Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-19-01071/USCOURTS-ca13-19-01071-0/pdf.json

Parties Involved:
Molon Motor and Coil Corporation
Appellant
Nidec Motor Corporation
Appellee

Document Text:

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 represented by KARA RENEE FUSSNER, STEVEN E. HOLTSHOUSER,

BRENDAN G. MCDERMOTT. 

 ______________________

Before LOURIE, REYNA, and HUGHES, Circuit Judges.

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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 Northern 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 Settlement”). 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.” Because we agree with the district court that the two agreements 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 Industries, Inc. (“Merkle-Korff”), for infringement of U.S. Patent 

6,054,785 (“the ’785 patent”). J.A. 76–78 (“the ’5134 litigation”). Merkle-Korff filed counterclaims, including for declaratory 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 February 2, 2006, Molon unilaterally provided Merkle-Korff with 

the 2006 Covenant, which states:

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Molon hereby forever covenants not to sue MerkleKorff for patent infringement (whether direct, contributory, 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 MerkleKorff 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 stipulation 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 patents and patent applications—including the ’785, ’915, 

and ’726 patents—within a narrowly defined exclusive 

market:

Grant. Molon hereby grants each of the MerkleKorff 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 transfer: (i) to any of the other Merkle-Korff Affiliates; 

and/or (ii) to [a third-party company and its 

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affiliates] (such persons and entities in (i) and (ii) 

above, collectively the “Kinetek Exclusive Market”). 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 resale or other transfer to any person or entity outside 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 “integration” clause1:

Entire Agreement. This Agreement is an integrated Agreement and constitutes the entire agreement 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 representatives, 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 written 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).

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representations, promises, or agreements pertaining to the terms or subject matter of this Agreement, whether express or implied, that are not set 

forth in this Agreement. All prior and contemporaneous conversations, negotiations, possible and alleged 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 alleges that Nidec is practicing and/or inducing others to 

practice the ’915 patent outside the licensed Kinetek Exclusive Market. See J.A. 58–64. 

Nidec moved for partial summary judgment on Molon’s 

infringement claim, arguing that Molon is barred from enforcing the ’915 patent against Nidec under the 2006 Covenant. 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. Because 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 Covenant 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 Settlement is in some ways broader—it is an exclusive license,

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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 because 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 patent 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 judgment 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 Elecs., Inc., 769 F.3d 1371, 1377 (Fed. Cir. 2014)). In the Seventh 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 appropriate 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 provision requiring that it “be governed and construed in accordance 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. 

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App. Ct. 2012) (“[W]e interpret the contract independently, 

without deference to the trial court.”). 

Traditional contract interpretation principles in Illinois 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 Settlement. The merger clause states in relevant part:

All prior and contemporaneous conversations, negotiations, possible and alleged agreements, representations 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 extrinsic evidence to interpret what the parties intended. 

The clause, on its face, only pertains to covenants “concerning the subject matter” of the 2007 Settlement.

Molon argues that the language of this clause in the 

2007 Settlement expressly extinguished the 2006 Covenant because the two agreements concern the same subject 

matter. Intermingled with that argument, Molon also suggests more generally that the existence of the merger 

clause within the 2007 Settlement is itself evidence of the 

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parties’ intent to extinguish the 2006 Covenant. We address these arguments below.

I

We first address the language of the merger clause in 

the 2007 Settlement, which limits its application to covenants “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. ConcreteI.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 rejected an “extremely narrow view” of two contracts as having 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 agreements 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 therefore 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 respect 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. 

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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 determine the subject matter of each agreement, we must examine 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 Covenant, 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 licensed products.

Next, we look at the subject matter of the 2007 Settlement, which is an eight-page bilateral contract, in which 

Merkle-Korff agreed to pay monetary consideration to Molon in exchange for an exclusive license covering more than 

a dozen United States and foreign patents and patent applications. J.A. 30–37. The 2007 Settlement is not limited 

to any specific products or geographical area, but it is limited to the Kinetek Exclusive Market. J.A. 31. Additionally, the 2007 Settlement gives Merkle-Korff a right to sue 

third parties for infringement of the licensed patents 

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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 patent 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 exclusive license and a nonexclusive license, particularly in the 

context of standing to assert a claim for patent infringement. See Rite-Hite, 56 F.3d at 1552 (citing Independent 

 

2 The district court noted a hypothetical “strange result” 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 outside of that market. See J.A. 10. Because the observation 

was not determinative of the district court’s decision, however, any error in the court’s reasoning was harmless.

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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 nonexclusive licensee has no such interest in the patent and 

merely enjoys freedom from suit. See id. Under this framework, it cannot be said that an exclusive license and a nonexclusive license necessarily concern the same subject 

matter, even though both licenses include the same patent. 

We thus find that there are important substantive differences between the subject matter of the 2006 Covenant 

and the 2007 Settlement. The 2006 Covenant is a unilateral promise by Molon not to sue Merkle-Korff (or its successor, 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 exclusionary 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 Settlement is limited to the Kinetek Exclusive Market. 

Molon criticizes the district court for allegedly requiring perfect congruity between the contracts. Appellant’s 

Br. 19. But the district court properly considered the substantive differences between the agreements. Like the district 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 

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“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 expressly 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. Lenart, 874 N.E.2d 43, 58 (Ill. 2007) (“The intent of the parties is not to be gathered from detached portions of a 

contract or from any clause or provision standing by itself.”). 

“Merger occurs when a contract supersedes and incorporates 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 extend infinitely to any and all dealings that might have occurred 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 Covenant, 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 

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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 intended to integrate negotiations into the final written contract, 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.” Appellee’s Br. 17.

We agree with Nidec that the 2006 Covenant is a separate agreement that was not merged with the 2007 Settlement. It is telling that Molon’s appeal relies on a clause 

that both parties repeatedly refer to as a “merger” or “integration” clause. Yet, neither party has invoked the merger 

doctrine in its traditional form as a doctrine of contract interpretation. 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 contract] merged all prior negotiations, letters and telegrams 

in the written agreement thus formulated and signed; and 

all extrinsic evidence of oral or written negotiations became incompetent, immaterial and irrelevant for the 

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purpose of contradicting or modifying the written agreement.”). 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 unrelated 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 existing products but then acquired the additional right to 

practice that patent for all products. Merkle-Korff previously 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.’” 

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Appellant’s Br. 15–16. To support that position, Molon 

points to language in the 2007 Settlement that merely clarifies 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 outside the Kinetek Exclusive Market. In reality, the 2007 

Settlement is silent with respect to Merkle-Korff’s pre-existing rights under the 2006 Covenant to practice the patent 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 obligations. 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). Although Molon argues that the 2006 Covenant was only irrevocable unilaterally by Molon, we agree with the district 

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court that the absence of any reference to the 2006 Covenant in the 2007 Settlement, though not dispositive, is an 

indication that Nidec did not intend to assent to its revocation. See J.A. 11–12.

For these reasons, we find that the merger clause in 

the 2007 Settlement does not indicate that the parties intended 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 allegedly new arguments solely to the purpose for which Molon 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 denied as moot. 

CONCLUSION

We have considered Molon’s remaining arguments, but 

we find them to be unpersuasive. Accordingly, the judgment of the district court is affirmed. Nidec’s motion to 

strike portions of the reply brief is denied as moot.

AFFIRMED

Case: 19-1071 Document: 81 Page: 16 Filed: 01/10/2020
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 straightforward. 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 exclusive 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 MerkleKorff’s successor, Nidec, can practice the ’915 patent outside of the Kinetek Exclusive Market, despite the 2007 Settlement’s clear prohibition of such practice—rewrites the 

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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, concludes that the two agreements do not have sufficiently related 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 related 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 Midwest’s overly narrow view that the subcontractor agreements’ 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 superseded” the credit information sheet’s conflicting payment 

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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 claiming it is not dispositive, the majority notes that the absence 

of any reference to the 2006 Covenant in the 2007 Settlement “is an indication that Nidec did not intend to assent 

to its revocation.” Maj. Op. at 16. There is no legal requirement that a party explicitly list prior agreements in a merger clause. Indeed, as the district court here noted, 

“[p]arties may have numerous outstanding contracts, even 

in a relatively simple operation,” hence, requiring the contracting parties to mention prior agreements in a merger 

clause should “not be taken too far.” J.A. 11. Yet, the majority 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 integration of the subcontractor agreements, we must . . . determine 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 provides that merger encompasses prior negotiations as well 

as prior “agreements, representations and covenants concerning the subject matter hereof.” J.A. 35. 

The majority conflates the merger doctrine with the related but distinct parol evidence rule. As the majority correctly notes, once merger has occurred, the “effect” of the 

merger “is to ‘preclude[] evidence of understandings, not 

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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 precludes evidence of understandings, not reflected in a writing”); 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 subject 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 subject matter analysis. 

First, the majority states that the 2007 Settlement and 

the 2006 Covenant did not conflict because the 2007 Settlement 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). 

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MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION 5

Under said license, the sale, offer to sell, lease, importation, 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, export 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 integrated, it superseded the broad and conflicting authorization to practice the ’915 patent granted in the 2006 

Covenant.

Second, the majority argues that there is no merger because 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 concepts are distinct. Under clause 2, the 2007 Settlement 

states that merger will occur for all prior dealings concerning the same subject matter, not the same terms. 

[1] There are no representations, promises, or 

agreements pertaining to the terms or subject matter of this Agreement, whether express or implied, 

that are not set forth in this Agreement. [2] All 

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6 MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION

prior and contemporaneous conversations, negotiations, possible and alleged agreements, representations 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 contract . . . 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 subject 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. 

Case: 19-1071 Document: 81 Page: 22 Filed: 01/10/2020