In the

United States Court of Appeals

For the Seventh Circuit

No. 08-2479

SMS DEMAG AKTIENGESELLSCHAFT,

Plaintiff,

v.

MATERIAL SCIENCES CORPORATION,

Defendant-Appellee.

APPEAL OF: TERRONICS DEVELOPMENT CORPORATION,

Intervenor-Appellant.

Appeal from the United States District Court 

for the Central District of Illinois.

No. 2:06-cv-02065—Michael P. McCuskey, Chief Judge.

ARGUED DECEMBER 12, 2008—DECIDED MAY 8, 2009

Before CUDAHY, FLAUM, and WOOD, Circuit Judges.

CUDAHY, Circuit Judge. In this diversity action, Terronics

Development Corporation (TDC) sues Material Sciences

Corporation (MSC) for breach of contract, seeking
2 No. 08-2479

damages and the return of certain patents TDC had

assigned to MSC. The district court granted MSC’s motion

for summary judgment in its entirety. We affirm the

dismissal of TDC’s damages claims, but reverse the

dismissal of TDC’s claim seeking the reassignment of

its patents.

I.

MSC is one of the largest liquid coating companies in

North America. It pre-paints the raw materials that are

used by commercial and industrial manufacturers in cars,

building supplies, industrial equipment and consumer

products. Beginning in the 1990s, MSC began working

with TDC—a small research and engineering company—to

develop a new process for coating metal materials using

powder-based paint. Like traditional powder coating

methods, TDC’s process—which the parties call the

“Powder Cloud” process—involves electrostatically

coating sheet metal by imparting different electric

charges to the powder paint and the metal substrate.

Also like other powder coating methods, the Powder

Cloud process wastes less coating material than traditional, liquid coating methods and eliminates the need

for solvents, thus minimizing the generation of hazardous

waste. TDC’s Powder Cloud process was apparently

innovative because it enabled a single apparatus to coat

products of different shapes, and to coat both sides of a

metal surface simultaneously. As a result, TDC’s Powder

Cloud technology seemed to promise both greater flexibility and faster processing than traditional powder

coating processes.
No. 08-2479 3

SMS was the original plaintiff in this action, but is not a 1

party to this appeal.

In 1994, TDC granted MSC an exclusive license to use

and sublicense the Powder Cloud technology in exchange

for a fixed annual fee plus a variable fee based on MSC’s

sales. The parties renewed their licensing agreement in

1996, and TDC assigned its technology for a fixed term

to MSC in 1998. It is this third “technology assignment”

agreement (henceforth the Agreement) that is at issue

here. The Agreement was never formally executed, but

MSC concedes for the purpose of this appeal that the

agreement is enforceable. Four provisions of the Agreement are worth mentioning at the outset: (1) TDC assigned

MSC title to five patents and six patent applications

relating to the Powder Cloud process; (2) MSC was required to purchase its powder coating equipment from

TDC unless TDC was unable to provide it; (3) MSC agreed

to purchase a fixed minimum amount of consulting

services and equipment from TDC during the years the

Agreement was in effect; and (4) the agreement would

expire in 2002, but could be renewed at MSC’s discretion and would be renewed automatically if certain

sales goals were met.

In 1996, MSC sublicensed the Powder Cloud technology

to SMS Demag Aktiengesellschaft (SMS), giving SMS the

exclusive right to market this technology outside of North

America. After this initial success, however, the com- 1

mercialization of the Powder Cloud technology did not

proceed as the parties had expected. For one thing, MSC
4 No. 08-2479

did not meet any of the sales goals that would have

triggered the Agreement’s automatic renewal or variable

fee provisions. Further, because the technology was a

great deal more experimental than the parties had anticipated, TDC experienced significant cost overruns in

supplying the equipment and services MSC needed.

(As TDC’s CEO Ed Escallon would later remark, “[t]he

Hubble’s optics weren’t correct on launch.”) In 1996 and

again in 1997, TDC chose to meet these cost overruns

by borrowing against its expectation of future profits,

executing two promissory notes in favor of MSC—the

second superseding the first—for a total of $258,484

together with a 7% annual rate of interest. Under the

terms of the second Note, MSC was permitted “at its

sole discretion” to credit the fees due to TDC under the

Agreement against the outstanding balance under the

Note after April 2001.

It appears that by 1998, MSC began having serious

second thoughts about its commitment to the Powder

Cloud technology. Company records indicate that as a

result of “overcapacity” and “lower than expected sales,”

MSC decided to merge its “applied technology group,”

which had been responsible for commercializing the

Powder Cloud technology, into its liquid coating division.

In addition, MSC postponed plans to construct a standalone powder coating facility, electing instead to add a

powder coating line to an existing, liquid coating facility

in Middletown, Ohio. The parties refer to this Middletown facility as “Line 15.” TDC elected not to supply

MSC with the equipment for Line 15.
No. 08-2479 5

The parties’ relationship came to an unpleasant end in

2002. In late 2001, Ed Escallon sent MSC a letter purporting

to memorialize an oral agreement providing for MSC to

cancel $100,000 of TDC’s debt under the Note. Escallon’s

letter stated that MSC agreed to forgive this debt to

compensate TDC after MSC elected not to purchase its

equipment for Line 15 from TDC. MSC did not respond to

Escallon’s letter. In April 2002, MSC sent TDC a letter

informing it that MSC was exercising its right under

the Note to credit the $250,000 technology assignment

fee MSC owed TDC for 2002 against the balance of the

Note, which at the time was about $350,000. Finally,

in May 2002, TDC sent MSC a letter notifying it that

it would “no longer provid[e] support to MSC activities.”

SMS, the original sub-licensee for the Powder Cloud

technology, commenced this action against MSC in

federal district court. TDC intervened, adding its own

breach of contract claim seeking $2,153,400 in damages

as well as the reassignment of four of its patents. MSC

counterclaimed against TDC for $103,843.52, based on

the outstanding balance on the Note as well as the cost of

the repair work for which TDC was paid but failed to

perform. The district court granted MSC’s motion for

summary judgment in its entirety, dismissing TDC’s

damages and equitable claims and granting judgment

for MSC on its counterclaims. On this appeal, TDC has

challenged only the dismissal of its claims.

II.

Summary judgment is appropriate when there are no

genuine factual disputes that require a trial. See Fed. R. Civ.
6 No. 08-2479

P. 56(c); Waldridge v. American Hoechst Corp., 24 F.3d 918,

920 (7th Cir. 1994). In evaluating a motion for summary

judgment, courts must view the evidence in the light

most favorable to the non-moving party. Reeves v.

Sanderson Plumbing Products, Inc., 530 U.S. 133, 150 (2000).

However, before a non-movant can benefit from a favorable view of the evidence, it must show that there is

some genuine evidentiary dispute. “Genuine,” in this

context, means “reasonably contestable.” Wallace v. SMC

Pneumatics, Inc., 103 F.3d 1394, 1396 (7th Cir. 1997). Put

otherwise, a factual dispute is “genuine” only if a reasonable jury could find for either party. Reeves, 530 U.S. at

148; de la Rama v. Ill. Dep’t of Human Servs., 541 F.3d 681,

685 (7th Cir. 2008).

In the present case, TDC sought an order compelling

MSC to reassign TDC’s patents as well as approximately

$2.15 million in damages. TDC’s damages claim was

comprised of three sub-claims: (1) $250,000, which TDC

alleges it was owed as an “assignment fee” for 2002;

(2) $143,400, which was the amount of consulting services

and equipment MSC was required to purchase from

TDC in 2002; and (3) $1,760,000, which represents the

fees TDC would have been due from 2003 to 2006 if the

Agreement had been renewed.

The district court granted summary judgment for MSC

on all of TDC’s claims. We review this decision de novo.

Gates v. Caterpillar, Inc., 513 F.3d 680, 685 (7th Cir. 2008).

Under the terms of the Agreement, Illinois law controls.

We will consider TDC’s claims in reverse order.
No. 08-2479 7

A.

$1.76 million of TDC’s claimed damages represents the

money it would have been owed if the Agreement had

been renewed. By its terms, the Agreement ran from

April 1998 to April 2002. MSC was empowered to renew

the Agreement for an additional four-year term “at its

sole discretion.” While there is no dispute that MSC

did not expressly renew the Agreement, TDC argues

that MSC renewed the agreement implicitly “by performance.” TDC makes two allegations in support of this

claim: first, it alleges that MSC extended SMS’s sub-license

in 2004; second, it claims that MSC continued to market

the Powder Cloud technology after the Agreement had

lapsed.

As to the first allegation, there is no evidence that MSC

affirmatively “extended” SMS’s sub-license after 2002.

Indeed, the copy of the sub-licensing agreement that was

made part of the record on appeal shows that MSC had

no need to “extend” the sub-license because the sublicense would be renewed automatically until it was

cancelled. Nor was MSC required to terminate the sublicense in 2002, when TDC repudiated the Agreement.

Section 10.6(a) of the Agreement provides that the expiration or non-renewal of the Agreement would have

no effect on existing sub-licenses.

There is also no evidence to support TDC’s allegation

that MSC implicitly renewed the Agreement by continuing to market TDC’s technology after 2002. TDC

points to what appears to be a printout from a 2004 trade

publication, which it submitted in opposition to MSC’s
8 No. 08-2479

motion for summary judgment, but which it did not

authenticate. Even if we were to assume that the printout

is what it purports to be, the printout lends no support

to TDC’s cause. The publication describes, among other

things, how MSC worked with TDC to develop a powder

coating system, how MSC’s application process “uses

several patented elements to achieve . . . high-speed

capabilities” and how MSC continues to attempt to find

markets for coated products. Assuming that this publication is authentic, it does not suggest that MSC was

continuing to exploit the specific patents that TDC had

assigned to MSC through the Agreement.

The non-moving party is entitled to have only reasonable inferences drawn in its favor. See Omosegbon v. Wells,

335 F.3d 668, 677 (7th Cir. 2003). In the present case, even

if MSC had continued to use its equipment to make and

sell powder-coated steel products, as the publication

indicates, there is no evidence to suggest—and it would be

unreasonable to infer—that MSC was infringing on

TDC’s patents in order to do so. Section 10.2 of the Agreement requires MSC to stop manufacturing and selling

TDC’s equipment to others after the Agreement expires;

it does not require it to stop using equipment it had

already paid for to manufacture powder-coated products

to sell to third parties.

In short, there is no genuine issue of fact as to whether

MSC renewed the Agreement. Accordingly, the summary dismissal of TDC’s claim for fees from 2003 to 2006

was proper.
No. 08-2479 9

B.

TDC’s claim for $143,400 in damages based on the

consulting services and equipment that MSC was

required to purchase in 2002 is equally without merit.

Section 4.4 of the Agreement provides that “MSC will

guarantee minimum annual spending with [TDC] to

provide consulting services, equipment and engineering

forthe non-renewable term of the agreement.” Specifically,

MSC was required to purchase $143,360 in services and

equipment from TDC in 2002. However, in May 2002,

TDC sent MSC a letter declaring that it was “no longer

providing support to MSC activities.” Under Illinois

law, “in the face of clear evidence of an intent to

repudiate, the non-repudiating party is no longer under

an obligation to perform.” In re C & S Grain Co., 47 F.3d

233, 237 (7th Cir. 1995) (citing Builder’s Concrete Co. v. Fred

Faubel & Sons, Inc., 373 N.E.2d 863, 868 (Ill. App. Ct. 3d

Dist. 1978)). After TDC declared its unwillingness to

perform under the Agreement, it was quite clearly not

entitled to payments it would otherwise have been

due under the Agreement.

Indeed, even if MSC had been the first party to breach

the Agreement—as we discuss below, it was not—TDC’s

complete repudiation of the Agreement would have

relieved MSC of its obligation to attempt to purchase the

equipment and services TDC declared itself unwilling to

provide. See Ahern v. Knecht, 563 N.E.2d 787, 792 (Ill. App.

Ct. 2d Dist. 1990) (“[S]ubstantial nonperformance . . .

warrants rescission.”).
10 No. 08-2479

C.

The final portion of TDC’s damages claim is for $250,000,

which represents the “guaranteed minimum fixed fee”

TDC alleges it is still owed for 2002. Section 3.1 of the

Agreement calls for MSC to pay TDC a fixed fee of

$250,000 by April 2002. However, in 1997, TDC borrowed

$258,484 from MSC to cover its cost overruns. By

April 2002, the balance under the Note was $349,773. And

on April 9, 2002, MSC gave TDC written notice of its

decision to “exercise its discretion [to] credit the Guaranteed Minimum (Fixed) Fees of $250,000 due under our

license agreement for this year against the outstanding

balance [under the Note].” The Note provides that “[a]fter

April 1st 2001, MSC may at its sole discretion credit

minimum fees due for that year to any remaining outstanding balance.” Thus, MSC’s decision to credit the

$250,000 it owed TDC for 2002 against the balance

under the Note was entirely proper.

As best we can tell, TDC has affirmatively waived its

claim that it is still owed the full $250,000 fee, admitting

that it “may have erred in the amount [it had originally]

demanded.” (TDC Br. at 12.) However, TDC continues to

argue that it is still owed $100,000 of this $250,000

license fee. Unfortunately, TDC’s account of why it is

still owed this money is almost completely incomprehensible. In its appellate brief, TDC suggests that it was

owed this money for “consulting services” under

Sections 6.4 and 6.5 of the Agreement. But there is

nothing in Sections 6.4 or 6.5—or anywhere else in the

Agreement—that validates TDC’s claim that it is owed
No. 08-2479 11

There is no merit to TDC’s argument that MSC is estopped 2

from relying on the U.C.C. because it failed to plead the U.C.C.

(continued...)

this specific amount; the pleadings give the impression

that TDC made this number up out of whole cloth.

Even more puzzling than this is the fact that TDC claims

that this alleged $100,000 debt is related to MSC’s construction of Line 15. It is undisputed that TDC elected not

to supply equipment for Line 15. As TDC’s CEO Ed

Escallon would later explain, “[TDC] had some

important market opportunities in designing and

building equipment unrelated to MSC, and did not want

to forgo them.” Thus, even though TDC had the right to

supply MSC with equipment, it waived this right,

which under the terms of the Agreement left MSC free

to supply Line 15 as it saw fit.

TDC’s claim becomes slightly more intelligible—but

only slightly—when considered in the context of

Escallon’s October 2001 letter to MSC. In his letter,

Escallon states that in April 1999, TDC granted MSC a

license to build Line 15 without TDC’s help in exchange

for “closing out the first 100,000 dollar note.” This was

apparently an oral agreement. Indeed, when Escallon

invited MSC to formally execute this alleged agreement

years later, MSC refused. Thus, even if there were

evidence of this alleged oral agreement, the agreement

would be invalid under Illinois’s version of the Uniform

Commercial Code, which requires that cancellation of a

Note must be in writing. See 810 Ill. Comp. Stat. § 5/3-

604(a).2
12 No. 08-2479

(...continued) 2

as an affirmative defense in its answer. TDC’s second amended

complaint gave no notice of a separate claim for $100,000

based on this alleged oral agreement. Nor did TDC object to

MSC’s invocation of the U.C.C. below.

Nor, for that matter, is there any merit to TDC’s argument that

this U.C.C. provision does not apply here because MSC

cancelled only a portion of TDC’s debt. The statute does not

distinguish between total and partial discharge of a party’s

obligations under a Note. During oral argument, TDC’s attorney was not able to point to any authority for its claim that

the statute should be read to apply only to a total discharge

of a debt.

However, even if Escallon had alleged merely that

MSC had made an oral promise to pay TDC

$100,000—instead of alleging that MSC orally promised

to forgive a portion of the Note—summary judgment for

MSC still would have been proper. The principal problem

with TDC’s claim is that there is no evidence that MSC

ever promised TDC anything. Contrary to TDC’s claims

to the contrary, Escallon’s statements that he was

promised $100,000 is not evidence. See de la Rama, 541

F.3d at 685 (bare allegations insufficient to defeat a

motion for summary judgment); Drake v. Minn. Mining &

Mfg. Co., 134 F.3d 878, 887 (7th Cir. 1998) (bald assertions

do not give rise to genuine issues of fact); McDonnell v.

Cournia, 990 F.2d 963, 969 (7th Cir. 1993) (self-serving

assertions without more will not defeat a motion for

summary judgment).
No. 08-2479 13

TDC attempts to avoid this conclusion by relying on

Illinois’s doctrine of “past performance.” Under this

doctrine, performance under an oral agreement can

render such an agreement enforceable. See Meyer v.

Logue, 427 N.E.2d 1253, 1256 (Ill. App. Ct. 1st Dist. 1981);

Hills v. Hopp, 122 N.E. 510, 512 (Ill. 1919). TDC argues

that the oral agreement called for it to forego its right to

supply equipment for Line 15 in exchange for $100,000.

(To put this point less charitably, TDC alleges that it was

promised $100,000 in exchange for doing nothing.) TDC

claims that it lived up to its part of the alleged bargain:

it refrained from supplying MSC with equipment. It

argues that this “performance,” such as it is, is enough

to render MSC’s alleged oral promise enforceable.

This argument, of course, is unavailing. The justification

for the past performance doctrine is at least in part

that performance under an oral agreement typically

constitutes evidence that there actually was an agreement.

See Meyer, 427 N.E.2d at 1256 (“When one party fully

performs his part of the alleged oral contract . . . the courts

recognize that this very performance strongly indicates

the existence of a contract.”) (citing 2 Corbin on Contracts § 430 (1950)); see also Carl A. Haas Auto. Imports, Inc.

v. Lola Card Ltd., 933 F. Supp. 1381, 1388 (N.D. Ill. 1996)

(noting that the past performance doctrine applies to

performance that is “clearly more consistent with the

existence of the agreement than with some other arrangement.”). Where, as here, the alleged performance costs a

party nothing—or where the same party actually benefits

from its own alleged “performance”—then this performance is no evidence at all of the existence of the agreement.
14 No. 08-2479

The following exchange occurred during MSC’s deposition of 3

TDC’s CEO: “Question: Now, the minimum consulting fees

and engineering fees that you are charging . . . that wasn’t all

profit, correct? Answer: Oh, my God. That was mostly loss . . .

Question: Had you agreed to provide $143,400 worth of

services for MSC . . . you’re saying your profit would have

been 15 to 20%, or a lot less than that? Answer: A lot less.

Question: Maybe nothing? Answer: Maybe nothing.”

In the present case, TDC alleges that it performed by

failing to exercise its right to supply equipment for

Line 15. However, Escallon admitted that TDC had no

interest in supplying the Line 15 equipment because

“[TDC] had some important market opportunities in

designing and building equipment unrelated to MSC, and

did not want to forgo them.” He also admitted that TDC

actually lost money supplying equipment to MSC. Because 3

TDC admits that it benefitted by forgoing its right to

supply equipment to Line 15, neither its “performance”

under the alleged oral agreement, nor Escallon’s selfserving insistence that there was such an agreement, is

enough to give rise to a triable issue concerning

whether MSC owes TDC $100,000.

D.

While the district court properly granted summary

judgment for MSC on TDC’s damages claims, it was

error for the court to dismiss TDC’s claim seeking the

reassignment of certain of its patents. Section 10.2 of the

Agreement provides that “[i]f this Agreement is terminated
No. 08-2479 15

or expires, MSC shall immediately cease manufacturing

and selling the Equipment . . . and shall return to [TDC]

all the Technology capable of being returned.” Section 1.12,

in turn, provides that “Technology includes but is not

limited to the patents . . . [and] patent applications,” which

were identified in exhibits to the Agreement. Read together, these provisions required MSC to reassign the

patents that were assigned to it under the Agreement

when the Agreement was terminated in May 2002.

MSC argues that it is not required to reassign TDC’s

patents because a different section of the Agreement,

section 10.6(b), requires it to reassign the patents “if the

agreement is terminated by MSC.” This provision

does not say that MSC is required to reassign the patents

only if MSC is the party breaching the Agreement. However, MSC argues that the insertion of this specific provision relating to the patents, in addition to the general

provision concerning “technology” reassignment, is

evidence that the parties intended to protect TDC’s interests if, but only if, MSC was the party in breach.

While this may have been what the parties intended, this

is not what they said. Under Illinois’s “four corners” rule,

if a written agreement is unambiguous, then the scope

of the parties’ obligations must be determined from the

contract language without reference to extrinsic evidence. Air Safety, Inc. v. Teachers Realty Corp., 706

N.E.2d 882, 884 (Ill. 1999). Here, by its terms, the Agreement requires MSC to reassign TDC’s patents if the

Agreement expires. Since these terms are unambiguous,

we must enforce the Agreement as written.
16 No. 08-2479

Unfortunately, there seems to be some uncertainty as

to which patents, precisely, TDC assigned to MSC, and

which patents MSC still retains. The Agreement was

never formally executed. While the parties concede for

the purposes of summary judgment that the Agreement

is enforceable, there are two different drafts of the Agreement that were included in the record on appeal. TDC’s

second amended complaint attaches what appears to be

the earlier of the two drafts, which lists five patents and

six patent applications that TDC putatively assigned to

MSC. However, TDC identifies four different patents in its

second amended complaint, none of which were transferred to MSC under the draft of the Agreement that TDC

attached to its complaint. Further, the record on appeal

shows that MSC has abandoned at least five of TDC’s

patents with TDC’s consent, and that a sixth patent has

already been reassigned to TDC. Thus, we cannot determine based on this record whether MSC has actually

retained title to any of the patents TDC assigned to it, nor

can we determine if the patents TDC identifies in

its complaint actually ever belonged to TDC.

Although we remand this case for further proceedings, we do so in the expectation that the issues we

have identified can be resolved expeditiously. There is

factual support for TDC’s claim that it assigned MSC title

to certain patents in 1998. The sole questions that remain

to be determined are: first, which patents did TDC

assign to MSC; and second, has MSC retained title to

any of these patents. The district court has broad discretion to determine the best method for resolving these

questions on remand.
No. 08-2479 17

III.

We affirm the district court’s dismissal of TDC’s claims

for damages, but reverse its dismissal of TDC’s equitable

claim for the reassignment of its patents and remand

for further proceedings consistent with this opinion.

AFFIRMED IN PART, REVERSED IN PART

AND REMANDED

5-8-09