Because Subject Matter of Covenant Not to Sue and Settlement Agreement Was Not the Same, Merger Clause Did Not Revoke Covenant, Barring Lawsuit

The patentee sued the alleged infringer in the Northern District of Illinois alleging patent infringement. The district court granted summary judgment that the patentee was barred from enforcing its patent against the alleged infringer under the terms of a 2006 covenant not to sue (CNS). The patentee appealed. The Federal Circuit held the merger clause in the 2007 Settlement Agreement did not revoke the 2006 CNS, and accordingly the 2006 CNS barred the patentee’s infringement claims against the accused infringer. To arrive at its decision, the court considered whether the subject matter of the CNS and the 2007 Settlement were the same, to determine whether the merger clause applied. The patentee argued the subject matter was the same because the subject matter of both agreements was the right to practice the asserted patent. 

The accused infringer argued the subject matter was different, because the agreements involved different types of licenses (exclusive v. non-exclusive), a different number of patents (more than 12 v. 2), and different products (Kinetek Exclusive Market v. any and all products). The court agreed with the district court and the accused infringer. In his dissent, Judge Reyna noted that “[r]esolution of this case should have been straightforward” because “[b]oth licenses related to the same subject matter—the right to practice the [asserted] patent.” Judge Reyna criticized the majority’s holding as rewriting the terms of the 2007 Settlement and giving the accused infringer “a windfall.”