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Polaris Industries, Inc. v. Arctic Cat Inc.

United States District Court, D. Minnesota

July 3, 2018


          William F. Bullard, Samuel T. Lockner, and Nathan Louwagie, CARLSON CASPERS VANDENBURGH LINDQUIST & SCHUMAN PA, for plaintiff.

          Joseph A. Herriges, Jason M. Zucchi, Conrad A. Gosen, and John C. Adkisson, FISH & RICHARDSON P.C., for defendants.



         In these related patent-infringement actions, Defendants Arctic Cat Inc. and Arctic Cat Sales Inc. (collectively “Arctic Cat”) appeal an order of the Magistrate Judge denying Arctic Cat's motion to compel Plaintiff Polaris Industries Inc. (“Polaris”) to produce documents related to Polaris's financial relationship with non-party Polaris Sales Inc. (“PSI”), a wholly owned subsidiary of Polaris. Because the Magistrate Judge did not clearly err in denying Arctic Cat's motion, the Court will affirm the order of the Magistrate Judge.


         In 2015, Polaris brought these actions against Arctic Cat, alleging patent infringement. (Compl., Nov. 16, 2015, Docket No. 1.)[1] The cases have proceeded through discovery; Daubert and dispositive motions are due to be filed in the coming months. (See Order, Apr. 13, 2018, Docket No. 136.)

         The present appeal concerns discovery related to lost-profits damages. A patentee who proves infringement is entitled to damages “adequate to compensate for the infringement.” 35 U.S.C. § 284. “To recover lost profits damages, the patentee must show a reasonable probability that, ‘but for' the infringement, it would have made the sales that were made by the infringer.” Rite-Hite Corp. v. Kelley Co., 56 F.3d 1538, 1545 (Fed. Cir. 1995) (en banc). Generally, “a patentee may not claim, as its own damages, the lost profits of a related company.” Warsaw Orthopedic, Inc. v. NuVasive, Inc., 778 F.3d 1365, 1375 (Fed. Cir. 2015).[2] A patentee may, however, recover the lost profits of a related company if the patentee can show that the profits of the related company flow inexorably to the patentee. Schwendimann v. Arkwright Advanced Coating, Inc., 220 F.Supp.3d 953, 974 (D. Minn. 2016); Kowalski v. Mommy Gina Tuna Res., 574 F.Supp.2d 1160, 1163 (D. Haw. 2008).

         At trial, Polaris intends to seek lost profits. (Sealed Tr. of Mots. Hr'g (“Tr.”) at 57:1-8, May 15, 2018, Docket No. 170.) Polaris - the patent owner in these actions -sells products through PSI that compete with the accused products sold by Arctic Cat. (See Sealed Ex. L at ¶ 20, Apr. 26, 2018, Docket No. 147.) Polaris seeks to recover the lost profits of PSI, arguing that profits from PSI flow inexorably to Polaris. (Tr. at 57:1-8; see Sealed Ex. L at ¶ 20.)

         In March 2016, Arctic Cat served Polaris with a Rule 34 request, asking for “[a]ll documents and things concerning any lost profits Polaris contends that it is owed by Arctic Cat for alleged infringement of the patent-in-suit.” (Decl. of Conrad Gosen (“Gosen Decl.”) ¶ 4, Ex. C at 123, Apr. 26, 2018, Docket No. 143.) In that request, Arctic Cat broadly defined “Polaris” to mean

Polaris Industries Inc., including all predecessors, successors, subsidiaries, divisions, parents, and affiliates thereof, past or present, joint ventures, and other legal entities that are wholly or partially owned or controlled by Polaris, either directly or indirectly, and all past or present directors, principals, officers, owners, employees, agents, representatives, consultants, attorneys, and others acting for or on behalf of these same entities.

(Id. ¶ 4, Ex. C at 115-16.) Polaris objected to Arctic Cat's definition of “Polaris, ” stating that Arctic Cat's broad definition did not comply with Rule 34's “reasonable particularity” requirement, that Polaris did not understand “the scope of what Arctic [Cat] [wa]s seeking, ” and thus that Polaris would “interpret ‘Polaris' to mean the plaintiff: Polaris Industries Inc.” (Id. ¶ 6, Ex. E at 141-42; see also Fed. R. Civ. P. 34(b)(1)(A).)

         During discovery, in 2015, Polaris produced a “Marketing and Distribution Agreement” between Polaris and PSI that purportedly shows how Polaris sells its products through PSI. (Decl. of Samuel T. Lockner (“Lockner Decl.”) ¶ 7, May 3, 2018, Docket No. 155; Sealed Ex. 6, May 3, 2018, Docket No. 161.)[3] Polaris claims that it cited this Marketing and Distribution Agreement in response to two of Arctic Cat's interrogatories related to damages. (Pl.'s Sealed Mem. in Opp'n at 17 n.11, May 3, 2018, Docket No. 154.) Polaris also produced “hundreds of documents related to PSI.” (Tr. at 73:22-24.)

         In April 2018, over two years after it served its document request, Arctic Cat moved to compel Polaris to produce documents related to the financial relationship between Polaris and PSI. (See Defs.' Mot. to Compel, Apr. 26, 2018, Docket No. 138.) Arctic Cat maintains that it was unaware until recently that Polaris would be seeking lost profits via an inexorable-flow theory. (Defs.' Sealed Mem. in Supp. at 1-2, Apr. 26, 2018, Docket No. 141.)

         The Magistrate Judge denied Arctic Cat's motion to compel. (Tr. at 75:14-25.)[4]The Magistrate Judge concluded, pursuant to Rule 26(b)(2)(C)(ii), that “Arctic Cat had ample opportunity to obtain information regarding the relationship between Polaris and PSI during discovery.” (Id. at 75:14-16.) In support of his conclusion, the Magistrate Judge found (1) that Polaris and Arctic Cat are “seasoned legal adversaries, ” (2) that the Marketing and Distribution Agreement “show[ed] that Polaris sold its product[s] via PSI, ” (3) that Arctic Cat was aware - based on Polaris's objection to Arctic Cat's definition of “Polaris” - that Polaris did not think PSI was included within the scope of Arctic Cat's document request, (4) that “Polaris's ...

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