
Appeal from the United States District Court for the
Northern District of Illinois in No. 1:16-cv-03545, Judge
Edmond E. Chang.
______________________
REYNA, Circuit Judge, dissenting.
Resolution of this case should have been straightfor-
ward. In the 2006 Covenant, Molon granted Merkle-Korff
a bare license to practice the ’915 patent in any market. In
the 2007 Settlement, Molon granted Merkle-Korff an ex-
clusive license to practice the ’915 patent in the Kinetek
Exclusive Market only. Both licenses relate to the same
subject matter—the right to practice the ’915 patent. Thus,
the 2007 Settlement’s merger clause, which wiped away all
prior covenants with the same subject matter, wiped away
the 2006 Covenant. The majority’s holding—that Merkle-
Korff’s successor, Nidec, can practice the ’915 patent out-
side of the Kinetek Exclusive Market, despite the 2007 Set-
tlement’s clear prohibition of such practice—rewrites the
2 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
terms of the 2007 Settlement and gives Nidec a windfall.
Rewriting the key terms of an otherwise clear agreement
is not the role of this court. For these reasons and those
discussed below, I respectfully dissent.
I. “Subject Matter”
The majority recognizes that the “right to practice the
’915 patent” is common to the 2006 Covenant and the 2007
Settlement. Maj. Op. at 14. The majority, however, con-
cludes that the two agreements do not have sufficiently re-
lated subject matter because they have “fundamental
differences,” mainly, Merkle-Korff’s additional right to sue
as an exclusive licensee under the 2007 Settlement. Id. at
10. I disagree. Under Illinois law, which applies here, the
common right to practice the ’915 patent is sufficiently re-
lated subject matter.
In Midwest Builder Distrib., Inc. v. Lord & Essex, Inc.,
a case cited by the majority, an Illinois court determined
that merger occurred between an earlier credit information
sheet and later subcontractor agreements because they
had sufficiently related subject matter. 891 N.E.2d 1, 20
(Ill. App. Ct. 2007). The earlier credit information sheet
provided that Midwest Builder Distribution (“Midwest”), a
cabinets and appliances company, would supply its goods
on credit to Lord & Essex, a home construction company.
Id. at 7. Later subcontractor agreements more narrowly
provided that Midwest would sell goods to Lord & Essex for
homes in five subdivisions. Id. The court rejected Mid-
west’s overly narrow view that the subcontractor agree-
ments’ subject matter was “focused exclusively on the
specifications of the products to be delivered.” Id. at 20.
The court instead found “the heart of the subject matter” to
be broader—the “payment obligations” of Lord & Essex to
Midwest. Id. The court also noted that the earlier credit
information sheet had the same subject matter, and, thus,
the later subcontractor agreements “preempted and super-
seded” the credit information sheet’s conflicting payment
MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 3
obligations. Id. Here, the “heart of the subject matter” of
the 2007 Settlement and the 2006 Covenant is the right to
practice the ’915 patent. Thus, like in Midwest Builder, the
two agreements merge.
Contrary to Midwest Builder, the majority applies an
unduly heightened standard for merger. Although claim-
ing it is not dispositive, the majority notes that the absence
of any reference to the 2006 Covenant in the 2007 Settle-
ment “is an indication that Nidec did not intend to assent
to its revocation.” Maj. Op. at 16. There is no legal require-
ment that a party explicitly list prior agreements in a mer-
ger clause. Indeed, as the district court here noted,
“[p]arties may have numerous outstanding contracts, even
in a relatively simple operation,” hence, requiring the con-
tracting parties to mention prior agreements in a merger
clause should “not be taken too far.” J.A. 11. Yet, the ma-
jority goes too far by implying that the 2007 Settlement
should have explicitly referenced the 2006 Covenant.
The majority also mistakenly believes that there was
no merger because the parties failed to note that both
agreements were part of the same negotiations. Maj. Op.
at 14. The merger doctrine, however, turns on whether two
separate agreements have related subject matter, not
whether they are part of the same negotiations. Midwest
Builder, 891 N.E.2d at 20 (“To determine the scope of inte-
gration of the subcontractor agreements, we must . . . de-
termine the intended subject matter of the contracts.”). In
addition, the majority’s narrow view of the merger doctrine
conflicts with the plain terms of the agreement, which pro-
vides that merger encompasses prior negotiations as well
as prior “agreements, representations and covenants con-
cerning the subject matter hereof.” J.A. 35.
The majority conflates the merger doctrine with the re-
lated but distinct parol evidence rule. As the majority cor-
rectly notes, once merger has occurred, the “effect” of the
merger “is to ‘preclude[] evidence of understandings, not
4 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
reflected in a writing, reached before or at the time of its
execution which would vary or modify [the integrated
agreement’s] terms.’” Maj. Op. at 13 (quoting J & B Steel
Contractors, Inc. v. C. Iber & Sons, Inc., 642 N.E.2d 1215,
1217 (Ill. 1994)). Yet, this “effect,” commonly referred to as
the parol evidence rule, is irrelevant in this appeal. See J
& B Steel Contractors, Inc., 642 N.E.2d at 1217 (noting that
the “parol evidence rule” is the “rule [that] generally pre-
cludes evidence of understandings, not reflected in a writ-
ing”); Restatement (Second) of Contracts § 213 cmt. A
(1981) (noting that the parol evidence rule is not “a rule of
interpretation,” but instead “defines the subject matter of
interpretation”). 1 Here, no party disputes that the 2007
Settlement merged with all prior dealings with related sub-
ject matter, and, thus, parol evidence will not be admissible
at trial. Instead, the parties disagree as to the scope of the
subject matter of the 2007 Settlement.
II. Contract Interpretation
The majority also misinterprets the language of the
2007 Settlement in three other instances, skewing its sub-
ject matter analysis.
First, the majority states that the 2007 Settlement and
the 2006 Covenant did not conflict because the 2007 Settle-
ment is silent with respect to Merkle-Korff’s pre-existing
rights to practice the ’915 patent under the 2006 Covenant.
Maj. Op. at 15. But the two agreements do conflict. The
2007 Settlement provides limited authorization to practice
the patent in one market. The 2007 Settlement states that:
1 “In Illinois, the Restatement of Contracts forms the
basis for the state’s contract law . . . .” In re Krueger, 192
F.3d 733, 741 (7th Cir. 1999).
MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 5
Under said license, the sale, offer to sell, lease, im-
portation, exportation, commercialization and/or
transfer of products and/or systems between two
Merkle-Korff Affiliates . . . shall in no way permit
the transferee Merkle-Korff Affiliate . . . to make,
have, made, use, sell, offer to sell, lease, import, ex-
port or otherwise commercialize such products
and/or systems for resale or other transfer to any
person or entity outside of the Kinetek Exclusive
Market.
J.A. 31. As the district court noted, this clause “denied
Merkle-Korff any further rights in the ’915 patent” beyond
the right to practice in the Kinetek Exclusive Market.
J.A. 4. Contrastingly, the 2006 Covenant provides broad
authorization to practice in all markets.
The conflict between the two agreements is key. An
integrated agreement “supersedes inconsistent terms of
prior agreements.” Restatement (Second) of Contract § 213
cmt. b (1981). Thus, because the 2007 Settlement is inte-
grated, it superseded the broad and conflicting authoriza-
tion to practice the ’915 patent granted in the 2006
Covenant.
Second, the majority argues that there is no merger be-
cause the 2007 Settlement contains “different terms” than
the 2006 Covenant. Maj. Op. at 14. Yet, under the plain
language of the 2007 Settlement, “different terms” do not
prevent merger. As displayed below, under clause 1 of the
2007 Settlement, the contract makes a distinction between
“terms or subject matter,” indicating that these two con-
cepts are distinct. Under clause 2, the 2007 Settlement
states that merger will occur for all prior dealings concern-
ing the same subject matter, not the same terms.
[1] There are no representations, promises, or
agreements pertaining to the terms or subject mat-
ter of this Agreement, whether express or implied,
that are not set forth in this Agreement. [2] All
6 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION
prior and contemporaneous conversations, negotia-
tions, possible and alleged agreements, representa-
tions and covenants concerning the subject matter
hereof, are merged herein and shall be of no force
or effect.
J.A. 35 (emphasis and numbering added). Hence, pursuant
to the 2007 Settlement, “subject matter” triggers merger, a
broader and separate concept than contractual terms.
Lastly, the majority reads out the term “covenants”
from the 2007 Settlement, rendering that portion of the
merger clause superfluous. A court must read “[e]very con-
tract . . . as a whole,” and “favor a construction” that does
not render superfluous a portion of the contract. Leavitt v.
Kostel, 177 N.E.2d 882, 885 (Ill. App. Ct. 1961). The 2007
Settlement states that all “covenants concerning the sub-
ject matter hereof, are merged herein and shall be of no
further force or effect.” J.A. 35. The parties do not dispute
that there were no other covenants between them besides
the 2006 Covenant when the parties entered into the 2007
Settlement. As a result, the term “covenants” presumably
refers to the 2006 Covenant.
In sum, because the majority misapplies Illinois law
and misinterprets the 2007 Settlement, I dissent.