United States Court of Appeals 

for the Federal Circuit 

__________________________ 

CUMMINS, INC., 

Plaintiff-Appellant, 

v. 

TAS DISTRIBUTING COMPANY, INC., 

Defendant-Appellee. 

__________________________ 

2010-1134 

__________________________ 

Appeal from the United States District Court for the 

Central District of Illinois in case no. 09-CV-1096, Judge 

Joe Billy McDade. 

______________________________ 

Decided: December 5, 2012 

______________________________ 

JEANNE M. GILLS, Foley & Lardner, LLP, of Chicago, 

Illinois, argued for the plaintiff-appellant. With her on 

the brief were JONATHAN R. SPIVEY and AARON J.

WEINZIERL. 

CRAIG L. UNRATH, Heyl, Royster, Voelker & Allen, of 

Peoria, Illinois, argued for the defendant-appellee. With 

him on the brief were KAREN L. KENDALL and TIMOTHY L.

BERTSCHY. Of counsel was JACOB D. KOERING, Freeborn 

& Peters, LLP, of Chicago, Illinois. 

__________________________ 
CUMMINS INC v. TAS DISTRIBUTING 2

Before NEWMAN, BRYSON, and REYNA, Circuit Judges. 

REYNA, Circuit Judge. 

Since 2003, Cummins, Inc. (“Cummins”) and TAS Distributing Company, Inc. (“TAS”) have been engaged in 

three separate actions regarding idle-control technologies 

for heavy-duty truck engines. In the latest, filed in 2009, 

Cummins sought a declaratory judgment that claims of 

TAS’s U.S. Patent Nos. 5,072,703 (“the ’703 patent”) and 

5,222,469 (“the ’469 patent”) (collectively “the TAS patents”) are invalid and unenforceable. The present appeal 

challenges the summary judgment determination of the 

district court, which found that Cummins’ declaratory 

judgment suit against TAS is barred by the doctrine of res 

judicata in light of an earlier litigation. Cummins, Inc. v. 

TAS Distributing Co. (TAS III), 676 F. Supp. 2d 701 (C.D. 

Ill. 2009). We agree that Cummins could have pursued 

claims regarding invalidity and unenforceability of the 

TAS patents in prior litigation, which featured the same 

parties, arose from the same group of operative facts, and 

resulted in a final resolution on the merits. Because res 

judicata bars Cummins’ defenses under 35 U.S.C. §§ 102 

and 103 in the present case, we affirm. 

I. Background 

A. Parties and Technology 

TAS, an Illinois corporation headquartered in Peoria, 

invented, developed, and marketed its patented technology that automatically turns a diesel engine on or off 

under certain circumstances. The technologies claimed in 

the ’703 patent, entitled “Apparatus for the Automatic 

Starting, Running, and Stopping of an Internal Combustion Engine,” and the ’469 patent, entitled “Apparatus for 

Monitoring an Internal Combustion Engine of a Vehicle,” 

were incorporated by TAS into systems called “Temp-A-
3 CUMMINS INC v. TAS DISTRIBUTING

Start” and “Temp-A-Stop.” Each system came in two 

varieties: an “ECM” or “One-Box” version incorporated in 

new engines and a “Retrofit” or “Two-Box” version installed in existing engines. 

Cummins, a large Indiana corporation that manufactures truck engines, approached TAS about licensing its 

TAS system technologies. In 1996, Cummins wrote to 

TAS forecasting sales of 4,000 TAS systems in the first 

year, 10,000 systems in the second year, “and beyond.” 

Joint App’x at 343. Cummins was especially interested in 

the “Temp-A-Start” system because of its purported 

ability to automatically start and stop the engine in 

response to different inputs, for example: oil temperature; 

engine block temperature; battery condition; electrical 

signals, such as cabin thermostat; and alerts from accessories, such as electric blankets, battery warmers, and 

fuel tank heaters. Subsequently, the parties entered into 

licensing agreements, including the February 1997 Master License Agreement which is the focus of this appeal. 

B. Master License Agreement 

The dispute in this case has its basis in the February 

1997 agreement between the TAS and Cummins (hereinafter “the Master License Agreement”), which granted 

Cummins the co-exclusive right to use technology owned 

or licensed by TAS relating to the “Temp-A-Start” and 

“Temp-A-Stop” systems, including the TAS patents. 

Cummins agreed under the terms of the Master License 

Agreement to pay a minimum $1 million royalty over five 

years, as well as an ongoing royalty of $50 to $125 per 

unit sold of the licensed products. Cummins could elect to 

terminate its rights to utilize the TAS technology after 

the fifth year. In addition, Cummins was required to 

maximize royalties: “Licensee shall make all reasonable 

efforts to market and sell [the TAS products] so as to 
CUMMINS INC v. TAS DISTRIBUTING 4

maximize the payment of royalties to Licensor under this 

License Agreement.” Joint App’x at 99. 

With the Master License Agreement in force, Cummins integrated both the “Temp-A-Start” and the “TempA-Stop” technologies into its own “ICON” product line. 

Cummins printed advertising literature and displayed its 

ICON products at industry trade shows. The “Temp-AStart” technology, however, purportedly proved unreliable, and sales were lackluster and substantially below 

the optimistic forecasts Cummins had reported to TAS. 

Although Cummins averaged annual sales of fewer than 

200 ICON products, Cummins paid TAS the full 

$1,000,000 minimum royalty. 

C. TAS I

In February 2003, TAS filed a declaratory judgment 

action in the United States District Court for the Central 

District of Illinois, alleging that Cummins had breached 

the Master License Agreement by failing to make “all 

reasonable efforts” to market and sell the TAS technology. 

TAS Distrib. Co. v. Cummins Engine Co. (TAS I), 491 

F.3d 625, 630 (7th Cir. 2007).1 In total, the complaint in 

TAS I set forth twelve counts, including claims for breach 

of contract and a demand for specific performance. Id. at 

627. Cummins maintained that it made reasonable 

efforts. It also filed a counterclaim, alleging that its 

obligation to pay royalties under the Master License 

Agreement was set to expire on March 31, 2003. See TAS 

Distrib. Co. v. Cummins Engine Co., No. 03-1026, slip op. 

at 4 (C.D. Ill. Jan. 21, 2005), aff’d, 491 F.3d 625 (7th Cir. 

2007). 

 1 Cummins Engine Company, Inc. is now 

known as Cummins, Inc. 
5 CUMMINS INC v. TAS DISTRIBUTING

At the close of discovery, Cummins moved for summary judgment and TAS cross-moved for partial summary judgment. TAS I, 491 F.3d at 627. On January 21, 

2005, the trial court granted Cummins’ motion for summary judgment. Id. at 629-30. The court found that 

genuine issues of triable fact existed as to whether Cummins had employed reasonable efforts in selling engines 

incorporating the TAS technology under the Master 

License Agreement, but that TAS had failed to present 

any proof of its damages. Id. at 630. The district court 

rejected as speculative the pre-contract sales forecasts in 

which Cummins estimated how many units it could sell 

on an annual basis and an unverified affidavit from TAS’s 

CEO purporting to show how many units a previous 

licensee had sold. Id. at 636. The district court also 

declined to order specific performance of Cummins’ obligations under the “all reasonable efforts” clause, finding 

that TAS would have an adequate remedy should Cummins violate future obligations under the Master License 

Agreement. Id. at 630. The district court granted TAS’s 

cross-motion for partial summary judgment, ruling that 

Cummins had a continuing contractual obligation extending beyond March 31, 2003 to make the per-unit royalty 

payments for ongoing sales. On appeal, the Seventh 

Circuit affirmed the TAS I decision. See id. at 625, 638. 

D. TAS II

On May 31, 2007, TAS filed a second suit in Illinois. 

See TAS Distrib. Co. v. Cummins Inc. (TAS II), No. 07-cv1141 (C.D. Ill.). In TAS II, TAS claimed that Cummins 

breached the Master License Agreement by failing to pay 

royalties on all of Cummins’ products that incorporated 

TAS technology. See TAS III, 676 F. Supp. 2d at 704. 

There was no dispute that Cummins made the minimum 

payment of $1 million, but TAS alleged that Cummins 

had not paid royalties on sales of 13,681 Retrofit units 
CUMMINS INC v. TAS DISTRIBUTING 6

from April 1, 1998 to April 30, 2010, which amounted to 

approximately $1,400,000 in unpaid royalties. TAS 

claimed that Cummins failed to provide TAS with the 

monthly reports of sales of products as required under the 

Master License Agreement. TAS also asserted that 

Cummins had put its own “ISF Plus System” into its 

products, rather than TAS’s licensed system, and owed 

royalties under the Master License Agreement for the 

TAS technology that was substituted. 

Discovery in TAS II included issues on the scope of 

TAS’s patented technology. In March 2009, Cummins 

deposed Mr. Loran Sutton, the sole named inventor of the 

TAS patents. During his deposition, the inventor admitted that a version of Temp-A-Start had been sold to 

another manufacturer, Bosch Trucking Company, in the 

mid-1980s, well before the critical dates of the ’469 and 

’703 patents.2 See Joint App’x at 133-135. This was 

consistent with Mr. Sutton’s deposition testimony taken 

in TAS I on February 11, 2004. Joint App’x at 417-418. 

He also revealed that none of the prior sales or marketing 

efforts had been disclosed to the Patent and Trademark 

Office during prosecution of the TAS patents. 

Based on the discovery of the prior sales, Cummins 

decided to challenge the validity and enforceability of the 

TAS patents licensed under the Master License Agreement. Cummins sought leave to amend its Answer to 

include patent-based affirmative defenses and counterclaims related to the prior sales of the TAS technology. In 

an April 9, 2010 order, the district court prevented Cummins from pursuing those claims on the grounds that 

 2 The ’703 patent issued on December 17, 1991, 

from an application filed on October 16, 1990; the ’469 

patent issued on June 29, 1993 from an application filed 

on June 9, 1992. 
7 CUMMINS INC v. TAS DISTRIBUTING

“[s]uch claims are clearly barred by res judicata: the 

claims should have and could have been brought in 

TAS I.” See TAS II, 2011 U.S. Dist. LEXIS 126349, at *5 

(C.D. Ill. Nov. 1, 2011). 

E. TAS III

On March 18, 2009, Cummins initiated TAS III. In 

TAS III, Cummins sought to have the trial court: (1) 

dismiss TAS’s suit in TAS II; (2) declare the ’703 and ’469 

patents invalid under 35 U.S.C. §§ 102 and 103; (3) declare the Master License Agreement void for patent 

misuse; (4) declare that TAS engaged in patent misuse for 

improperly enforcing the TAS patents; (5) declare the ’703 

and ’469 patents unenforceable due to inequitable conduct; and (6) rescind the Master License Agreement in its 

entirety. TAS III, 676 F. Supp. 2d at 704; Joint App’x 

255-262. 

Cummins relied on three main arguments. First, that 

products embodying Temp-A-Start or Temp-A-Stop technologies were sold as early as 1986, more than a year 

before the filing dates of the TAS patents, and that these 

sales were not disclosed to the PTO. Second, that the 

actual inventor of the ’469 patent was not Mr. Loran 

Sutton, but his brother, and that this fact was not disclosed to the PTO. And third, that there is a three year 

gap in the chain of title of the ’703 patent such that there 

was no right to assign it. TAS III, 676 F. Supp. 2d at 704-

05 & nn.3-4. Each of these facts is alleged to have occurred prior to or during the process of obtaining the 

patents, which was prior to TAS I. Id. at 705. 

On November 30, 2009, the district court granted 

TAS’s motion for summary judgment effectively barring 

all of Cummins’ claims for declaratory relief on the basis 

of the doctrine of res judicata. Id. at 703. The district 

court noted that: 
CUMMINS INC v. TAS DISTRIBUTING 8

The validity of the contracts was, though implicitly, an operative fact in TAS I. Cummins certainly could have contested, as either a defense or 

a counterclaim, the validity of the contracts and 

the patents that it asserts underlie the contracts 

in TAS I, and if successful, Cummins' claims 

would have defeated TAS’ suit in TAS I. These 

factual assertions are certainly related in time, 

space, origin, and motivation to the breach of contract at issue in TAS I; they would have formed a 

convenient trial unit with TAS I’s factual issues; 

and a decision on the validity of the underlying 

contract would have conformed to standard expectations in a breach of contract dispute. 

Id. 

Cummins claimed an equitable exception to res judicata on the grounds that TAS made contractual misrepresentations that prevented Cummins from raising the 

patent-based defenses in TAS I. Id. at 713. The trial 

court rejected this argument, relying on testimony and 

evidence showing that Cummins was informed prior to 

TAS I that TAS had sold potentially invalidating variants 

of the Temp-A-Start system since the 1980s. See id. at 

715-17. Specifically, internal minutes of an October 22, 

1996 meeting between TAS and Cummins executives 

contained the following statement: “TAS has been in 

production with variants of the system since 1985, and 

have [sic] shipped 3000-4000 units.” Id. at 715; Joint 

App’x at 362. Cummins did not dispute the authenticity 

of these minutes, which were recorded by its own employee. In addition, the district court pointed out that Mr. 

Sutton testified at his deposition in TAS I that Temp-A-
9 CUMMINS INC v. TAS DISTRIBUTING

Start was first marketed and sold around 1986.3 See

Joint App’x at 417. The district court found that the prior 

sales were known to Cummins and created a duty of due 

diligence under Illinois law, and that Cummins “could not 

close its eyes to the possibility, revealed in the 1986 sales, 

that the patents might be subject” to challenge. TAS III, 

676 F. Supp. 2d at 716. The district court concluded that 

it “was not convinced, even when all the evidence is 

viewed in the light most favorable to Cummins, that TAS 

had made any misrepresentations that prevented Cummins from asserting its patent invalidity claim in TAS I.” 

Id. at 715. The district court held that as a matter of law, 

Cummins’ TAS III suit was precluded by the doctrine of 

res judicata, and terminated the case. Cummins timely 

appealed. We have jurisdiction under 28 U.S.C. 

§ 1295(a)(1). 

II. Discussion 

A. Standard of Review and Choice of Law 

This court reviews a district court’s grant of summary 

judgment under the law of the regional circuit in which 

the district court sits, which in this case is the Seventh 

Circuit. Lexion Med., LLC v. Northgate Techs., Inc., 641 

F.3d 1352, 1358 (Fed. Cir. 2011). The Seventh Circuit 

reviews a district court’s grant of summary judgment de 

novo. Staats v. County of Sawyer, 220 F.3d 511, 514 (7th 

Cir. 2000). Summary judgment must be granted “if the 

movant shows that 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(a). In ruling on a 

 3 TAS still denies that a stand-alone Temp-AStart system was sold as early as 1986. TAS admits only 

that a version of Temp-A-Start was on sale, which, it 

asserts, “did not satisfy all claims in the ’703 patent.” 

Joint App’x at 290–92. 
CUMMINS INC v. TAS DISTRIBUTING 10

motion for summary judgment, the court must view the 

record evidence in the light most favorable to the nonmoving party. SMS Demag Aktiengesellschaft v. Material 

Scis. Corp., 565 F.3d 365, 368 (7th Cir. 2009). 

Whether a claim is barred by res judicata is a question of law reviewed by appellate courts de novo. See, e.g., 

Accumed LLC v. Stryker Corp., 525 F.3d 1319, 1323 (Fed. 

Cir. 2008). Because this court applies the law of the 

regional circuit where general principles of res judicata

are at issue, Illinois state law governing res judicata

applies in this case. See id.; Media Tech. Licensing, LLC 

v. Upper Deck Co., 334 F.3d 1366, 1369 (Fed. Cir. 2003). 

The res judicata effect of a prior judgment of a federal 

court sitting in federal diversity is determined by the law 

of the state in which the court sits. Semtek Int’l Inc. v. 

Lockheed Martin Corp., 531 U.S. 497, 508 (2001). 

B. Res Judicata 

Res judicata, also known as “claim preclusion,” operates in Illinois to prevent a party from bringing suit to 

resolve claims that were or could have been decided in a 

prior action. River Park, Inc. v. City of Highland Park, 

703 N.E.2d 883, 896 (Ill. 1998). Three conditions must 

pertain before Illinois state courts will bar a later suit 

based on res judicata: a court of competent jurisdiction 

must have rendered a final judgment on the merits in an 

earlier suit; the earlier and later suits must involve the 

same causes of action; and the two suits must involve the 

same parties or their privies. Id. at 889. The doctrine of 

res judicata “extends to what was actually decided in the 

first action, as well as those matters that could have been 

decided in that suit.” Id. at 889; see also Corcoran-Hakala 

v. Dowd, 840 N.E.2d 286, 290 (Ill. App. Ct. 2005) (observing that res judicata extends to all matters, including 

those that could have been offered). 
11 CUMMINS INC v. TAS DISTRIBUTING

Illinois courts have consistently held that the bar of 

res judicata extends not only to questions actually decided, but also to all defenses and counterclaims, which 

might have been presented in the prior litigation. See, 

e.g., Leitch v. Hine, 66 N.E.2d 90, 95 (Ill. 1946); Bacon v. 

Reichelt, 111 N.E. 565, 566 (Ill. 1916); Harvey v. Aurora & 

Geneva Ry. Co., 57 N.E. 857, 861 (Ill. 1900); Neff v. 

Smyth, 111 Ill. 100, 110 (1884); Cabrera v. First Nat’l 

Bank of Wheaton, 753 N.E.2d 1138, 1145 (Ill. App. Ct. 

2001). 

C. Arguments 

Cummins presents three main questions on appeal 

challenging the trial court’s application of res judicata: (1) 

whether the trial court’s basis for jurisdiction in TAS I

was such that its judgment could have preclusive effect 

over subsequent patent-based defenses; (2) whether TAS I

and TAS III are based on the same set of transactional 

facts; (3) whether exceptions to the application of the res 

judicata are available to Cummins. We address each of 

these questions in turn. 

1. Jurisdictional Basis of TAS I

Cummins argues that res judicata cannot apply in 

this case because the district court in TAS I lacked proper 

subject matter jurisdiction under the Declaratory Judgment Act, 28 U.S.C. § 2201(a), to hear issues regarding 

patent invalidity and unenforceability. Cummins argues 

that because there was no case or controversy regarding 

infringement in TAS I due to its continued royalty payments, there could not have been declaratory judgment 

jurisdiction to adjudicate defenses to infringement. We 

find no jurisdictional bar that would have prevented 

Cummins from asserting its patent-based defenses in 

response to TAS's declaratory judgment action in TAS I, 

notwithstanding that Cummins continued making royalty 
CUMMINS INC v. TAS DISTRIBUTING 12

payments. See MedImmune, Inc. v. Genentech, Inc., 549 

U.S. 118, 130 (2007) (citing Altvater v. Freeman, 319 U.S. 

359 (1943)) (“[A] licensee’s failure to cease its payment of 

royalties d[oes] not render nonjusticiable a dispute over 

the validity of the patent.”). In addition, regardless of 

whether Cummins could have sought affirmative relief in 

TAS I in the form of a declaratory judgment counterclaim, 

it plainly could have raised its patent-based defenses in 

response to TAS’s contract claims, but it did not do so.4

2. Transactional Test 

Illinois has adopted a three-prong test to determine 

the applicability of res judicata. Cummins concedes that 

“[t]here is no dispute as to identity of parties, nor that 

TAS I represents a final judgment on the merits.” Appellant’s Br. at 19. Thus, the first and third prong of the 

Illinois res judicata test—requiring a final judgment on 

the merits and two suits involving the same parties or 

their privies—are satisfied. The gravamen of Cummins’ 

appeal centers on the second prong of the res judicata

test—whether the causes of action in TAS I and TAS III

are the same. Cummins asserts that they are not thereby 

precluding any res judicata effect. 

To determine whether causes of action are the same 

for preclusion purposes, the Illinois Supreme Court 

adopted the “transactional test” articulated in the Restatement (Second) of Judgments. River Park, 703 N.E.2d 

at 892-93. Under the transactional test, “separate claims 

[are] considered the same cause of action for purposes of 

 4 TAS argues that Cummins raises for the first 

time before this court certain arguments, including the 

jurisdictional argument, which we should deem waived. 

We find all of Cummins’ arguments against applying res 

judicata unpersuasive, so we do not reach the issue of 

waiver. 
13 CUMMINS INC v. TAS DISTRIBUTING

res judicata if they arise from a single group of operative 

facts, regardless of whether they assert different theories 

of relief.” Id. at 893. The Supreme Court of Illinois has 

affirmed that a claim is extinguished under these principles, “even though the plaintiff is prepared in the second 

action (1) [t]o present evidence or grounds or theories of 

the case not presented in the first action, or (2) [t]o seek 

remedies or forms of relief not demanded in the first 

action.” Id. (quoting Restatement (Second) of Judgments 

§ 25, at 209 (1982)). 

a. Same Operative Facts 

Cummins asserts that the operative facts in TAS III

are too dissimilar to those at issue in TAS I to have 

preclusive effect. Cummins argues that res judicata

cannot apply because the present matter relates to patent 

invalidity, misuse, and unenforceability, whereas the 

prior case dealt only with enforcing the “all reasonable 

efforts to market and sell” under the Master License 

Agreement. Cummins cites non-authoritative statements 

and cases from other jurisdictions in support of a more 

forgiving articulation of what constitutes the same cause 

of action than as defined under Illinois law. See, e.g., 

Appellant’s Br. at 23 (citing as “instructive” Andersen v. 

Chrysler Corp., 99 F.3d 846 (7th Cir. 1996) (applying 

Wisconsin law)). 

We find River Park controlling. The court in River 

Park held that “different kinds or theories of relief still 

constitute[] a single cause of action if a single group of 

operative facts give rise to the assertion of relief.” River 

Park, 703 N.E.2d at 891. Hence, “operative facts” are not 

just those supporting the first judgment, but all “facts 

that give rise to plaintiffs’ right to relief.” Id. at 892 

(quoting Rein v. David A. Noyes & Co., 172 Ill. 2d 325, 

338–39 (1996)). 
CUMMINS INC v. TAS DISTRIBUTING 14

The district court in TAS III found that the validity of 

the Master Agreement was, though implicitly, an operative fact in TAS I and that Cummins could have contested, either as a defense or counterclaim, the validity of 

the Master Agreement and the patents that it asserts 

underlie the agreement in TAS I. If successful, Cummins’ 

claims would have defeated TAS’s suit in TAS I. Further, 

Cummins’ claims of invalidity and unenforceability of the 

TAS patents, if proven, would impair the judgment in 

TAS I that Cummins has a continuing obligation to pay 

ongoing royalties under the License Agreement after 

March 2003. 

We conclude that the district court’s decision is within 

the Illinois standard for res judicata as announced by 

River Park. Cummins elected not to assert the defenses 

despite that if argued and won, the defenses would have 

been a complete defense in TAS I. See Henry v. Farmer 

City State Bank, 808 F.2d 1228, 1235-36 (7th Cir. 1986) 

(applying Illinois law to find former defendants barred 

from bringing a claim that would have been a complete 

defense to the prior action). The onus was on Cummins 

under Illinois state law to raise the defenses at that time 

or forfeit their use at a later time. See Cabrera, 324 Ill. 

App. 3d at 94 (“[U]nder Illinois law no counterclaims are 

classified as compulsory; however, this does not preclude 

the application of res judicata.” (internal citations omitted)); Sanders Confectionery Prods., Inc. v. Heller Fin., 

Inc., 973 F.2d 474, 484 (6th Cir. 1992) (“[W]hat is important is not whether a particular claim is compulsory, but 

whether the claim should have been considered during 

the prior action.”). Illinois courts have determined not to 

engage in “piecemeal presentation of defenses,” and we 

give deference to this sound policy. Henry, 808 F.2d at 

1234. 
15 CUMMINS INC v. TAS DISTRIBUTING

Cummins points to three considerations mentioned in 

River Park it claims disfavor finding a common cause of 

action in this case: “[1] whether the facts are related in 

time, space, origin, or motivation, [2] whether they form a 

convenient trial unit, and [3] whether their treatment as 

a unit conforms to the parties' expectations or business 

understanding or usage.” River Park, 703 N.E.2d at 893. 

The district court considered each of these considerations 

and found them unhelpful to Cummins. TAS III, 676 F. 

Supp. 2d at 708. We find no error in the district court’s 

analysis or conclusion. 

Cummins also argues that its patent misuse claims 

are not subject to preclusion because Mercoid Corp. v. 

Mid-Continent Investment Co., 320 U.S. 661 (1944), 

stands for the proposition that res judicata does not apply 

to a claim of patent misuse even if that claim could have 

been raised in an earlier action. The Mercoid case, however, is much narrower than Cummins suggests. In 

Mercoid, the patentee sought an injunction against infringement of its patent, and the accused infringer defended based in part on a claim of patent misuse. In 

response to the patentee’s assertion that res judicata

foreclosed the accused infringer from raising patent 

misuse as a defense, the Supreme Court held that a court 

of equity cannot be foreclosed from exercising its discretion to deny injunctive relief because of “the failure to 

interpose the same defense in an earlier litigation.” 320 

U.S. at 670. 

The Supreme Court’s res judicata discussion makes it 

clear that Mercoid is different from this case. Unlike in 

Mercoid, the district court in this case was not asked to 

enforce a patent through the issuance of an injunction; 

instead, the licensee has sought to invalidate a license 

agreement—and thus relieve itself of any ongoing obligation to pay royalties—based on a theory of license invalid-
CUMMINS INC v. TAS DISTRIBUTING 16

ity that could have been raised in an earlier suit on the 

same contract. The justification for holding res judicata

inapplicable in Mercoid is thus absent here. See Glitsch, 

Inc. v. Koch Eng’g Co., 216 F.3d 1382, 1386 (Fed. Cir. 

2000) (concluding that Mercoid allows the assertion of 

patent misuse, in a second action, as a defense against 

infringement or in a request for declaratory relief, but it 

“does not justify allowing a party to launch a collateral 

attack on a ruling in the first action, the effect of which 

would be to alter the judgment in that action”). In this 

case, the sole purpose of Cummins’ patent misuse claims 

is to defeat TAS’s claims for contract damages. Similar to 

the claims related to invalidity and unenforceability, the 

district court correctly determined that the patent misuse 

defense is barred by res judicata. Therefore, under Illinois law, res judicata bars Cummins’ present suit. 

b. Nullification of TAS I

Cummins argues that the district court erred when it 

concluded that allowing Cummins to assert invalidity 

defenses would risk nullification of the judgment in TAS 

I. Cummins suggests that nullification would not apply 

because a defendant is not required to bring all available 

counterclaims in a prior action absent a compulsory 

counterclaim rule. Cummins contends that nullification 

of TAS I would be impossible because it, and not TAS, 

was the prevailing party in TAS I. 

The risk of inconsistent decisions is a longstanding 

concern of the judiciary. See Alvear-Velez v. Muskasey, 

540 F.3d 672, 677 (7th Cir. 2008) (quoting Montana v. 

United States, 440 U.S. 147, 153-54 (1979)). Courts 

routinely refuse under Illinois law to “either nullify the 

earlier judgment or impair the rights established in the 

earlier action.” Corcoran-Hakala, 840 N.E.2d at 290; 

accord Henry, 808 F.2d at 1235-36. In Henry, the Seventh 
17 CUMMINS INC v. TAS DISTRIBUTING

Circuit did not allow the defendant in an earlier breach of 

contract action to bring a later action that, if successful, 

would have voided the contract. 

Here, the district court found the potential nullification of the TAS I judgment a sufficient basis for applying 

res judicata, noting that it had found the contract valid. 

We need not decide whether Cummins’ allegations would 

nullify the district court’s judgment because those claims 

rely on the predicate determination that the patents are 

invalid or unenforceable, a holding which would impair 

the judgment from TAS I that established TAS’s continuing right to receive royalties. Cf. Nasalok Coating Corp. 

v. Nylok Corp., 522 F.3d 1320, 1328 (Fed. Cir. 2008) (“[A] 

defendant who fails to assert counterclaim in the first 

action may not later maintain an action on that claim if 

‘successful prosecution of the second action would nullify 

the initial judgment or would impair rights established in 

the initial action.’”) (quoting Restatement (Second) of 

Judgments § 22(2)(b)). 

The district court explained that a defendant who 

may assert a counterclaim, but fails to do so, is precluded 

from bringing a subsequent action based on that counterclaim if nullification were to result. See id. at 707 & n.8 

(citing the “common law compulsory counterclaim rule” in 

Corcoran-Hakala, 840 N.E.2d at 293-94); see also Restatement (Second) of Judgments § 22(2)(b). Here it is 

clear that the claims asserted by Cummins were proper 

defenses to the claims litigated in TAS I. Additionally, 

Cummins’ invalidity and unenforceability claims, if 

proven, would impair the rights TAS received in TAS I, 

which obligated Cummins to make ongoing royalty payments under the License Agreement. As a result, such 

claims are barred under res judicata. 
CUMMINS INC v. TAS DISTRIBUTING 18

We disagree that in TAS I Cummins was the prevailing party. The district court found that TAS was owed a 

continuing royalty beyond May 2003 and entered judgment against Cummins. 

3. Exceptions 

Cummins argues that certain exceptions to res judicata apply in this case: a declaratory judgment exception, 

and a misrepresentation exception. We agree with the 

district court’s ruling that the declaratory judgment 

exception does not apply under Illinois law. TAS III, 676 

F. Supp. 2d at 711. 

Further, Cummins asserts that TAS made misrepresentations in the course of this continued dispute, which 

prevented Cummins from becoming aware that it possessed invalidity and unenforceability defenses. The 

district court considered Cummins’ misrepresentations 

argument and, despite viewing the evidence in a manner 

most favorable to it, determined that Cummins was 

aware of the basis for the invalidity and unenforceability 

claims during the course of the TAS I discovery, which 

rendered a misrepresentation exception inapplicable. Id.

at 712-17. We discern no error in the district court’s 

analysis. 

III. Conclusion 

We find Cummins’ claims in TAS III are barred by the 

doctrine of res judicata, and affirm the district court’s 

grant of summary judgment in favor of TAS. 

AFFIRMED 

Costs 

No Costs.