Court Opinion

ID: 813096
Source: CourtListenerOpinion
Date Created: 2012-12-05 16:36:21+00
Date Added: 2024-06-11T18:00:46.795971
License: Public Domain

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 Dis-
tributing 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 pat-
ents”) 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 technol-
ogy 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 Combus-
tion 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 in-
stalled in existing engines.
    Cummins, a large Indiana corporation that manufac-
tures 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 acces-
sories, such as electric blankets, battery warmers, and
fuel tank heaters. Subsequently, the parties entered into
licensing agreements, including the February 1997 Mas-
ter 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 (herein-
after “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, Cum-
mins integrated both the “Temp-A-Start” and the “Temp-
A-Stop” technologies into its own “ICON” product line.
Cummins printed advertising literature and displayed its
ICON products at industry trade shows. The “Temp-A-
Start” technology, however, purportedly proved unreli-
able, 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 sum-
mary judgment and TAS cross-moved for partial sum-
mary judgment. TAS I, 491 F.3d at 627. On January 21,
2005, the trial court granted Cummins’ motion for sum-
mary judgment. Id. at 629-30. The court found that
genuine issues of triable fact existed as to whether Cum-
mins 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’ obli-
gations under the “all reasonable efforts” clause, finding
that TAS would have an adequate remedy should Cum-
mins 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 extend-
ing 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-cv-
1141 (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 admit-
ted 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 Agree-
ment. Cummins sought leave to amend its Answer to
include patent-based affirmative defenses and counter-
claims related to the prior sales of the TAS technology. In
an April 9, 2010 order, the district court prevented Cum-
mins 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) de-
clare 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 con-
duct; 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 tech-
nologies 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 dis-
closed 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 oc-
curred 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 implic-
      itly, an operative fact in TAS I. Cummins cer-
      tainly 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 con-
      tract 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 expec-
      tations in a breach of contract dispute.
Id.
    Cummins claimed an equitable exception to res judi-
cata on the grounds that TAS made contractual misrepre-
sentations 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 em-
ployee. 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 Cum-
mins 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-A-
Start 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 non-
moving 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 ques-
tion 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,” oper-
ates 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) (observ-
ing 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 de-
cided, 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 Judg-
ment 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 pay-
ments, 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.” Appel-
lant’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 Re-
statement (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 princi-
ples, “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 opera-
tive fact in TAS I and that Cummins could have con-
tested, 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 omit-
ted)); Sanders Confectionery Prods., Inc. v. Heller Fin.,
Inc., 973 F.2d 474, 484 (6th Cir. 1992) (“[W]hat is impor-
tant 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, how-
ever, is much narrower than Cummins suggests. In
Mercoid, the patentee sought an injunction against in-
fringement of its patent, and the accused infringer de-
fended 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 discre-
tion 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 obliga-
tion 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 Illi-
nois 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 nullifica-
tion 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 continu-
ing 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 counter-
claim 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 Re-
statement (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 pay-
ments 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 prevail-
ing party. The district court found that TAS was owed a
continuing royalty beyond May 2003 and entered judg-
ment against Cummins.
                        3. Exceptions
    Cummins argues that certain exceptions to res judi-
cata 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 misrepre-
sentations in the course of this continued dispute, which
prevented Cummins from becoming aware that it pos-
sessed 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.