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Polaris Industries Inc. v. Arctic Cat Inc.

United States District Court, D. Minnesota

March 29, 2017

POLARIS INDUSTRIES INC., Plaintiff/Counter Defendant,
v.
ARCTIC CAT INC. and ARCTIC CAT SALES INC., Defendants/Counter Claimants.

          Dennis C. Bremer and William F. Bullard, CARLSON CASPERS VANDENBURGH LINDQUIST & SCHUMAN P.A., for plaintiff/counter defendant.

          John C. Adkisson, Joseph A. Herriges, and Conrad A. Gosen, FISH & RICHARDSON P.C., for defendants/counter claimants.

          MEMORANDUM OPINION AND ORDER GRANTING PLAINTIFF'S MOTION TO DISMISS DEFENDANTS' COUNTERCLAIM

          JOHN R. TUNHEIM United States District Judge

         Plaintiff/Counter Defendant Polaris Industries, Inc. (“Polaris”) brought this action as part of a series of patent infringement cases between 2013 to 2015 against Defendants/Counter Claimants Arctic Cat Inc. and Arctic Cat Sales Inc. (collectively, “Arctic Cat”) relating to 4x4 Trail Recreational Off-Road Vehicles (“4x4 Trail ROV”). Arctic Cat counterclaimed that Polaris monopolized or attempted to monopolize the 4x4 Trail ROV market by engaging in sham litigation in violation of Section 2 of the Sherman Act. Polaris moved to dismiss Arctic Cat's counterclaim. Because there has not been a sufficient number of infringement cases to necessitate a serial sham litigation inquiry and because Polaris's challenged patent infringement action is not objectively baseless, the Court will grant Polaris's motion to dismiss Arctic Cat's counterclaim.

         BACKGROUND

         I. POLARIS AND ARTCIC CAT ARE MARKET COMPETITORS

         Arctic Cat and Polaris manufacture off-road vehicles. From 2007 to 2013, Polaris controlled the 4x4 Trail ROV market in the United States with over 90% market share. (Defs.' Am. Ans. & Countercl. (“Countercl.”) ¶ 59, Feb. 18, 2016, Docket No. 15.) In 2007, Polaris announced a new 4x4 Trail ROV - the Polaris Ranger RZR. (Id. ¶ 58.) In 2013, Arctic Cat introduced a competing product - the Wildcat Trail. (Id. ¶ 60.) Arctic Cat's entry in the 4x4 Trail ROV market allegedly reduced Polaris's market share by 10%. (Id. ¶ 62.)

         II. POLARIS'S PATENT INFRINGEMENT CASES AGAINST ARCTIC CAT

         A. Five Patent Cases

         Between 2013 and 2015, Polaris brought five separate patent infringement cases against Arctic Cat.[1] The technologies in these cases concern ROVs and generally relate to the Polaris Ranger RZR. These disputes first began on December 3, 2013, when Polaris sent Arctic Cat a letter alleging a series of Arctic Cat Wildcat vehicles infringed or “[would] infringe” on three of Polaris's patents (U.S. Patent Nos. 8, 596, 405 (“ ‘405”), 7, 819, 220 (“ ‘220”), and 8, 383, 125 (“ ‘125”)). (Countercl. ¶ 14.) Arctic Cat promptly filed a declaratory judgment action for non-infringement of the three patents. (Case 1 Compl. ¶ 6, Dec. 19, 2013, Docket No. 1.) Polaris later conceded it had no basis for asserting infringement on its ‘220 and ‘125 patents, and provided Arctic Cat with a covenant not to sue on those two patents. (Countercl. ¶ 16.)

         Over the course of several months, Polaris successively filed three patent infringement actions alleging certain Arctic Cat vehicles infringed on Polaris's patents: Case 1 regarding the ‘405 patent; Case 2 regarding U.S. Patent No. 8, 746, 719 (“ ‘719”); and Case 3 regarding U.S. Patent No. 8, 827, 028 (“ ‘028”). (Case 1 Defs.' Answer & Countercl. ¶¶ 18-29, Nov. 10, 2014, Docket No. 48; Case 2 Compl. ¶¶ 8-12, Sept. 5, 2014, Docket No. 1; Case 3 Compl. ¶¶ 8-12, Sept. 9, 2014, Docket No. 1.) This Court granted Arctic Cat's motion to consolidate Cases 1, 2, and 3, despite Polaris's opposition. (Case 1 Mem. Op. & Order on R&R of Magistrate Judge, May 12, 2015, Docket No. 100.)

         Thereafter, while the consolidated cases were pending, Arctic Cat filed petitions for Inter Partes Review (“IPR”) with the Patent Trial and Appeal Board (the “PTAB”) attacking the validity of Polaris's ‘405, ‘028, and ‘719 patents. (Countercl. ¶ 21.) Because the IPR could impact the civil actions, Polaris and Arctic Cat jointly requested a stay. (Case 1 Parties' Stipulation for Stay of Cases, Aug. 28, 2015, Docket No. 125.) The parties explained the stay would “conserve party resources, ” “facilitate resolution of the matter, ” and “simplify and streamline” the parties' dispute. (Case 1 Joint Appeal from Order Den. Stipulated Mot. to Stay Litigation at 1, 6, Sept. 14, 2015, Docket No. 140.) The Court granted the stay “with the clear expectation that the parties” would not use the IPR process to “prolong or obfuscate this litigation.” (Case 1 Mem. Op. & Order Reversing Order of the Magistrate Judge at 6, Nov. 5, 2015, Docket No. 151.) At the same time, Polaris accelerated the process to obtain additional patents to assert against Arctic Cat. (Countercl. ¶ 24.)

         On November 16, 2015, eleven days after this Court stayed the consolidated case, Polaris filed Case 4, alleging certain Arctic Cat vehicles infringed its U.S. Patent No. 8, 944, 449 (“ ‘449”). (Case 4 Compl. ¶¶ 8-12, Nov. 16, 2015, Docket No. 1.) Case 4 specifically regarded Arctic Cat's alleged use of a “sway bar having a middle portion positioned rearward of a rear end of the frame” in their 4x4 Trail ROVs. (Id. ¶ 10.)

         Finally, on December 22, 2015, Polaris filed the instant action, Case 5, against Arctic Cat alleging Arctic Cat's Wildcat vehicles infringed U.S. Patent No. 9, 217, 501 (“ ‘501”), a patent Polaris obtained through an accelerated process. (Compl. ¶¶ 8-25, Dec. 22, 2015, Docket No. 1; Countercl. ¶ 37.)

         B. Results from Inter Partes Review

         On February 4, 2015, the PTAB issued a written decision confirming the claims under review on the ‘405 patent, the patent originally asserted in Case 1, were invalid as obvious. (Countercl. ¶ 39.) The PTAB stated it was “unaware of any case law that supports [Polaris's] position, ” that Polaris's arguments were unpersuasive, “d[id] not comport with common sense, ” aspects were “devoid of any analysis, ” and that Polaris's position “would effectively eviscerate obviousness law.” (Id.) Furthermore, on January 30, 2017, the PTAB issued a written decision confirming claims under review regarding the ‘028 patent and ‘719 patent were also invalid. (Pl.'s Ltr. to Court, Exs. A at 62-63, B at 47, C at 74, D at 65, Feb. 2, 2017, Docket No. 104.)

         C. Arctic Cat's Claims of Sham Litigation in Cases 1 and 3 - Dismissed with Prejudice

         In Case 1, Arctic Cat asserted that Polaris's allegations of patent infringement were sham litigation in that those allegations were objectively baseless and were made with the intent to monopolize or maintain a monopoly in the 4x4 Trail ROV market. (Case 1 Am. Compl. ¶¶ 150-55, Apr. 29, 2014, Docket No. 10.) Arctic Cat also asserted as separate counts in its complaint that Polaris's patents were unenforceable due to its inventor's inequitable conduct during patent prosecution. (Id. ¶¶ 144-49.)

         The Court granted Polaris's motion to dismiss Arctic Cat's sham litigation and inequitable conduct claims with prejudice. (Case 1 Mem. Op. & Order at 52-55, Oct. 20, 2014, Docket No. 60.) The Court noted: “The sham exception applies where (1) ‘the lawsuit [is] objectively baseless in the sense that no reasonable litigant could realistically expect success on the merits, ' and (2) ‘the baseless lawsuit conceals an attempt to interfere directly with the business relationships of a competitor through the use of the government process - as opposed to the outcome of that process - as an anticompetitive weapon.'” (Id. at 53 (alteration in original) (quoting Prof'l Real Estate Inv'rs, Inc. v. Columbia Pictures Indus., Inc. (PREI), 508 U.S. 49, 60-61 (1993)).) The Court found that Arctic Cat's ÔÇťallegations are merely a recitation of the elements of a sham litigation claim and ...


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