Molon Motor and Coil Corp. v. Nidec Motor Corp., [2019-1071](January 10, 2020), the Federal Circuit affirmed judgment in favor of Nidec Motor Molon’s claim for infringement of U.S. Patent 6,465,915, on the ground that Molon was barred from enforcing the ’915 patent against Nidec pursuant to a covenant not to sue that Molon granted in 2006. Molon contended that the 2006 Covenant was extinguished by a clause in a Settlement, License and Release Agreement that the parties entered into in 2007, which stated that all prior covenants “concerning the subject matter hereof” are “merged” and “of no further force or effect.” The Federal Circuit agreed with the district court that the two agreements concern different subject matter and therefore do not merge.
Molon sued Nidec’s predecessor for infringement of one patent, and Nidec’s predecessor counterclaimed for a declaratory judgment invalidity/non-infringement of two others including the ‘915 patent. To eliminate the counterclaim, Molon granted Nidec’s predecessor a covenant not to sue under the two additional patents. Eventually Molon and Nidec’s predecessor settled the original ligation with a settlement agreement granted a limited license under all three patents. This settlement agreement had an integration clause that provided:
The district court found that the 2006 Covenant gives Nidec a right to avoid suit for patent infringement on two patents, one of which is the ’915 patent, while the 2007 Settlement is in some ways broader—it is an exclusive license, it includes more than a dozen patents and applications, and it provides Nidec with some enforcement rights—and in other ways narrower—it is limited to a defined market of customers—than the 2006 Covenant.
All prior and contemporaneous conversations, negotiations, possible and al-leged agreements, representations and covenants concerning the subject matter hereof, are merged herein and shall be of no further force or effect.
The Federal Circuit agreed with Nidec and the district court that it is incorrect to broadly define the subject matter of both agreements as the right to practice the ’915 patent. Rather, to determine the subject matter of each agreement, the Federal Circuit said it must examine the actual language of the agreements themselves, and consider how the language of each agreement conveys the substantive rights and obligations exchanged between the parties. The Federal Circuit observed:
The 2006 Covenant is a unilateral promise by Molon not to sue [Nidec’s predecessor] for infringement of two patents, one of which is the ’915 patent. The 2007 Settlement, in contrast, is a bilateral contract through which Molon transferred to [Nidec’s predecessor] a share in the existing and potential exclusionary rights under more than a dozen listed patents and applications, one of which is the ’915 patent. Moreover, the 2006 Covenant is limited to products existing at the time of its execution, while the 2007 Settlement includes both existing and future products. And the 2006 Covenant is not limited to any specific market, while the 2007 Settlement is limited. The court concluded, the 2006 Covenant remains in effect be-cause it does not concern the same subject matter as the 2007 Settlement.