United States District Court, D. Minnesota
ARCTIC CAT, INC., a Minnesota Corporation, and ARCTIC CAT SALES INC., a Minnesota Corporation, Plaintiffs,
POLARIS INDUSTRIES INC., a Minnesota Corporation, and POLARIS INDUSTRIES INC., a Delaware Corporation, Defendants. POLARIS INDUSTRIES, INC., a Delaware Corporation, Plaintiff,
ARCTIC CAT INC., a Minnesota corporation, Defendant.
Ann N. Cathcart Chaplin, John C. Adkisson, and Joseph A. Herriges, FISH & RICHARDSON PC, Minneapolis, MN, for Arctic Cat, Inc. & Arctic Cat Sales Inc.
Alan G. Carlson and William F. Bullard, CARLSON CASPERS VANDENBURGH LINDQUIST SCHUMAN PA, Minneapolis, MN, for Polaris Industries, Inc.
MEMORANDUM OPINION AND ORDER
JOHN R. TUNHEIM, District Judge.
These two cases arise out of patents owned by Polaris Industries, Inc. ("Polaris") related to side-by-side all-terrain-vehicles. After Polaris accused Arctic Cat, Inc. ("Arctic Cat") of infringing those patents, Arctic Cat brought a declaratory judgment action in this Court seeking a declaration of noninfringement with respect to those patents. The next day Polaris filed an action, also in this Court, for patent infringement of one of the atissue patents against Arctic Cat. Because Polaris did not identify its suit as being related to the declaratory judgment action, the cases were originally assigned to different judges, but have now been reassigned and are both pending before this Court.
In each case, the party denominated as plaintiff moves to dismiss the complaint of their adversary. Polaris argues that Arctic Cat's complaint must be dismissed because it does not serve the purposes of the Declaratory Judgment Act. Arctic Cat argues that Polaris' complaint must be dismissed and give way to Arctic Cat's earlier-filed action. In the alternative, Arctic Cat moves for consolidation. Polaris also moves to dismiss some of Arctic Cat's claims under Federal Rule of Civil Procedure 12(b)(6).
Because the Court concludes that dismissal is not warranted under either the Declaratory Judgment Act or the first-filed doctrine, the Court will deny the motions to dismiss to the extent they are based on those grounds. However, the Court will exercise its discretion to consolidate these related actions in the interests of judicial economy and maintenance of consistent results. Finally, with the exception of the claims for declaratory relief and breach of contract, the Court will grant Polaris' motion to dismiss the claims in Arctic Cat's amended complaint for failure to plead plausible claims for relief.
I. THE PARTIES
Arctic Cat is a Minnesota corporation that manufactures and sells recreational vehicles. (Civ. No. 13-3579, Am. Compl. ¶ 1, Apr. 29, 2014, Docket No. 10.) Polaris is also a Minnesota-based company engaged in the manufacture and sale of recreational vehicles. ( Id. ¶ 3, Ex. D.) Specifically, of relevance to the present lawsuits, both Arctic Cat and Polaris manufacture side-by-side all-terrain-vehicles. ( See id., Ex. D.) Polaris has obtained a number of patents protecting various aspects of its "RANGER RZR" sideby-side all-terrain vehicles which are the subject of these lawsuits. ( Id. ¶ 6, Ex. D.)
II. PRE-SUIT DISCUSSIONS
The events that precipitated the two lawsuits began with a letter dated December 3, 2013, in which an attorney representing Polaris with regard to patent matters gave Arctic Cat's president "notification of claims of patent infringement by Arctic Cat, Inc." ( Id., Ex. D at 2.) The letter indicated that Polaris had reviewed Arctic Cat's Wildcat and Wildcat 4 vehicles and "concluded that they infringe Polaris' U.S. Patent No. 8, 596, 405... which issued today, December 3, 2013." ( Id. ) With respect to other patents, the letter explained that "based upon photos and other information obtained [about Arctic Cat's newly introduced vehicle, the Wildcat Trail], we believe that it too will infringe upon at least one or more of the claims of Polaris' U.S. Patent Nos. 7, 819, 220; 8, 382, 125; 8, 596, 405; or one or more of the claims of Polaris' pending published patent applications; for example, U.S. XXXXXXXXXXX or US20130161109." ( Id. ) The letter noted that it was providing "formal Notice of the Polaris Patents that creates an affirmative duty for Arctic Cat to investigate such Polaris Patents in relation to the products mentioned herein" explaining:
We ask that you immediately evaluate the vehicles referred to herein, and, if you disagree with our conclusions, report to us your detailed conclusions. We also hereby demand that your company cease and desist making, using, offering for sale, selling, or importing any product that infringes upon our client's rights, including the Arctic Cat Vehicles referred to above.
We would like to reach an amicable, but immediate, resolution with Arctic Cat. However, given the seriousness of this matter, we request a prompt written response from you no later than: December 20, 2013.
If we do not receive a timely and complete affirmative reply to this Notice, we will so advise Polaris to consider pursuing the various legal remedies available to them as a consequence of Arctic Cat's unauthorized actions, including the right to seek damages, injunctive relief, and the recovery of legal fees.
( Id., Ex. D at 2-3 (emphasis in original).)
On December 17, 2013, Arctic Cat responded to the letter explaining that it was in the process of reviewing Polaris' patents and Arctic Cat's products referenced in the December 3 letter. (Civ. No. 13-3579, Decl. of Alan G. Carlson, Ex. A, May 13, 2014, Docket No. 18.) Arctic Cat's counsel stated:
My intent is to form meaningful (if initial) conclusions in the very short term. That said, I'd like to have an initial discussion with you tomorrow, if possible, so that we can discuss how best to proceed. One thing I'd like to discuss is whether it makes sense for the parties to enter into a Rule 408-type agreement to facilitate open discussions.
( Id., Ex. A at 2.) The next day, Arctic Cat requested an extension of the December 20, 2013 deadline by which to respond to Polaris' infringement determinations. (Am. Compl. ¶ 17.) Polaris denied the request. ( Id. )
III. THE LAWSUITS
A. Arctic Cat's Lawsuit
On December 19, 2013, "rather than be held hostage by the uncertainty created by Polaris's vague and unsubstantiated attacks" (Am. Compl. ¶ 18), Arctic Cat filed a lawsuit ("the Arctic Cat lawsuit") seeking a declaratory judgment of noninfringement - based on the allegations in Polaris' December 3 letter - with respect to three patents: Patent No. 8, 596, 405 ("the 405 Patent"), Patent No. 7, 819, 220 ("the 220 Patent"), and Patent No. 8, 382, 125 ("the 125 Patent") (Civ. No. 13-3579, Compl., Dec. 19, 2013, Docket No. 1). The Arctic Cat lawsuit was initially assigned to Chief Judge Michael J. Davis and Magistrate Judge Franklin L. Noel. (Civ. No. 13-3579, Notice of Initial Case Assignment, Dec. 20, 2013, Docket No. 4.)
The next day Arctic Cat sent an email to Polaris, notifying Polaris of the declaratory judgment action that Arctic Cat had filed. (Civ. No. 13-3579, Carlson Decl., Ex. B.) Arctic Cat's counsel explained:
Arctic Cat would have preferred discussing with Polaris an early and amicable resolution. That said, Polaris' demand that Arctic Cat produce (on extremely short notice) a formal, written non-infringement and/or invalidity opinion on Polaris' three patents and two pending applications, and do so in light of multiple vehicles, was, in Arctic Cat's view, neither possible nor calculated to be reasonable. Polaris' refusal to offer a modest extension to its arbitrary deadline underscored our concern that Polaris was not interested [in] pursuing an amicable resolution.
( Id., Ex. B at 2.) Arctic Cat also indicated that it had analyzed the issues and determined that Arctic Cat's products did not infringe Polaris' patents, and that "Arctic Cat is still interested in resolving this matter amicably and in the short term." ( Id. )
B. Polaris' Lawsuit
On December 20, 2013, Polaris filed its own lawsuit in this District against Arctic Cat ("the Polaris lawsuit"). (Civ. No. 13-3595, Compl., Dec. 20, 2013, Docket No. 1.) In its complaint, Polaris brought a single claim for patent infringement against Arctic Cat, alleging infringement of the 405 Patent. ( Id. ¶¶ 10-15.) In the civil cover sheet accompanying Polaris' complaint, it left blank the section for listing "related case(s) if any." ( Id., Attachment 2.) The Polaris lawsuit was initially assigned to Judge Joan N. Erickson and Magistrate Judge Steven E. Rau. (Civ. No. 13-3595, Notice of Initial Case Assignment, Dec. 23, 2013, Docket No. 3.)
IV. POST-FILING SETTLEMENT DISCUSSIONS
After the parties filed their lawsuits, they agreed to discuss a resolution of the patent issues. (Am. Compl. ¶ 19.) Prior to the discussions, Arctic Cat informed Polaris that it possessed "significant prior art [related to the patents] that Polaris had not previously submitted to the Patent Office, " and had "engineering drawings demonstrating that the Arctic Cat products did not infringe" the at-issue patents. ( Id. ) Polaris' counsel - Mr. Groen - "requested, purportedly for the purposes of advancing settlement discussions, that [Arctic Cat's counsel] provide this information to Polaris." ( Id. ) Arctic Cat alleges "on information and belief" that "Polaris had no intention of engaging in good-faith settlement negotiations." ( Id. ¶ 20.)
On January 21, 2014, the parties entered into a Negotiation Agreement pursuant to Federal Rule of Evidence 408 ("the Negotiation Agreement"). ( Id. ¶ 21, Ex. E.) "The purpose of the Negotiation Agreement was to maintain the confidentiality of information disclosed during the parties' settlement discussions." ( Id. ¶ 21.) The Negotiation Agreement defines confidential information broadly as "any information, written or oral, which relates to the business, products, processes, or services of any Party, " except "information which was already known to the receiving Party, " "information ascertainable or obtainable from public or published information, " "information received from a third Person not known by the receiving Party to be employed by or affiliated with the disclosing Party" and "information which is or becomes known to the public other than through a breach of this Agreement." ( Id., Ex. E at 3.) With respect to what materials are deemed confidential information, the Negotiation Agreement further provides:
Until such time as a Party serves and provides notice to counsel of service of any Complaint filed by a Party as for the date of this Agreement in the United States District Court for the District of Minnesota, all written materials, including emails, exchanged or disclosed between counsel for the Parties shall be deemed Confidential Information, whether or not marked as confidential. Written materials exchanged by the parties after service shall be deemed Confidential Information if marked as Confidential Information.
( Id. ) The Negotiation Agreement provides that "[t]he Parties will hold the Confidential Information in complete confidence and will not, without the written consent of all Parties, disclose it in whole or in part or use it for any purpose other than the [settlement] Discussions." ( Id. ) The parties also agreed that discussions undertaken pursuant to the Negotiation Agreement "shall not be used for any purpose in litigation between the Parties." ( Id., Ex. E at 2.)
On January 22, 2014, the parties met to discuss Polaris' patent infringement allegations. (Am. Compl. ¶ 24.) As of January 22, neither Polaris nor Arctic Cat had served the opposing party with the complaints filed in the lawsuits. At the meeting, Arctic Cat provided Polaris with copies of the documents it had previously agreed to provide - including engineering drawings of the allegedly infringing Arctic Cat product and prior art references. ( Id. ¶ 25.) Arctic Cat alleges that its attorney "expressly stated that disclosing this Confidential Information was a leap of faith, ' even with the Negotiation Agreement in place, because he was giving the materials to the one person in the world - Polaris's patent prosecution counsel... - who was in the best position to misuse the Confidential Information during the prosecution of Polaris's pending patent applications." ( Id. ) Arctic Cat alleges that after it provided Polaris with these materials, Polaris indicated that it needed additional time to consider the materials, and "would get back to Arctic Cat to schedule a follow-up settlement meeting, " but that "Polaris never contacted Arctic Cat again to discuss settlement." ( Id. ¶¶ 26-27.)
On February 3, 2014, Polaris disclosed to the Patent and Trademark Office ("PTO") certain prior art that Arctic Cat had provided to Polaris at the settlement meeting. ( Id. ¶ 28, Ex. F.) The disclosure was made in connection with Polaris' patent application 11/494, 890 ("the 890 application"). ( Id. ¶ 28, Ex. F at 2.) In the supplemental information disclosure statement Polaris indicated that it was "enclos[ing] three pieces of alleged prior art which were recently provided by a third party as potentially relevant to the present application. Although Polaris believes these references to be cumulative to other references submitted and consider[ed] by the Examiner, out of an abundance of caution Polaris is bringing these references to the Examiner's attention." ( Id., Ex. F at 2.) Polaris did not "seek or receive Arctic Cat's consent to make the disclosure." ( Id. ¶ 29.) Polaris re-submitted some of these pieces of prior art to the PTO on April 10, 2014, because the initial submissions had been insufficiently legible and not adequately dated. ( Id. ¶ 33, Ex. G at 3.)
Arctic Cat alleges that it attempted to contact Polaris on April 3, 2014, to reinitiate settlement discussions, but was informed that the matter had been transferred to a different attorney. ( Id. ¶ 32.) When Arctic Cat contacted that attorney, it received no response. ( Id. )
V. POLARIS' CONDUCT BEFORE THE PTO
A number of Arctic Cat's claims arise out of its allegations that Polaris, its inventor of the at-issue products, Aaron Deckard, and its prosecuting attorney, Eric Groen, engaged in misconduct in prosecuting certain of Polaris' patent applications and issued patents. ( See id. ¶ 35.) Those allegations are recited briefly here, and are explored in more detail in the context of Polaris' motion to dismiss these claims under Rule 12(b)(6).
Arctic Cat claims that Polaris engaged in misconduct by failing to disclose prior art. Specifically, Arctic Cat alleges:
By at least May 2004, Polaris had constructed a fully operational model of an all-terrain vehicle that, on information and belief, met all the limitations of at least claim 1 of the 220 patent. Polaris called this vehicle the "Vista." As of May 2004, Mr. Deckard was aware of Polaris's Vista vehicle. In fact, Mr. Deckard stated in an August 1, 2012 declaration submitted to the PTO during the prosecution of the 125 and 405 patents that the Vista vehicle was "used in the development of the Ranger RZR, " the Polaris product that Polaris itself claims embodies each of the three Patents in Suit.
( Id. ¶ 39 (citing id., Ex. H).) On May 19 through 23, 2004 Polaris performed a research study at the Mounds ORV Park in Flint, Michigan, using the Vista. ( Id. ¶ 40, Ex. H.) During this study sixty-five paid participants tested the Vista, filled out post-test questionnaires, and participated in post-test interviews. ( Id. ¶ 40, Ex. H.) The research study was organized by Gongos and Associates - a consumer research and marketing firm - in an attempt, alleges Arctic Cat "to gauge consumer demand and aid Polaris in devising its marketing strategy for the fully functional Vista vehicle." ( Id. ¶ 41, Ex. I.) Arctic Cat alleges that despite its knowledge of the Vista, Polaris failed to disclose the Vista as prior art during prosecution of the 220 Patent and that "[h]ad the PTO examiner been fully apprised of the information regarding the public use of the Vista vehicle, the PTO examiner would not have allowed at least claim 1 of the 220 patent." ( Id. ¶ 44; see also id ¶¶ 43, 45-50.) Arctic Cat also alleges that Polaris misrepresented the scope of other items of prior art during prosecution. ( See id. ¶¶ 59-61.)
Additionally, Arctic Cat alleges that Polaris engaged in a pattern of deceptive conduct in front of the PTO by representing that the 405 and 125 Patents were continuations of an earlier patent application number 11/494, 891 ("the 891 application"), which application led to the issuance of the 220 Patent. ( Id. ¶¶ 51-54, Exs. J-K.) Specifically, Arctic Cat alleges:
In the [891 application], the specification states that Universal joint 144 connects coupler 142 to front drive shaft 146 which powers the front wheels of ATV 10 through a front differential.' However, in the applications that led to the issuance of the 125 and 405 patents, the specification states Universal joint 144 connects coupler 142 to front drive shaft 146 which powers the front wheels of ATV 10.' In other words, the specification of the applications that led to the issuance of the 125 and 405 patents is broader than the specification that led to the ...