In a divided panel decision, the US Court of Appeals for the Federal Circuit concluded that a merger clause in the parties’ settlement agreement did not extinguish a prior covenant not to sue. Molon Motor & Coil Corp. v. Nidec Motor Corp., Case No. 19-1071 (Fed. Cir. Jan. 10, 2020) (Lourie, J) (Reyna, J, dissenting).
In 2004, Molon sued Nidec’s predecessor, Merkle-Korff, for infringement of Molon’s patent. In response, Merkle-Korff filed declaratory judgment counterclaims against two other Molon patents, seeking declarations of invalidity and non-infringement. Molon subsequently offered Merkle-Korff a covenant not to sue (2006 covenant) on the counterclaim patents. The covenant provided a unilateral non-exclusive license covering products existing at the time with no limits to specific markets.