Integration Clause Does Not Necessarily Extinguish Prior Agreement on Same Patent

MOLON MOTOR AND COIL CORP. v. NIDEC MOTOR CORPORATION

Before Lourie, Reyna, and Hughes. Appeal from U.S. District Court for the Northern District of Illinois.

Summary: In interpreting an integration clause that nullifies all prior agreements on the same subject matter, the court will look at factors such as type of license, scope of market, number of patents, and types of products, to determine what is the same subject matter.

In 2006, Molon granted Merkle-Korff a covenant not to sue on two patents.  In 2007, Merkle-Korff entered an exclusive license agreement with Molon covering the same two patents, but within a narrowly defined market scope. The 2007 Agreement contained an integration clause that said all prior agreements “concerning the subject matter hereof, are merged herein and shall be of no further force or effect.”  Molon later filed a patent infringement suit against Nidec, Merkle-Korff’s successor in interest to the patents, for practicing a licensed patent outside the licensed market. 

The district court found the two agreements did not concern the same subject matter and thus the integration clause of the 2007 Settlement did not extinguish the 2006 Covenant.  The Federal Circuit affirmed.  Although both agreements included the asserted patent, the agreements concerned different subject matter because of differences in the types of rights granted, scope of market, number of patents, and types of products included in each agreement.

Judge Reyna dissented, finding that both agreements related to sufficiently related subject matter, i.e., the right to practice the relevant patent.

Editor: Paul Stewart

Written by: Lindsay Laddaran & Mark Kachner