### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No. 14

- 1663
T HE G RIGOLEIT C OMPANY , Plaintiff

- Appellant ,

v.

W HIRLPOOL C ORPORATION , Defendant

- Appellee

.

____________________ Appeal from the Unit ed States District Court for the Central District of Illinois

. No. 05

- CV

- 2126

— Colin S. Bruce , Judge

.

____________________
A RGUED S EPTEMBER 29, 2014

— D ECIDED O CTOBER 16, 2014

____________________

Before E ASTERBROOK , W ILLIAMS , and S YKES , Circuit Judges

. E ASTERBROOK , Circuit Judge

. For many years Whirlpool purchased injection

- molded plastic knobs and deco rative metal stampings from Gri goleit. In 1992 Whirl pool told Gri goleit that it would replace its products with those made by Phillips Plastics. After concluding that Phillips was us ing a method pro tected by its patents, Gri goleit demanded that Whirlpool switch back. In 1993 they st r uck a bargain: Grig oleit would license Whirlpool and Phillips to practice the p a-2 No. 14

- 1663

tents, and instead of royalties Grigoleit would get some of Whirlpool’s bu siness. Paragraph 3 of the contract says:
Whirlpool sh all not be obligated to pay Gri goleit any monies as royalties ... so long as Whirlpool continues to purchase from Gri goleit Whirlpool’s requirement for present styling of knobs for the “Estate” and “Roper ” brand lines of automatic clothes washers and dryers and so long as ... Whirlpool continues to give serious consideration to Grigoleit [ for other product lines when Grigoleit can provide] more than parity in technology, quality, service, delivery and price in comparison with other qualified suppliers[.] The agreement expired, with the patents, in 2003. From 1993 through 2003 Whirlpool bought all knobs for the Estate and Roper lines from Grigoleit. But it bought some knobs for other lines from Grigoleit’s com petitors, and Grigoleit concluded that it had not received the “serious consideration” to which ¶3 entitled it. That dispute was arb itrated, as the contract provided. The arbitrator concluded that Whirlpool had failed to consider Grigoleit’s parts for

some lines of washers and dryers “and therefore is liable for payment of money royalties or damages as the courts may determine.” In this suit under the diversity jurisdiction, Grigoleit demanded damages calculated by a contract mea sure : the profit it would ha ve made had Whirlpool purchased its requirements of knobs exclusively from Grigoleit. The district court held, however, that Whirlpool had not pro mised to give Grigoleit’s knobs serious consideration ; instead it had promised to pay royal ties if it failed t o do so . 2010 U.S. Dist. L EXIS 45524 (C.D. Ill. May 10, 2010 ). Unfortunately, the contract failed to specify the royalty Whirlpool would owe if it did not meet the conditions for a royalty

- free licen se. T he court concluded that a reasonable royalty falls in the rangeNo. 14

- 1663 3

of 1¢ to 12¢ per part and scheduled proceedings to produce a definitive royalty. 2014 U.S. Dist. L EXIS 686 (C.D. Ill. Jan. 3, 2014). The parties then agreed that royalties computed under the district court’s approach come to $140,000, but Gri goleit reserved its right to contest the two rulings on appeal. Grigoleit’s principal argument in this court is that, once Whirlpool took advantage of the royalty

- free license under ¶3, it became bound for the duration of the contract to give Grigoleit “se rious consideration” for all of its requirements for parts that Grigoleit could supply. Paragraph 3’s language forecloses that contention. It says, twice, that Whirlpool gets a royalty

- free license “so long as” it purchases Grigoleit’s knobs for two produc t lines and gives it “serious consider ation” for the rest

. The phrase “so long as” permitted Whir lpool to change how it performed, getting a royalty

- free l icense in some periods and paying royalties in others. Whir lpool failed to keep its promise; for some periods it neither gave Grigoleit “serious consideration” nor paid royalties. This allowed Grigoleit to seek compensation , which it has done. But what it is entitled to are “royalties” rather than contract damages under a the ory that once Whirlpool took a royalty

- free license for any period it was bound to meet the conditions of ¶3 until the patents expired

. Grigoleit protests that the district court’s approach treats the contract as an option, hel d by Whirlpool, rather than as bilateral and binding. Grigo leit accuses the district judge of ignoring ¶1, which grants Whirlpool a non

- exclusive license and releases it from liability for pre

- agreement infringement. But the district court did not ignore Grigoleit’s promises; i nstead it read the contract as includ ing Whirlpool’s promise to pay royalties

— without any need for Grigoleit to show4 No. 14

- 1663

that its patents were valid and infringed

— unless it me t the conditions in ¶3 . That’s a substantial promise by Whirl pool. Paragraph 7, which says that the contract terminates if Whirlpool stops buying Grigoleit’s products for the Roper and Estate lines, does not imply that Whirlpool must give “serious consideration” to Grigoleit’s parts for all lines, i ndefini tely, once it buys even one of Grigoleit’s knobs ; instead it reinforces the inference that the contract continues, but Whirlpool must pay royalties, if it stops giving “serious co nsideration” to Grigoleit’s offerings for other lines. Nonetheless, Grigoleit contends that even if Whirlpool was entitled to change its mind and shift from buying knobs to paying roya lties, the amount it owes still should be calc ulated under the lost

- profits method of contract law. The main reason that it gives for this contention is that during their negotiations the parties decided not to set a per

- piece royalty. Only a con tract measure of damages then is poss ible, the argument concludes. Yet ¶9 of the contract is an i ntegration or entire

- agreement clause, in which Grigoleit and Whirlpool disclaim any understandings that do not appear in the contract’s final text. What the t ext tells us is that Whirlpool owes “royaltie s, ” and lost profits differ from ro yalties. The caption on the contract is “LICENSE AGREEMENT” and the heading on ¶3 is “Royalties”. The district court therefore was not obliged to treat ¶3 as a r equirements con tract; the deal is a patent li cense

. A FFIRMED