`
`
`
`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 Market2 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