Arctic Cat, Inc. et al v. Polaris Industries Inc. et al

Filing 40

MEMORANDUM OPINION AND ORDER (1) Granting in part and denying in part Polaris' (15) Motion to Dismiss in case 0:13-cv-03579-JRT-FLN. (a)The motion is denied to the extent it seeks discretionary dismissal of A rctic Cat's claims for declaratory judgment (Counts I, II, and III). (b) The motion is also denied with respect to Arctic Cat's claim for breach of contract (Count IV). (c) The motion is granted with respect to Arctic Cat's claims f or fraud (Count V), unenforceability of the '220 Patent (Count VI), unenforceability of the '125 and '405 Patents (Count VII), Walker Process fraud (Count VIII), and sham litigation (Count IX). These claims are dismissed with prejudic e. (2) Granting in part and denying in part Arctic Cat's (17) Motion to Dismiss or in the Alternative to Consolidate Cases in case 0:13-cv-03595-JRT-FLN. (a) The motion is denied to the extent it seeks dismissal of Polaris compla int. (b) The motion is granted to the extent it seeks consolidation of the above-captioned cases. All documents will be filed in civil case number 13-3579. The caption of civil case number 13-3579 will remain unchanged: Arctic Cat, Inc. and Arcti c Cat Sales, Inc. will remain listed as Plaintiffs and Polaris Industries, Inc., both the Minnesota and Delaware corporations, will remain listed as Defendants. (Written Opinion). Signed by Judge John R. Tunheim on October 20, 2014. Associated Cases: 0:13-cv-03579-JRT-FLN, 0:13-cv-03595-JRT-FLN(DML)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Civil No. 13-3579 (JRT/FLN)
ARCTIC CAT, INC., a Minnesota
Corporation, and ARCTIC CAT SALES INC.,
a Minnesota Corporation,
Plaintiffs,
v.
POLARIS INDUSTRIES INC., a Minnesota
Corporation, and POLARIS INDUSTRIES
INC., a Delaware Corporation,
Defendants.

MEMORANDUM OPINION
AND ORDER

Civil No. 13-3595 (JRT/FLN)
POLARIS INDUSTRIES, INC., a Delaware
Corporation,
Plaintiff,
v.
ARCTIC CAT INC., a Minnesota corporation,
Defendant.

Ann N. Cathcart Chaplin, John C. Adkisson, and Joseph A. Herriges,
FISH & RICHARDSON PC, 60 South Sixth Street, Suite 3200,
Minneapolis, MN 55402, for Arctic Cat, Inc. & Arctic Cat Sales Inc.
Alan G. Carlson and William F. Bullard, CARLSON CASPERS
VANDENBURGH LINDQUIST SCHUMAN PA, 225 South Sixth
Street, Suite 4200, Minneapolis, MN 55402, for Polaris Industries, Inc.
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

27

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.

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BACKGROUND
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.)1 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.)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

1

Because civil case number 13-3595 does not contain an amended complaint, all
references to the amended complaint in this Order refer to the amended complaint filed in civil
case number 13-3579, and will be cited without reference to the case number.
2

All references to page numbers are to the CMECF pagination.

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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, US 20080023240 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 408type agreement to facilitate open discussions.

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(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.

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(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.)3 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.)

3

Arctic Cat makes much of Polaris’ failure to designate the Arctic Cat lawsuit as a
related case, and appears to argue that Polaris’ civil cover sheet violated the Local Rules. (See,
e.g., Civ. No. 13-3579, Arctic Cat’s Mem. in Opp’n to Mot. to Dismiss at 5, June 3, 2014,
Docket No. 27.) Arctic Cat has not, however, cited to any particular rule that was violated, or
explained what consequences should result from any such rule violation. It appears that the only
rule potentially implicated by Polaris’ failure to designate the related case is Local Rule 3.1,
which governs the filing of the civil cover sheet. The rule provides that “[a] completed civil
cover sheet must accompany every document initiating a civil action.” D. Minn. LR 3.1. But the
rule also states that “[b]ecause the cover sheet is solely for administrative purposes, matters
appearing only on the cover sheet have no legal effect.” Id. Accordingly, to the extent that
Polaris’ failure to identify a clearly related case in its cover sheet could be construed as a
violation of Local Rule 3.1, the Court finds that such a failure has no legal effect on the
proceedings and therefore has not considered this failure in ruling on the instant motions.

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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

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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

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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.)

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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
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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 issuance of the
‘220 patent because it does not limit the front drive shaft to powering the
front wheels of the vehicle through a front differential.
(Id. ¶ 56 (emphasis in original) (citing id., Exs. L-N).)

VI.

PROCEDURAL HISTORY
On April 11, 2014, both parties served their respective complaints. (Civ. No. 13-

3579, Summons Returned Executed, Apr. 11, 2014, Docket No. 6; Civ. No. 13-3595,
Summons Returned Executed, Apr. 11, 2014, Docket No. 11.)
On April 28, 2014, Polaris notified Arctic Cat that it intended to file a motion to
dismiss the Arctic Cat lawsuit and instructed Arctic Cat to let Polaris know “by no later

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than 10am tomorrow morning whether Arctic Cat will stipulate to this motion.
Otherwise, we will assume that Arctic Cat intends to oppose the motion.” (Civ. No. 133579, Carlson Decl., Ex. C at 2.) The next day, Arctic Cat filed an amended complaint in
the Arctic Cat lawsuit adding claims for breach of contract, fraud, unenforceability of the
‘220, ‘125, and ‘405 Patents based on Polaris’ inequitable conduct, and monopolization
or attempted monopolization of the market for certain recreational vehicles.

(See

generally Am. Compl.)
The parties met and conferred regarding motions to dismiss on April 29. After the
meet and confer, Polaris sent an email confirming that at the meet and confer it had asked
Arctic Cat to dismiss its complaint and proceed in the Polaris lawsuit or in the alternative
agree to transfer the Arctic Cat lawsuit to Judge Erickson and consolidate the cases.
(Civ. No. 13-3579, Decl. of Joseph A. Herriges, Ex. B at 4-5, June 3, 2014, Docket
No. 28.) Arctic Cat disputed this representation of Polaris’ request, noting that it had not
been asked to transfer its case to Judge Erickson and only disagreed to consolidation with
the Polaris lawsuit to the extent such consolidation would result in the Polaris lawsuit
being listed as the first-filed case in the consolidated action. (Id., Ex. B at 4.) Arctic Cat
inquired whether Polaris would be willing to dismiss the Polaris lawsuit and file its patent
infringement claims as counterclaims in the Arctic Cat lawsuit and also whether, in the
alternative, Polaris would be willing to consolidate the two cases, with the Arctic Cat
lawsuit and case number being listed first. (Id.) Arctic Cat put forward a proposal
whereby (1) neither party would dismiss its case, (2) the parties would consolidate the
cases, (3) the consolidated case caption would list Arctic Cat’s lawsuit first, (4) two sets

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of pleadings would remain “but the parties would consider streamlining the cases once
the pleadings are closed,” (5) the parties would leave unresolved issues of which side
would present first at trial “[h]owever, Arctic Cat would be able to argue that it should go
first at trial since it had the first filed case,” and (6) the parties would agree not to file
motions to dismiss each other’s complaints based on arguments that the other’s complaint
violated the first-filed rule or was anticipatory, preemptive, or duplicative. (Id., Ex. B at
3.) Polaris did not agree to this proposal.
On May 1, 2014, Polaris filed a letter in the Arctic Cat lawsuit alerting the Court
that both the Arctic Cat and Polaris lawsuits involved a common patent and were
therefore related cases. (Civ. No. 13-3579, Letter, May 1, 2014, Docket No. 12.) Arctic
Cat responded that this letter “is simply a motion for consolidation in improper letter
form,” and requested “that the Court not take any action as a result of Mr. Carlson’s
letter, and that the issue of consolidation be addressed through Arctic Cat’s motion or
through stipulation or other motion practice.” (Civ. No. 13-3579, Letter, May 2, 2014,
Docket No. 13.) After these letters were filed, Chief Judge Davis recused from the case,
and it was reassigned to the undersigned. (Civ. No. 13-3579, Order of Recusal, May 6,
2014, Docket No. 14.)
On May 2, 2014, Arctic Cat filed a motion to dismiss or in the alternative, motion
to consolidate cases in the Polaris lawsuit. (Civ. No. 13-3595, Mot. to Dismiss, May 2,
2014, Docket No. 17.) On May 13, 2014, Polaris filed its own motion to dismiss Arctic
Cat’s amended complaint in the Arctic Cat lawsuit. (Civ. No. 13-3579, Mot. to Dismiss,
May 13, 2014, Docket No. 15.)

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On May 15, 2014, the Polaris lawsuit was reassigned from Judge Erickson to the
undersigned due to the related nature of the cases. (Civ. No. 13-3595, Order Reassigning
Case, May 15, 2014, Docket No. 23.) Arctic Cat then sent Polaris an email inquiring
“[n]ow that both cases have been assigned to Judge Tunheim, does that affect Polaris’s
response to Arctic Cat’s proposal . . . to consolidate the two cases? We would still be
willing to discuss if so.” (Civ. No. 13-3579, Herriges Decl., Ex. B at 2-3.) Polaris
replied:
Arctic’s DJ action was precipitous, unnecessary, filed in bad faith, and did
not arise from facts the DJ statute was designed to serve.
Sure, Judge Tunheim could take a pragmatic approach, say “boys will be
boys,” and figure out a way for us to stumble through both cases. But I
trust that won’t happen because lawyers are not boys and lawyers should
not abuse the judicial system.
We believe the facts should cause Judge Tunheim to dismiss the DJ action,
instead of condoning Arctic’s conduct by continuing Arctic’s case, with, as
you propose, “Arctic Cat’s case listed first.” Polaris believes there should
be only one civil action. Please dismiss the Arctic case.
(Id., Ex. B at 2.) Arctic Cat refused to dismiss its lawsuit, and both motions to dismiss
are currently pending before the Court.

ANALYSIS
I.

DISCRETIONARY MOTIONS TO DISMISS
Polaris argues that the Arctic Cat lawsuit should be dismissed in its entirety under

the Court’s discretionary authority because the declaratory judgment claims filed by
Arctic Cat “are the result of gamesmanship by Arctic Cat,” and the Arctic Cat lawsuit
therefore does not serve the purposes of the Declaratory Judgment Act. (Civ. No. 13-

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3579, Polaris’ Mem. in Supp. of Mot. to Dismiss at 15, May 13, 2014, Docket No. 17.)
Arctic Cat argues in its own motion to dismiss, that its lawsuit – as the first-filed action –
must proceed and that the Polaris lawsuit should be dismissed.4 The Court first examines
the propriety of dismissal under the Declaratory Judgment Act and then discusses the
application of the first-filed rule to the facts and circumstances of these actions.

A.

Dismissal Under Declaratory Judgment Act

The Declaratory Judgment Act provides the Court with the discretionary authority
to adjudicate declaratory judgment actions, stating that the court “may declare the rights
and other legal relations of any interested party seeking such declaration, whether or not
further relief is or could be sought.” 28 U.S.C. § 2201(a) (emphasis added). The
Supreme Court has explained that “[s]ince its inception, the Declaratory Judgment Act
has been understood to confer on federal courts unique and substantial discretion in
deciding whether to declare the rights of litigants.” Wilton v. Seven Falls Co., 515 U.S.
277, 286 (1995); see also Innovative Therapies, Inc. v. Kinetic Concepts, Inc., 599 F.3d
1377, 1385 (Fed. Cir. 2010) (“[T]he discretion afforded to district courts to administer the
declaratory judgment practice is broad.”). This discretion is vested in the district courts
“in the first instance, because facts bearing on the usefulness of the declaratory judgment
remedy, and the fitness of the case for resolution, are peculiarly within their grasp.”
Wilton, 515 U.S. at 289. Pursuant to such discretion, the Court is empowered, even

4

Although the issues are interrelated, this Order first discusses the propriety of dismissal
before turning to Arctic Cat’s request for alternative relief in the form of consolidation.

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where it has subject matter jurisdiction over a declaratory judgment action, “to decline to
hear the case.” Micron Tech., Inc. v. Mosaid Techs., Inc., 518 F.3d 897, 902 (Fed. Cir.
2008).5 “The use of discretion is not plenary, however, for ‘[t]here must be well-founded
reasons for declining to entertain a declaratory judgment action.’” Elecs. for Imaging,
Inc. v. Coyle, 394 F.3d 1341, 1345 (Fed. Cir. 2005) (alteration in original) (quoting Capo,
Inc. v. Dioptics Med. Prods., 387 F.3d 1352, 1355 (Fed. Cir. 2004)). “Absent such
reasons, precedent establishes that when there has been a direct charge of infringement by
the patentee, and an actual controversy exists due to ongoing activity that has been
accused of infringement, the accused infringer has the right to resolve the dispute.”
Capo, Inc., 387 F.3d at 1355.
In determining whether to exercise its discretion to dismiss a declaratory judgment
action the Court “should decide whether hearing the case would serve the objectives for
which the Declaratory Judgment Act was created.” Micron Tech., Inc., 518 F.3d at 902
(internal quotation marks omitted); see also Elecs. for Imaging, Inc., 394 F.3d at 1345
(“Federal courts must act in accordance with the purposes of the Declaratory Judgment
Act and the principles of sound judicial administration when declining jurisdiction in
declaratory suits.” (internal quotation marks omitted)).

5

“When these objectives are

The Court has jurisdiction over Arctic Cat’s declaratory judgment claims, which
Polaris does not dispute, as the claims present a case or controversy under Article III because the
letter created a “definite and concrete” dispute about the parties’ legal relationship. See 3M Co.
v. Avery Dennison Corp., 673 F.3d 1372, 1376 (Fed. Cir. 2012) (noting that in order to satisfy
Article III’s case or controversy requirements “the question in each case is whether the facts
alleged, under all the circumstances, show that there is a substantial controversy, between parties
having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a
declaratory judgment” (internal quotation marks omitted)).

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served, dismissal is rarely proper.”

Micron Tech., Inc., 518 F.3d at 902; see also

Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 937 (Fed. Cir. 1993) (“When there is an
actual controversy and a declaratory judgment would settle the legal relations in dispute
and afford relief from uncertainty or insecurity, in the usual circumstance the declaratory
action is not subject to dismissal.”), abrogated on other grounds by Wilton, 515 U.S. 277.
“A declaratory action allows a party who is reasonably at legal risk because of an
unresolved dispute, to obtain judicial resolution of that dispute without having to await
the commencement of legal action by the other side.” Elecs. for Imaging, Inc., 394 F.3d
at 1345 (internal quotation marks omitted).

“[T]he Declaratory Judgment Act was

intended to fix the problem that arises when the other side does not sue.” Sony Elecs.,
Inc. v. Guardian Media Techs., Ltd., 497 F.3d 1271, 1284 (Fed. Cir. 2007); see also
Minn. Mining & Mfg. Co. v. Norton Co., 929 F.2d 670, 673 (Fed. Cir. 1991) (explaining
that the Act was intended “to prevent avoidable damages from being incurred by a person
uncertain of his rights and threatened with damage by delayed adjudication”); Goodyear
Tire & Rubber Co. v. Releasomers, Inc., 824 F.2d 953, 956 (Fed. Cir. 1987) (explaining
“the purpose of the Declaratory Judgment Act, which in patent cases is to provide the
allegedly infringing party relief from uncertainty and delay regarding its legal rights”).
The Federal Circuit has explained that:
[A] patent owner . . . attempts extra-judicial patent enforcement with scarethe-customer-and-run tactics that infect the competitive environment of the
business community with uncertainty and insecurity. Before the Act,
competitors victimized by that tactic were rendered helpless and immobile
so long as the patent owner refused to grasp the nettle and sue. After the
Act, those competitors were no longer restricted to an in terrom choice
between the incurrence of a growing potential liability for patent

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infringement and abandonment of their enterprises; they could clear the air
by suing for a judgment that would settle the conflict of interests.
Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735 (Fed. Cir. 1988)
(citation omitted), overruled on other grounds by MedImmune, Inc. v. Genentech, Inc.,
549 U.S. 118 (2007). In other words, under the Act, “[a] plaintiff need not ‘bet the farm,
or . . . risk treble damages . . . before seeking a declaration of its actively contested legal
rights.’”

Cat Tech LLC v. TubeMaster, Inc., 528 F.3d 871, 883 (Fed. Cir. 2008)

(alterations in original) (quoting MedImmune, Inc., 549 U.S. at 129).
Polaris argues that Arctic Cat’s declaratory judgment action does not serve these
purposes because
[t]his case is not the result of delay by Polaris or Polaris using “scare-thecustomer-and-run tactics.” Polaris’s December 3 letter proposed an
immediate resolution of the matter with a concrete deadline of
December 20, 2013. This is diligence, not delay. When Arctic Cat filed
this case on December 19, Polaris was not delaying – Polaris was waiting
for Arctic Cat’s response. . . . Arctic Cat’s choice to strategically bring this
case one day before the December 20 deadline while Polaris was still
waiting for a response shows that Arctic Cat was not worried about Polaris
delaying suit; rather, Arctic Cat actually was worried about Polaris
filing suit first.
(Civ. No. 13-3579, Polaris’ Mem. in Supp. of Mot. to Dismiss at 16 (emphasis in
original).) Polaris also contends that Arctic Cat’s action does not serve the purposes of
the Declaratory Judgment Act because Arctic Cat’s offer to continue settlement
negotiations the day after filing its lawsuit demonstrates that Arctic Cat was not actually
interested in resolving uncertainty in court.
The Court will decline to exercise its discretion to dismiss Arctic Cat’s lawsuit, as
it concludes that the suit satisfies the purposes of the Declaratory Judgment Act. In its

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motion to dismiss Polaris focuses almost exclusively on its lack of delay – arguing that it
gave Arctic Cat a firm deadline of December 20 for negotiation and after that Polaris
would have sought legal determination of Arctic Cat’s alleged infringement. In other
words, Polaris argues that Arctic Cat was not faced with lingering uncertainty about its
legal rights because Polaris was going to bring a lawsuit if Arctic Cat failed to respond to
the infringement allegations. But this argument relies heavily on the benefit of hindsight
and information regarding Polaris’ understanding of what its own next steps would be, to
which Arctic Cat was not privy. In the December 3 letter Polaris stated that if Arctic Cat
did not respond by December 20, counsel “will so advise Polaris to consider pursuing the
various legal remedies available to them as a consequence of Arctic Cat’s unauthorized
actions.” (Am. Compl., Ex. D at 3.) From Arctic Cat’s perspective, this was by no
means a promise that Polaris would bring a lawsuit to resolve the patent issues. Instead,
Arctic Cat was faced with a situation where Polaris had demanded that Arctic Cat cease
producing or selling a line of products. When negotiations broke down after Polaris
refused to allow Arctic Cat additional time to investigate, Arctic Cat was left in a position
of stopping production or running the risk of being sued for infringement at some point in
the future, a situation the Declaratory Judgment Act was designed to prevent.

See

Danisco U.S. Inc. v. Novozymes A/S, 744 F.3d 1325, 1332 (Fed. Cir. 2014) (“At bottom,
Danisco is in the position of either abandoning its RSL products or running the risk of
being sued for infringement, which is precisely the type of situation that the Declaratory
Judgment Act was intended to remedy.”); see also Elecs. for Imaging, Inc., 394 F.3d at
1345 (“A declaratory judgment action allows a party who is reasonably at legal risk

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because of an unresolved dispute, to obtain judicial resolution of that dispute without
having to await the commencement of legal action by the other side.” (internal quotation
marks omitted)).

Furthermore, that Arctic Cat faced the type of uncertainty the

Declaratory Judgment Act was designed to prevent is highlighted by the fact that,
although Polaris’ December 3 letter cited numerous patents and patent applications that
were potentially infringed by Arctic Cat’s products, to date Polaris has brought a lawsuit
with respect to only one of those patents. Had Arctic Cat not brought the present
declaratory judgment action, it would have remained in a state of uncertainty regarding
its liability with respect to the other patents referenced in Polaris’ letter.
Polaris relies primarily on two cases in support of its argument that the Court
should exercise its discretion to dismiss Arctic Cat’s declaratory judgment claims. First,
Polaris cites Fresenius USA, Inc. v. Transonic Systems, Inc., 207 F. Supp. 2d 1009 (N.D.
Cal. 2001). In Fresenius, counsel for the patent holder – Transonic – sent a letter to
Fresenius USA indicating that Transonic had sued a third-party company for patent
infringement, that the court in that case had adopted certain claims constructions, and that
based on those claim constructions certain of Fresenius USA’s products may infringe the
same patent. Id. at 1010. The letter concluded that “Transonic desires to resolve all
infringement issues discussed above quickly and amicably. Therefore, please review the
enclosed materials and contact me within two weeks to discuss possible resolutions to
these outstanding infringement issues.” Id. Two weeks later, Fresenius USA filed an
action seeking a declaratory judgment for noninfringement and invalidity of the asserted
patent. Id. Only then did FU Fresenius USA respond to the letter providing the reasons

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for its belief that its products were not infringing. Id. at 1010-11. Shortly after filing the
complaint the parties engaged in settlement negotiations “at which time [Fresenius USA]
offered to dismiss its complaint if Transonic would agree that it could only sue
[Fresenius USA] in the Northern District of California. This offer was declined.” Id. at
1011 (citation omitted).
After concluding that it lacked subject matter jurisdiction over the action, the
district court in Fresenius held, in the alternative, that it would decline to exercise
jurisdiction over the declaratory judgment action because it failed to satisfy the purpose
of the Act of preventing a would-be-infringer from choosing between incurring growing
potential liability for patent infringement and abandoning its business.

The court

explained:
At the time it filed suit, [Fresenius USA] was not yet faced with any such
dilemma since this was the first communication from Transonic, and there
was an outstanding offer to negotiate. There is no evidence that Transonic
in any way delayed or intended to avoid filing suit if an amicable resolution
could not be achieved. Exercising jurisdiction over declaratory-relief
actions under such circumstances would create a strong disincentive for
patentees to communicate with potential infringers before filing suit, for
fear of being sued first and thus forced to litigate in the defendant’s forum
of choice.
Id. at 1012-13.
In addition to not being binding precedent, the Court finds that Fresenius is
distinguishable on its facts from the Arctic Cat lawsuit in several material respects. First,
in Fresenius there was an outstanding offer to negotiate at the time the would-beinfringer filed its declaratory judgment action. Here, at the time Arctic Cat filed its
lawsuit on December 19, 2013, there was no outstanding offer to negotiate. At that point

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Arctic Cat had communicated to Polaris that in order to engage in the amicable
negotiation suggested by Polaris in the December 3 letter, Arctic Cat would need more
time, which Polaris refused. Therefore when Arctic Cat filed its lawsuit Polaris had
effectively terminated negotiations by refusing to allow Arctic Cat the time it requested
to conduct its own investigation of the patents and the allegedly infringing products.
Second, Fresenius USA’s conduct in Fresenius in attempting to negotiate as part of a
settlement a guarantee that the patent holder would only bring suit in the Northern
District of California clearly indicated an intent to gain a tactical advantage by filing a
declaratory judgment action in its preferred forum. This conduct was an important part
of the court’s reasoning as evidenced by its discussion of the “strong disincentive for
patentees to communicate with potential infringers before filing suit, for fear of being
sued first and thus forced to litigate in the defendant’s forum of choice.” Id. at 1013
(emphasis added). Here, there are no such forum selection considerations. Both Arctic
Cat and Polaris filed their lawsuits in the District of Minnesota, and there is no evidence
that Arctic Cat attempted to use its lawsuit as a bargaining chip to gain a procedural
advantage in terms of forum selection. Therefore, although the facts of Fresenius are at
first blush similar, the Court concludes that the case does not provide a persuasive basis
upon which to dismiss the Arctic Cat lawsuit.
Polaris also relies upon EMC Corp. v. Norand Corp., 89 F.3d 807 (Fed. Cir.
1996), overruled on other grounds by MedImmune, 549 U.S. 118, as recognized by Teva
Pharm. USA, Inc. v. EISAI Co., 620 F.3d 1341, 1349 (Fed. Cir. 2010). In EMC Corp.,
the Federal Circuit concluded that it was not an abuse of the district court’s discretion to

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dismiss a declaratory judgment action brought by EMC. Id. at 809. The district court
based its dismissal on two primary reasons: first, the two parties “were involved in
negotiations over the sale or licensing of Norand’s patents up to the time the complaint
was filed” and there was no suggestion that “Norand’s participation in the negotiations
was merely a pretext designed to give Norand a basis for keeping EMC from obtaining
declaratory judgment relief”; second, the circumstances surrounding and immediately
following the filing of the complaint – including the fact that the complaint was filed
shortly after Norand informed EMC of its plans to enter negotiations with EMC’s
competitors, and the day after the complaint was filed EMC’s counsel called Norand’s
counsel and reported that the declaratory judgment complaint had been filed as merely a
defensive step. Id. at 815. Based on these facts, the district court concluded that the
declaratory judgment sought by EMC did not satisfy the purposes of the Declaratory
Judgment Act, explaining that to allow the action to proceed would “create an incentive
structure that is inconsistent with the public interest in preserving declaratory proceedings
for cases closer to the central objectives of declaratory proceedings” and that “a party in
EMC’s position could abuse the declaratory judgment device to obtain a more favorable
bargaining position in its ongoing negotiations with the patentee and also undermine the
value of the patent so as to impede its sale or licensing to a third party.” Id. at 814
(alteration and internal quotation marks omitted).

The Federal Circuit affirmed,

concluding that “[u]nder these circumstances, the district court could properly view the
declaratory judgment complaint as a tactical measure filed in order to improve EMC’s

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posture in the ongoing negotiations – not a purpose that the Declaratory Judgment Act
was designed to serve.” Id. at 815.
As with Fresenius, although EMC Corp. shares some relevant facts with the
present case, the Court finds it distinguishable from the circumstances surrounding the
Arctic Cat lawsuit. In EMC Corp. the parties were engaged in ongoing negotiations at
the time the complaint was filed, which, as explained above, is not the case here. With
respect to the impact of ongoing negotiations on the purposes of the Declaratory
Judgment Act, the Federal Circuit explained that “a patentee in the midst of active
negotiations may not be leaving the other party ‘immobile’ or ‘helpless’ and may not be
benefiting from the delay. Instead, the patentee may be attempting to avoid litigation by
engaging the other party in extra-judicial dispute resolution.” Id. The Federal Circuit
also explicitly noted that a would-be-infringer could avoid the problem of dismissal under
the Declaratory Judgment Act “simply by cutting off negotiations if it appears that the
patentee is not negotiating in good faith.” Id. After Arctic Cat requested, and was
denied, an extension of time, under the Federal Circuit’s explanation of the rule, it was
within its rights to cut off the negotiations and seek to determine its legal rights with
respect to the at-issue patents.
Furthermore, the EMC Corp. decision has two important limitations. First, EMC
Corp. found only that “[i]n light of the limited scope of our review, we cannot conclude
that the district court’s decision on that issue was so contrary to the teachings and
experience concerning the functions and extent of federal judicial power, that it
constituted an abuse of discretion.” Id. (citation and internal quotation marks omitted).

- 24 -

Therefore, EMC Corp. does not appear to compel a particular conclusion in this case and
certainly does not hold that it would be an abuse of the Court’s discretion to refuse to
dismiss Arctic Cat’s declaratory judgment action. Furthermore, the Federal Circuit has
since backed away from the more expansive statements in EMC Corp. regarding the use
of a declaratory judgment action to obtain a tactical advantage, explaining that even
where declaratory suits “have had the effect of placing appellants in a more favorable
negotiating position, that effect is not a sufficient reason to decline to hear the suit.” Sony
Elecs., Inc., 497 F.3d at 1289 (remanding where the district court exercised its discretion
to dismiss declaratory judgment action in part because “there is no affirmative evidence
to suggest that appellants filed this suit in order to obtain a more favorable bargaining
position in any ongoing license negotiations”). In the absence of affirmative evidence
such as that found in EMC Corp., where the declaratory judgment action was filed after
the patent holder indicated that it was going to begin negotiating licenses with third
parties, and the filer of the declaratory judgment action admitted that the action was
merely a defensive measure, dismissal is not warranted. Here, Polaris has not presented
affirmative evidence that Arctic Cat filed its declaratory judgment action solely to gain a
tactical advantage.

That it may have incidentally provided an advantage (which

advantage Polaris has been unable to articulate) is insufficient to warrant dismissal.
Accordingly, the Court concludes that EMC Corp. does not require dismissal and will
decline to dismiss Arctic Cat’s declaratory judgment action because it serves the purposes
of the Declaratory Judgment Act.

- 25 -

B.

First-Filed Rule

Arctic Cat moves for dismissal of the Polaris lawsuit on the basis that the Arctic
Cat lawsuit was the first-filed suit. Polaris argues that the general rule allowing a firstfiled suit to go forward does not apply to the facts and circumstances of this case, and that
its own lawsuit should be allowed to proceed.
“The ‘first-to-file’ rule is a doctrine of federal comity, intended to avoid
conflicting decisions and promote judicial efficiency, that generally favors pursuing only
the first-filed action when multiple lawsuits involving the same claims are filed in
different jurisdictions.” Merial Ltd. v. Cipla Ltd., 681 F.3d 1283, 1299 (Fed. Cir. 2012).
When two actions that sufficiently overlap are filed in different federal district courts, the
first-filed rule provides that the later-filed case is generally to be stayed, dismissed, or
transferred to the forum of the first-filed action. See Futurewei Techs., Inc. v. Acacia
Research Corp., 737 F.3d 704, 708 (Fed. Cir. 2013).6 The rule applies even where the
first-filed action is a declaratory judgment action. Micron Tech., Inc., 518 F.3d at 904.
The first-filed rule is not, however, absolute and “[t]he trial courts have discretion to
make exceptions to this general rule in the interest of justice or expediency, as in any
issue of choice of forum.” Micron Tech., Inc., 518 F.3d at 904; Merial, 681 F.3d at 1299
(explaining that even under the first-filed rule “‘an ample degree of discretion,
6

Application of the first-filed rule to determine which of two cases will proceed is a
determination sufficiently tied to patent law such that the question is governed by the Federal
Circuit’s law. See Elecs. for Imaging, 394 F.3d at 1345–46 (“The question whether to accept or
decline jurisdiction in an action for a declaration of patent rights in view of a later-filed suit for
patent infringement impacts this court’s mandate to promote national uniformity in patent
practice. Because it is an issue that falls within our exclusive subject matter jurisdiction, we do
not defer to the procedural rules of the regional circuits nor are we bound by their decisions.”).

- 26 -

appropriate for disciplined and experienced judges, must be left to the lower courts’”
(quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co., 342 U.S. 180, 183-84 (1952)).
In determining whether an exception to the first-filed rule should be made courts
consider, among other factors, “judicial and litigant economy, and the just and effective
disposition of disputes.” Elecs. for Imaging, Inc., 394 F.3d at 1347 (Fed. Cir. 2005)
(internal quotation marks omitted).
The parties do not dispute that the Arctic Cat lawsuit was filed first. Instead,
Polaris argues that the first-filed rule does not apply in this case because the rule is
designed to determine the proper venue for a dispute – an issue not presented by these
facts where two cases are filed in the same district and assigned to the same judge.
Courts have explained that the purpose of the first-filed rule is “[t]o conserve judicial
resources and avoid conflicting rulings” by “giv[ing] priority, for purposes of choosing
among possible venues when parallel litigation has been instituted in separate courts, to
the party who first establishes jurisdiction.” Nw. Airlines, Inc. v. Am. Airlines, Inc., 989
F.2d 1002, 1006 (8th Cir. 1993) (emphases added); see also Futurewei Techs., Inc., 737
F.3d at 708 (“When two actions that sufficiently overlap are filed in different federal
district courts, one for infringement and the other for declaratory relief, the declaratory
judgment action, if filed later, generally is to be stayed, dismissed, or transferred to the
forum of the infringement action.” (emphasis added)); In re Founds. Worldwide, Inc.,
542 F. App’x 998, 999 (Fed. Cir. 2013) (“[The first-filed] rule permits a district court to
decline jurisdiction or transfer an action when a complaint involving the same parties and
issues has already been filed in another district.” (emphasis added)); Spread Spectrum

- 27 -

Screening LLC v. Eastman Kodak Co., 657 F.3d 1349, 1357 (Fed. Cir. 2011) (describing
the first filed rule as a “general rule that favors the forum of the first-filed action
(emphasis added) (internal quotation marks omitted)); Smart v. Sunshine Potato Flakes,
L.L.C., 307 F.3d 684, 687 (8th Cir. 2002) (“The first-filed factor is often dominant in
determining which federal court should proceed when the parties to an arbitration award
have filed cross motions to vacate and confirm the award in different district courts.”
(emphasis added)). These cases overwhelmingly indicate that the first-filed rule is not
implicated in situations like this – where a single district judge is confronted with two
different cases that raises the same legal issues arising out of common facts. Instead, the
first-filed rule is a venue or forum selection mechanism encouraging dismissal of a laterfiled suit in a different district.
That the first-filed rule is not intended to govern the resolution of two lawsuits
filed in the same district and assigned to the same judge is further evidenced by the
factors that courts are instructed to examine when determining the applicability of the
first-filed rule. For example, courts decline to apply the first-filed rule when compelling
circumstances, or red flags are present, such as where “the action was brought as a
wrongful preemptive strike or as an attempt at forum shopping,” Hearth & Home Techs.,
Inc. v. J&M Distrib., Inc., Civ. No. 12-686, 2012 WL 5995232, at *3 (D. Minn. Nov. 30,
2012), or the suit “deprive[s] a potential plaintiff of his choice of forum,” 909 Corp. v.
Village of Bolingbrook Police Pension Fund, 741 F. Supp. 1290, 1293 (S.D. Tex. 1990).
See also Micron Tech., Inc., 518 F.3d at 904 (explaining that “as in any issue of choice of
forum” district courts have discretion when applying the first-filed rule and consider “the

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convenience and availability of witnesses, the absence of jurisdiction over all necessary
or desirable parties, and the possibility of consolidation with related litigation”). Courts
also consider bad faith in determining whether to apply the first-filed rule, indications of
which can include “filing a suit in an unnatural forum” or “secretly filing the first-filed
declaratory judgment action and keeping the lawsuit secret as a negotiating tool and
method to preempt the defendant’s choice of forum when it later files suit.” Hearth &
Home Techs., 2012 WL 5995232 at *5 (alterations and internal quotation marks omitted).
Finally, courts consider matters of efficiency and practicality in determining whether the
first-filed rule should apply such as “duplicative efforts and costs and . . . inconvenience
to the parties, together with the waste of judicial resources inherent in parallel litigation.”
Nw. Airlines, 989 F.2d at 1007. In a situation such as this, these factors make little sense
as both parties have chosen the same forum and issues of party convenience and
duplicative efforts and costs are not implicated.
Arctic Cat argues that the first-filed rule is applicable in cases filed in the same
district, but does not cite, and the Court has not found, any cases in which a court has
applied the rule when dealing with two cases pending in the same district before the same
judge. Arctic Cat explains that “[i]f anything, the fact that the two cases were filed in the
same district cautions against dismissing Arctic Cat’s complaint because many of the
issues typically present in competing actions in different jurisdictions – for example,
forum shopping and witness availability – are not present here.” (Civ. No. 13-3579,
Arctic Cat’s Mem. in Opp’n to Mot. to Dismiss at 17, June 3, 2014, Docket No. 27.)
Rather than support the use of the doctrine here, Arctic Cat’s argument further

- 29 -

emphasizes the futility of trying to meaningfully apply the first-filed doctrine in this
situation. It is not surprising that few of the concerns counseling against application of
the first-filed rule are present, because the rule simply does not apply here. Instead, as
explained below, the Court already has adequate tools to deal with cases involving
similar parties and claims filed in the same district through its discretion to consolidate
related cases. Accordingly, the Court concludes that the first-filed rule does not apply to
these cases, as they do not present a situation in which the Court must choose between
different fora, and will decline to dismiss Polaris’ lawsuit on this ground.7
II.

MOTION TO CONSOLIDATE
As an alternative to its argument that the Polaris lawsuit should be dismissed

under the first-filed rule, Arctic Cat argues that the case should be consolidated and
“expresses no preference as to whether the cases should be consolidated” under the
Arctic Cat or Polaris lawsuits. (Civ. No. 13-3595, Arctic Cat’s Mem. in Supp. of Mot. to
Dismiss or Consolidate at 13, May 2, 2014, Docket No. 19.)
Under Federal Rule of Civil Procedure 42 if “actions before the court involve a
common question of law or fact, the court may: (1) join for hearing or trial any or all
matters at issue in the actions; (2) consolidate the actions; or (3) issue any other orders to
avoid unnecessary cost or delay.” Fed. R. Civ. P. 42(a). “Rule 42 requires only that
there be a common question of law or fact, and consolidation is permissible even if the
7

Because the Court has concluded that the first-filed rule does not apply where, as here,
both cases in question are filed in the same district and pending before the same judge, this Order
does not address the parties’ arguments regarding the existence or lack thereof of red flags or
compelling circumstances that could warrant deviation from the first-filed rule.

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claims arise out of independent transactions.” Fratzke v. IC Sys., Inc., Civ. Nos. 05-1115,
06-232, 2007 WL 1114155, at *2 (D. Minn. Apr. 13, 2007) (internal quotation marks
omitted). But “consolidation is not appropriate if it leads to inefficiency, inconvenience,
or unfair prejudice to a party, as the purpose of consolidation is to encourage convenience
and economy of administration of cases and avoid unnecessary cost or delay.”

Id.

(citations and internal quotation marks omitted); see also EEOC v. HBE Corp., 135 F.3d
543, 550-51 (8th Cir. 1998).
There are few models for consolidation in cases such as these, because most often
consolidation occurs in cases where consolidation does not change the orientation of the
parties as either plaintiffs or defendants. For example, courts have ordered consolidation
where a single plaintiff files two patent-infringement suits against two different
defendants where the two suits involve the same patents and same accused products. See
Horton, Inc. v. Kit Masters, Inc., Civ. Nos. 08-6291, 08-6292, 2009 WL 8590687, at *1
(D. Minn. Apr. 1, 2009). In such cases, after an order of consolidation, the plaintiff
typically files a consolidated complaint against all of the defendants, and the later-filed
case is closed. See Fratzke, 2007 WL 1114155 at *1 (ordering consolidation, directing
plaintiffs to file an amended consolidated complaint, and directing the clerk’s office to
close the later-filed case).
Here, the parties do not dispute that the two cases involve common questions of
law and fact, as both lawsuits relate to the infringement and validity of the same patent.
Additionally, although Polaris believes that consolidation is the “wrong remedy” (Civ.
No. 13-3595, Polaris’ Mem. in Opp’n to Mot. to Dismiss or Consolidate at 23, May 23,

- 31 -

2014, Docket No. 26) this argument is based entirely on its contention that the Arctic Cat
lawsuit should be dismissed under the Declaratory Judgment Act. Other than arguing
that Arctic Cat’s motion must be dismissed under the Declaratory Judgment Act for
gamesmanship – an argument which the Court has rejected – Polaris has raised no
substantive objections to consolidation other than a generalized complaint that
consolidation would be unfair.

Polaris has not, for example, demonstrated that

consolidation would lead to inefficiencies, inconvenience, or unfair prejudice. At most,
Polaris has suggested that consolidation would allow Arctic Cat to present its case first in
the event that these claims proceed to trial. As noted below, however, matters of which
party presents first at trial in cases where both sides raise affirmative claims for relief is
not an issue decided strictly by the case caption, and instead is a matter left to the Court’s
discretion to be decided based on considerations of efficiency, witness availability, and
possible jury confusion at a time in the litigation when it is clear which claims remain to
be tried. Therefore, Polaris’ claim that it will be unable to present its case first at trial
does not demonstrate the type of unfair prejudice that would stem from, and therefore
counsel against, consolidation.
The Court concludes that it would be unwieldy and unnecessary for both it and the
parties to attempt to maintain these two cases separately – issuing different scheduling
orders, hearing separate motions, and attempting to avoid inconsistent results with respect
to arguments made on the same patents. Because the cases raise identical issues of law
and fact, and consolidation will not result in inefficiencies, inconvenience, or any
discernable prejudice, the Court will order the consolidation of these cases. The Court is

- 32 -

aware that, unlike many cases, these two cases do not present a simple consolidation
option. In other words, Arctic Cat and Polaris cannot simultaneously both be defendants
and plaintiffs in a single consolidated case. Because the parties have identified no other
workable option, the Court will defer to its customary practice in managing related cases,
and will consolidate the actions into the earlier-filed Arctic Cat lawsuit. The Court will
require Polaris, if it desires to proceed with its claims, to file its infringement complaint
as a counterclaim in the consolidated lawsuit. Arctic Cat will be designated as plaintiff
and counterclaim defendant, and Polaris will be designated as defendant and
counterclaim plaintiff. The Court notes that by ordering consolidation and making these
designations, it has made no ruling on which party would present its case first in the
event that any of the asserted claims proceed to trial.

III.

RULE 12(b)(6) MOTION
In addition to its motion for dismissal of the declaratory judgment claims

addressed above, Polaris has also moved to dismiss the remaining claims in Arctic Cat’s
amended complaint on the basis that they fail to state claims under Rule 12(b)(6) and
otherwise fail to comply with the pleading standards.

A.

Standard of Review

In reviewing a motion to dismiss brought under Federal Rule of Civil Procedure
12(b)(6), the Court considers all facts alleged in the complaint as true to determine if the
complaint states a “‘claim to relief that is plausible on its face.’” Magee v. Trs. of
Hamline Univ., Minn., 747 F.3d 532, 535 (8th Cir. 2014) (quoting Ashcroft v. Iqbal, 556

- 33 -

U.S. 662, 678 (2009)). To survive a motion to dismiss, a complaint must provide more
than “‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of
action . . . .’” Iqbal, 556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544,
555 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Id. “Where a complaint pleads facts that are merely consistent
with a defendant’s liability, it stops short of the line between possibility and plausibility,”
and therefore must be dismissed. Id. (internal quotation marks omitted). Finally, Rule
12(b)(6) “authorizes a court to dismiss a claim on the basis of a dispositive issue of law.”
Neitzke v. Williams, 490 U.S. 319, 326 (1989).

B.

Breach of Contract

To state a claim for breach of contract under Minnesota law, a “plaintiff must
show (1) formation of a contract, (2) performance by plaintiff of any conditions precedent
to his right to demand performance by the defendant, and (3) breach of the contract by
defendant.”

Park Nicollet Clinic v. Hamann, 808 N.W.2d 828, 833 (Minn. 2011).

Count IV of Arctic Cat’s amended complaint brings a claim for breach of contract based
upon its allegation that “Polaris breached at least Section 4 of the Negotiation Agreement
by disclosing Confidential Information to the PTO without Arctic Cat’s written consent.
This constitutes a material breach of the Negotiation Agreement.” (Am. Compl. ¶ 127.)
Polaris argues that Arctic Cat’s claim for breach of contract must be dismissed for three
reasons. First, for failure to plausibly allege a breach of contract; second, because the

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Negotiation Agreement – if interpreted as Arctic Cat claims – would be unenforceable as
against public policy; and finally, because Arctic Cat fails to plead damages.

1.

Plausible Claim

With respect to failure to plead a plausible breach of contract claim, Polaris argues
that “Arctic Cat’s bizarre breach of contract theory is that Polaris breached Section 4 of
the agreement by disclosing publicly available prior art,” and that this allegation fails to
state a claim “because publicly available prior art is not Confidential Information under
the Negotiation Agreement.” (Civ. No. 13-3579, Polaris’ Mem. in Supp. of Mot. to
Dismiss at 24.) This argument requires the Court to interpret the Negotiation Agreement.
The determination of whether a contract is ambiguous and interpretation of an
unambiguous contract are questions of law that the Court may decide at the motion to
dismiss stage, “but the interpretation of an ambiguous contract is a question of fact for the
jury.” Denelsbeck v. Wells Fargo & Co., 666 N.W.2d 339, 346 (Minn. 2003). “A
contract is ambiguous if its terms are reasonably susceptible to more than one
interpretation.” Savela v. City of Duluth, 806 N.W.2d 793, 807 (Minn. 2011). “The
determination of whether a contract is unambiguous depends on the meaning assigned to
the words and phrases in accordance with the apparent purpose of the contract as a
whole.” Halla Nursery, Inc. v. City of Chanhassen, 781 N.W.2d 880, 884 (Minn. 2010).
Polaris’ argument that the prior art disclosed to the PTO was not confidential
information within the meaning of the Negotiation Agreement focuses on the section of
the Negotiation Agreement defining confidential information as “any information, written
or oral, which relates to the business, products, processes, or services of any Party” with
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the exception of “information ascertainable or obtainable from public or published
information.” (Am. Compl., Ex. E at 3.) But in Section 4.4, the Negotiation Agreement
provides that prior to service of a complaint in 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.” (Id.
(emphasis added).)

This provision conflicts with the definition of confidential

information and creates an ambiguity regarding what constitutes confidential information
covered by the Negotiation Agreement prior to the time of filing a complaint. See
Anacapa Tech., Inc. v. ADC Telecomms., Inc., 241 F. Supp. 2d 1016, 1023 (D. Minn.
2002) (finding a similar clause which excepted from the definition of confidential
information publicly available information, but provided that certain technology, some of
which was publicly available “shall be included within the definition of . . . Confidential
Information” “ambiguous on its face”). Polaris argues that Section 4.4 relates only to the
marking of documents, and not whether those documents are confidential information
within the meaning of the Negotiation Agreement in the first instance. Although that
may be one reasonable interpretation of the provision, it is not the only reasonable
interpretation dictated by the language of Section 4.4. Section 4.4 clearly states that all
written materials disclosed prior to the filing of the complaint “shall be deemed
Confidential Information, whether or not marked as confidential.” (Id.) Therefore, based
on the plain language alone, the provision could reasonably be interpreted as defining the
scope of confidential information based on when it was disclosed between the parties and
whether it was marked, rather than whether it was publicly available. Because the Court

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concludes that the Negotiation Agreement is ambiguous, it will deny Polaris’ motion to
dismiss on this ground. See Praktika Design & Projectos Ltd. v. Marvin Lumber &
Cedar Co., Civ. No. 06-957, 2006 WL 2788182, at *4 (D. Minn. Sept. 26, 2006) (“The
Court concludes that the contract is susceptible to more than one interpretation, and that
extrinsic evidence must be considered to resolve the ambiguity. As such, the Court
cannot grant defendants’ motion to dismiss the breach of contract claim.”); cf. Anacapa
Tech., Inc., 241 F. Supp. 2d at 1023-24 (examining the facts developed during discovery
at the summary judgment stage to determine whether plaintiff’s interpretation of the
ambiguous contract was reasonable).

2.

Public Policy

Polaris next argues that if the Negotiation Agreement could be interpreted as
preventing the disclosure of prior art to the PTO it is void as against public policy,
because Polaris was under a statutory duty to deal with the PTO in good faith and candor,
which includes disclosing information that may be material to patentability, whether or
not the information is confidential.
“As a general rule, a contract is not void as against public policy unless it is
injurious to the interests of the public or contravenes some established interest of
society.” Isles Wellness, Inc. v. Progressive N. Ins. Co., 725 N.W.2d 90, 93 (Minn. 2006)
(internal quotation marks omitted). Agreements which encourage violations of federal
law have been held to contravene “recognizable public policy.” See McBrearty v. U.S.
Taxpayers Union, 668 F.2d 450, 450-51 (8th Cir. 1982). But in general, “[a] court’s
power ‘to declare a contract void for being in contravention of sound public policy is a
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very delicate and undefined power, and . . . should be exercised only in cases free from
doubt.’” Katun Corp. v. Clarke, 484 F.3d 972, 976 (8th Cir. 2007) (alteration in original)
(quoting Hollister v. Ulvi, 271 N.W. 493, 498-99 (Minn. 1937)).
Although a confidentiality agreement which encouraged Polaris to violate federal
law by not disclosing certain information to the PTO may violate public policy, the
Negotiation Agreement here did not prohibit such disclosure. Instead, the Negotiation
Agreement merely required Polaris to obtain Arctic Cat’s written consent before such
disclosure. Therefore, the Negotiation Agreement is not void on its face because it does
not encourage violations of federal law, nor do the allegations in the amended complaint
indicate that Arctic Cat refused to give consent upon Polaris’ request. At this stage,
therefore, the Court will decline to dismiss the breach of contract claim on the basis that
the Negotiation Agreement was void.

3.

Damages

Finally, Polaris argues that the breach of contract claim must be dismissed for
failure to plead damages. The Minnesota Supreme Court has, however, “recognized that
the plaintiff may not have to allege that the breach caused damages in order to state a
claim for breach of contract.” Park Nicollet Clinic, 808 N.W.2d at 833 n.5 (citing as
supportive precedent Burns v. Jordan, 44 N.W. 523, 524 (Minn. 1890), but as contrary
precedent Sloggy v. Crescent Creamery Co., 75 N.W. 225 (Minn. 1898)). Because the
Minnesota Supreme Court has recognized that a plaintiff need not necessarily plead
damages in order to survive a motion to dismiss a breach of contract claim, the Court will

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decline to dismiss on this basis. Therefore, the Court will allow Arctic Cat’s claim for
breach of contract to proceed.

C.

Fraud

To state a claim for fraud under Minnesota law, Arctic Cat must allege: (1) a false
representation by Polaris of a past or existing material fact susceptible of knowledge;
(2) made with knowledge of the falsity of the representation or made without knowing
whether it was true or false; (3) with the intention to induce Arctic Cat to act in reliance
thereon; (4) that the representation caused Arctic Cat to act in reliance thereon; and
(5) that Arctic Cat suffered pecuniary damages as a result of the reliance. See Valspar
Refinish, Inc. v. Gaylord’s Inc., 764 N.W.2d 359, 368 (Minn. 2009).
The basis of Arctic Cat’s fraud claim is that Polaris’ counsel’s, Mr. Groen, “made
a material representation to Arctic Cat that the Confidential Information that Arctic Cat
provided Polaris was for the purpose of assisting the parties in understanding their
respective positions and working toward an amicable resolution of Polaris’s infringement
claims and that such information would remain confidential.” (Am. Compl. ¶ 130.)
Arctic Cat further alleges that “at the time Mr. Groen made his misrepresentations to
Arctic Cat, Mr. Groen never intended to maintain the confidentiality of Arctic Cat’s
Confidential Information and never intended to amicably resolve the parties’ dispute.”
(Id. ¶ 132.) Arctic Cat alleges that it reasonably relied on Mr. Groen’s representations
and “[i]f Arctic Cat had known Polaris and Mr. Groen’s true intent, that Polaris and
Mr. Groen did not intend to maintain the confidentiality of the Confidential Information
and had no intent to engage in good-faith settlement negotiations, it would not have
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provided the material to Polaris.” (Id. ¶ 133.) With respect to damages, Arctic Cat
claims that it was damaged “because Mr. Groen took Confidential Information provided
under the guise of settlement negotiations, and publicly disclosed that Confidential
Information to the PTO in an attempt to bolster a patent application containing allowed
claims that Polaris has accused Arctic Cat of infringing.” (Id. ¶ 134.)
Although the fraud claim is not a model of clarity, it appears that there are two
distinct misrepresentations that purport to be the basis of the claim. First is the alleged
misrepresentation that Mr. Groen would maintain the confidentiality of the prior art
disclosed by Arctic Cat. Second is the alleged misrepresentation that Polaris would
engage in good-faith settlement negotiations.
With respect to the first misrepresentation, Polaris argues that the claim fails
because it fails to allege a duty independent of the Negotiation Agreement.

The

independent duty rule provides that a plaintiff cannot recover damages in tort for an
alleged breach of contract except in “exceptional cases where the defendant’s breach of
contract constitutes or is accompanied by an independent tort.” Wild v. Rarig, 234
N.W.2d 775, 789 (Minn. 1975); see also Russon v. NCS Pearson, Inc., 462 F. Supp. 2d
981, 994 (D. Minn. 2006). The mere existence of a governing contract between the
parties, however, does not preempt or eliminate the possibility of a tort claim. AKA
Distrib. Co. v. Whirlpool Corp., 137 F.3d 1083, 1086 (8th Cir. 1998). If a tort claim is
based on a breach of duty that “is indistinguishable from the breach of contract,” the tort
claim will fail, but if “a relationship would exist which would give rise to the legal duty
without enforcement of the contract promise itself,” the tort claim is viable. Hanks v.

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Hubbard Broad., Inc., 493 N.W.2d 302, 308 (Minn. Ct. App. 1992) (internal quotation
marks omitted); see also Constr. Sys., Inc. v. Gen. Cas. Co. of Wis., Civ. No. 09-3697,
2011 WL 3625066, at *9 (D. Minn. Aug. 17, 2011). In other words, “[a] fraud claim
independent of the contract is actionable, but it must be based upon a misrepresentation
that was outside of or collateral to the contract.” AKA Distrib. Co., 137 F.3d at 1086; see
also Marvin Lumber & Cedar Co. v. PPG Indus., Inc., 223 F.3d 873, 887 (8th Cir. 2000)
(“[A]n independent fraudulent concealment claim will not lie where the fraudulent
concealment relates to a promisor’s duties under the contract.”).
Here, Arctic Cat’s first misrepresentation is based entirely on its allegation that
Polaris promised to keep certain information confidential (promises contained in the
Negotiation Agreement) and failed to do so (in breach of that agreement). Because the
misrepresentation alleged is identical to Polaris’ duty of performance under the
Negotiation Agreement, the Court will dismiss the fraud claim to the extent it is based
upon the alleged misrepresentation that Polaris would keep information disclosed by
Arctic Cat confidential. See Jones v. W. Union Fin. Servs., Inc., 513 F. Supp. 2d 1098,
1101 (D. Minn. 2007) (granting summary judgment on plaintiff’s negligence and
negligent infliction of emotional distress claims where the claims were based on
allegations that defendant “was negligent by failing to deliver the money to the correct
person” which was “a breach of duty identical to the breach of contract”); see also AKA
Distrib. Co., 137 F.3d at 1087 (finding that a fraud claim was not independent of the
contract and its performance where “[t]he fraud claim is that Whirlpool lied when it said
AKA would be a distributor for a long time” because “duration was a term of the

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contract, and breach of that term was the basis for AKA’s time-barred contract claim”);
Bridgestone/Firestone, Inc. v. Recovery Credit Servs., Inc., 98 F.3d 13, 19-20 (2d Cir.
1996) (finding representations that the party intended to remit all sums due and owing to
plaintiff under a contract “amount to little more than intentionally-false statements” by
the party “indicating his intent to perform under the contract” which were insufficient to
support a claim for fraud).8
With respect to Arctic Cat’s second misrepresentation, the Court concludes that
this aspect of the fraud claim fails because Arctic Cat has not alleged a false
representation of fact by Polaris in accordance with Federal Rule of Civil Procedure 9.
Rule 9 provides that, in order to adequately plead a claim for fraud, “a party must state
with particularity the circumstances constituting fraud or mistake.” Fed. R. Civ. P. 9(b).
“To satisfy the particularity requirement of Rule 9(b), the complaint must plead such
facts as the time, place, and content of the defendant’s false representations, as well as the
details of the defendant’s fraudulent acts, including when the acts occurred, who engaged
in them, and what was obtained as a result.” United States ex rel. Raynor v. Nat’l Rural
Utilities Coop. Fin., Corp., 690 F.3d 951, 955 (8th Cir. 2012) (internal quotation marks
omitted).

In its amended complaint, Arctic Cat has identified no affirmative

8

Arctic Cat does not seriously dispute that a promise to keep information confidential is
a duty contained within the Negotiation Agreement. Instead, it argues that its fraud claim is not
barred by the independent duty rule because its fraud claim is broader than its breach of contract
claim. Specifically, Arctic Cat argues that it alleges misrepresentations about Polaris’ intent to
use the information for purposes of engaging in good faith settlement negotiations in addition to
allegations that Polaris misrepresented that the information would remain confidential. (Civ. No.
13-3579, Arctic Cat’s Mem. in Opp’n to Mot. to Dismiss at 33.) That Arctic Cat may have other
misrepresentation claims in addition to its claims regarding Polaris’ alleged representation that
the information would remain confidential is irrelevant to whether the latter representation is
contained within the Negotiation Agreement and therefore barred by the independent duty rule.

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misrepresentations, of any kind, made by Mr. Groen related to Polaris’ intent to engage in
good faith settlement negotiations. Instead, the amended complaint contains allegations
that can best be described as Arctic Cat’s own commentary and interpretation of various
communications and events surrounding the settlement discussions. The closest the
amended complaint comes to identifying an actual statement made by Polaris is its
allegation that “Mr. Groen requested, purportedly for the purposes of advancing
settlement discussions, that Mr. Okerlund provide this information to Polaris.” (Am.
Compl. ¶ 19.) But this allegation, even accepted as true, does not indicate that Mr. Groen
himself made a misrepresentation about Polaris’ intent to settle, nor is it a specific
description of the misrepresentation that would comport with Rule 9. Instead, it is Arctic
Cat’s interpretation of Mr. Groen’s request for documents – that it was purportedly for
the purposes of advancing settlement discussions. This allegation, without more, does
not identify with particularity a false representation of fact and is therefore insufficient to
state a claim for fraud. Accordingly, the Court will grant Polaris’ motion to dismiss
Arctic Cat’s fraud claim to the extent it is based upon a misrepresentation regarding
Polaris’ intent to engage in settlement negotiations.

D.

Inequitable Conduct

“Inequitable conduct is an equitable defense to patent infringement that, if proved,
bars enforcement of a patent.” Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d
1276, 1285 (Fed. Cir. 2011). A patent may be rendered unenforceable for inequitable
conduct where the patent applicant “(1) made an affirmative misrepresentation of
material fact, failed to disclose material information, or submitted false material
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information, and (2) intended to deceive the [PTO].” Star Scientific, Inc. v. R.J. Reynolds
Tobacco Co., 537 F.3d 1357, 1365 (Fed. Cir. 2008); see also Honeywell Int’l Inc. v.
Universal Avionics Sys. Corp., 488 F.3d 982, 999 (Fed. Cir. 2007). The Federal Circuit
has recently taken steps to narrow the scope of inequitable conduct claims – heightening
the intent and materiality standards after finding that such claims have “plagued not only
the courts but also the entire patent system” because “allegations of inequitable conduct
are routinely brought on the slenderest grounds” and result in “increased adjudication
cost and complexity, reduced likelihood of settlement, burdened courts, strained PTO
resources, increased PTO backlog, and impaired patent quality.” Therasense, Inc., 649
F.3d at 1289-90 (internal quotation marks omitted).
In Counts VI and VII of the amended complaint, Arctic Cat brings claims alleging
that the ‘220, ‘125, and ‘405 Patents which are the subject of its declaratory judgment
action are unenforceable as a result of Polaris’ inequitable conduct. Specifically, Arctic
Cat alleges that “Polaris, including at least named inventor Aaron Deckard, deliberately
withheld material prior art from the PTO during the prosecution of the ‘220 patent,
including at least the prior public use of the Vista vehicle, and did so with a specific
intent to deceive the PTO.” (Am. Compl. ¶ 137.) With respect to the ‘125 and ‘405
Patents, Arctic Cat alleges that the subject matter of these patents is not “‘sufficiently
distinct’ from that of the ‘220 patent to eliminate the taint of Mr. Deckard’s inequitable
conduct during the prosecution of the ‘220 patent” and that the ‘125 and ‘405 Patents are
therefore “unenforceable in view of the inequitable conduct that occurred during the
prosecution of the related ‘220 patent.” (Id. ¶¶ 141-42.)

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Polaris argues that Arctic Cat’s inequitable conduct claims must be dismissed for a
number of reasons including because the exhibits attached to the amended complaint
show that the failure to disclose the Vista was not material and for failure to plead the
inequitable conduct claims with the requisite particularity.

1.

Materiality

In order to prevail on an inequitable conduct claim arising out of failure to disclose
prior art, the Federal Circuit has held that
as a general matter, the materiality required to establish inequitable conduct
is but-for materiality. When an applicant fails to disclose prior art to the
PTO, that prior art is but-for material if the PTO would not have allowed a
claim had it been aware of the undisclosed prior art. Hence, in assessing
the materiality of a withheld reference, the court must determine whether
the PTO would have allowed the claim if it had been aware of the
undisclosed reference.
Therasense, Inc., 649 F.3d at 1291. Therefore, in order to state a claim for inequitable
conduct based on Polaris’ failure to disclose the Vista during prosecution of the ‘220
Patent, Arctic Cat’s allegations must demonstrate that the PTO would not have allowed at
least claim 1 of the ‘220 Patent had it been aware of the Vista.
The exhibits attached to Arctic Cat’s amended complaint demonstrate that after
Polaris was sued by another entity who claimed that the Vista was material, Polaris
disclosed the Vista during prosecution of the ‘125 and ‘405 Patents. (Am. Compl., Exs.
H-I; see also id., Ex. C at 4 (the ‘125 Patent application showing that the August 1, 2012
declaration of Aaron Deckard, disclosing the Vista, was one of the documents presented
to the PTO during prosecution), Ex. A at 4 (the ‘405 Patent application showing that the
August 1, 2012 and January 17, 2013 declarations of Aaron Deckard, disclosing the
- 45 -

Vista, were documents presented to the PTO during prosecution). Despite this disclosure
during prosecution, the PTO issued the ‘125 and ‘405 Patents, demonstrating that the
Vista was not material prior art to those patents, because the PTO allowed the claims
even after it had been made aware of the Vista. See Cornucopia Prods., LLC v. Dyson,
Inc., 881 F. Supp. 2d 1086, 1100 (D. Ariz. 2012) (finding that a complaint failed to allege
materiality where “the file history shows that the patent examiner considered and
adequately understood the Japanese patent. The patent nonetheless eventually issued.”).
Although this disclosure was made after the ‘220 Patent issued, the amended complaint
alleges that the ‘125 and ‘405 Patents “claim to have a specification containing the same
matter as the ‘220 patent’s specifications” and there are only “minor variations” in the
independent claims of the three patents in suit. (Am. Compl. ¶¶ 37-38; see also id., Ex. A
at 38 (claim 1 of the ‘405 Patent), Ex. B at 36 (claim 1 of the ‘220 Patent), Ex. C at 125
(claim 1 of the ‘125 Patent).) Because the ‘125 and ‘405 Patents are continuations of the
‘220 Patent and contain the same specification and nearly identical independent claims,
the PTO’s finding that the Vista was not material to the ‘125 and ‘405 Patents would
apply with equal force to the ‘220 Patent. In other words, if the Vista was not material to
the issuance of the ‘125 and ‘405 Patents – as demonstrated by the PTO’s issuance of
those patents even after disclosure – it could not have been material to the issuance of the
‘220 Patent. Therefore, the Court finds that Arctic Cat has failed to plead a material
omission of prior art and will dismiss Arctic Cat’s claim for inequitable conduct.
Arctic Cat’s only arguments with respect to materiality is that it requires factfinding that is impermissible at the motion to dismiss stage, and that a patentee cannot

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cure inequitable conduct by later disclosure. First, as noted above, the Court’s conclusion
regarding materiality is based entirely on the allegations in the amended complaint and
the exhibits attached to it.9 Arctic Cat has alleged that the ‘125 and ‘405 Patents are
continuations of the ‘220 Patent and contain the same specifications. Arctic Cat has also
attached materials to its amended complaint showing that even after the Vista was
disclosed to the PTO it issued the ‘125 and ‘405 Patents, indicating that the Vista was not
material as a matter of law. Arctic Cat’s amended complaint contains no allegations
demonstrating that the Vista could have been material to the ‘220 Patent, and accordingly
dismissal is appropriate. Second, Arctic Cat’s argument regarding cure is misplaced.
The Court’s dismissal does not suggest that if the Vista had been material, Polaris’ later
disclosure of it could have cured the original inequitable conduct. See Therasense, Inc.,
649 F.3d at 1288 (“Unlike other deficiencies, inequitable conduct cannot be cured by
reissue or reexamination.” (citations omitted)). Instead, Polaris’ later disclosure – which
had no impact on the PTO’s issuance of Polaris’ patents – goes to the issue of materiality
and demonstrates that the Vista was not material.

9

The Court notes that Arctic Cat did allege 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 because that information was prior
art.” (Am. Compl. ¶ 44.) But “[g]enerally, ‘when a written instrument contradicts allegations in
the complaint to which it is attached, the exhibit trumps the allegations.’” WINBCO Tank Co. v.
Palmer & Cay of Minn. L.L.C., 435 F. Supp. 2d 945, 955 (S.D. Iowa 2006) (quoting N. Ind. Gun
& Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 454 (7th Cir. 1998)). Here, Arctic Cat
attached to its amended complaint Polaris’ disclosures to the PTO and the patents which issued
after those disclosures, indicating that the Vista was not material. These materials which go
directly to the issue of materiality and come from the PTO itself trump Arctic Cat’s general
allegations.

- 47 -

2.

Particularity

Furthermore, even if the exhibits to Arctic Cat’s amended complaint did not
contradict its assertion that the Vista was material to the ‘220 Patent, the Court would
conclude that Arctic Cat has failed to plead this claim with the necessary particularity.
“[I]n pleading inequitable conduct in patent cases, Rule 9(b) requires identification of the
specific who, what, when, where, and how of the material misrepresentation or omission
committed before the PTO.” Exergen Corp. v. Wal-Mart Stores, Inc., 575 F.3d 1312,
1327 (Fed. Cir. 2009). With respect to the “what” and the “where” specifically, the
Federal Circuit has held that a pleading fails to satisfy the requirements of Rule 9 where it
fails to identify, for example, “which claims, and which limitations in those claims, the
withheld references are relevant to, and where in those references the material
information is found.” Id. at 1329.
Additionally, with respect to state of mind, the Federal Circuit has explained that
“[t]he relevant ‘conditions of mind’ for inequitable conduct include: (1) knowledge of the
withheld material information or of the falsity of the material misrepresentation, and
(2) specific intent to deceive the PTO.” Id. at 1327. “Although ‘knowledge’ and ‘intent’
may be averred generally,” the Federal Circuit “requires that the pleadings allege
sufficient underlying facts from which a court may reasonably infer that a party acted
with the requisite state of mind.” Id. Finally, pleading on information and belief is
appropriate “when essential information lies uniquely within another party’s control, but
only if the pleading sets forth the specific facts upon which the belief is reasonably
based.” Id. at 1330. In sum, “[a] charge of inequitable conduct based on a failure to

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disclose will survive a motion to dismiss only if the plaintiff’s complaint recites facts
from which the court may reasonably infer that a specific individual both knew of
invalidating information that was withheld from the PTO and withheld that information
with a specific intent to deceive the PTO.” Delano Farms Co. v. Cal. Table Grape
Comm’n, 655 F.3d 1337, 1350 (Fed. Cir. 2011). “A pleading that simply avers the
substantive elements of inequitable conduct, without setting forth the particularized
factual bases for the allegation, does not satisfy Rule 9(b).” Exergen Corp., 575 F.3d at
1326-27.
The Court finds that here, Arctic Cat has failed to adequately allege claims for
inequitable conduct. Arctic Cat’s claim of inequitable conduct is based on its contention
that Polaris failed to disclose the Vista, and that the Vista was material to the issuance of
the ‘220 Patent because it was a public use. (Am. Compl. ¶ 137.) To demonstrate public
use, Arctic Cat must show “that the claimed invention was in public use before the
patent’s critical date.” Clock Spring, L.P. v. Wrapmaster, Inc., 560 F.3d 1317, 1325
(Fed. Cir. 2009). Therefore, Arctic Cat must allege that the Vista was a public use of the
‘220 Patent’s claim limitations. See id. But Arctic Cat’s allegations regarding why the
Vista was material are not pled with specificity. Arctic Cat alleges only that “[b]y 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.”
(Am. Compl. ¶ 39.) Although pleading on information and belief is permitted, this
pleading fails to set forth the specific facts upon which Arctic Cat’s belief that the Vista
embodies the ‘220 Patent is reasonably based. In other words Arctic Cat has provided no

- 49 -

allegations regarding its understanding of what features the Vista has that would embody
claim 1 of the ‘220 Patent, and therefore “‘how’ an examiner would have used this
information in assessing the patentability of the claims.” Exergen Corp., 575 F.3d at
1330.
Finally, the Court concludes that Arctic Cat has failed to allege deceptive intent on
the part of Aaron Deckard with particularity. Again Arctic Cat alleges only that “[o]n
information and belief, Mr. Deckard’s failure to disclose this information to the PTO was
both knowing and willful, and was specifically intended to induce the PTO to issue patent
claims it would not otherwise have issued.” (Am. Compl. ¶ 43.) But again Arctic Cat
has failed to support its pleading based on information and belief with “the specific facts
upon which the belief is reasonably based.” Exergen Corp., 575 F.3d at 1330-31 (finding
a pleading deficient which did not contain specific factual allegations that an individual
“decided to deliberately withhold [information] from the relevant examiner”).

The

heightened pleading standard for inequitable conduct is intended to prevent the claim
from “devolv[ing] into a magic incantation to be asserted against every patentee and its
allegation established upon a mere showing that art or information having some degree of
materiality was not disclosed.” Id. at 1331 (internal quotation marks omitted). At most
Arctic Cat alleges that Deckard knew of a test of the Vista which he believed did not
satisfy the public use standard, did not disclose the Vista to the PTO during prosecution
of the ‘220 Patent, and later brought the Vista to the PTO’s attention after litigation
regarding the Vista’s materiality commenced.

These allegations are insufficient to

demonstrate deliberate withholding of information as required by the Federal Circuit’s

- 50 -

pleading standards. Accordingly, the Court will grant Polaris’ motion and dismiss Arctic
Cat’s inequitable conduct claims.10

E.

Walker Process Fraud

Because a patent is a monopoly, a patent-holder can generally enforce its rights
under a patent without fear of antitrust liability. Simpson v. Union Oil Co., 377 U.S. 13,
24 (1964).

But under the Walker Process doctrine “[a] patentee who brings an

infringement suit may be subject to antitrust liability for the anti-competitive effects of
that suit if the alleged infringer (the antitrust plaintiff) proves . . . that the asserted patent
was obtained through knowing and willful fraud.”

Nobelpharma AB v. Implant

Innovations, Inc., 141 F.3d 1059, 1068 (Fed. Cir. 1998) (citing Walker Process Equip.,
Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 177 (1965)). To establish fraud on the
PTO, a party may assert “either a fraudulent misrepresentation or a fraudulent omission.”
Id. at 1070. The misrepresentation or omission alleged “must evidence a clear intent to
deceive the examiner and thereby cause the PTO to grant an invalid patent.” Id. With
regard to allegations based on fraudulent omissions, “there must be evidence of intent
separable from the simple fact of the omission.” Dippin’ Dots, Inc. v. Mosey, 476 F.3d
1337, 1347 (Fed. Cir. 2007).

10

Because Arctic Cat’s allegations regarding the unenforceability of the ‘125 and ‘405
Patents are based entirely on its claim of inequitable conduct that occurred during the
prosecution of the ‘220 Patent (see Am. Comp. ¶¶ 141-42), the Court will dismiss the inequitable
conduct claims with respect to all of the at-issue patents, having concluded that Arctic Cat has
not alleged inequitable conduct with respect to the ‘220 Patent.

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Here, Arctic Cat brings a claim for Walker Process fraud, based on its contention
that Polaris committed fraud on the PTO by “making false representations and/or
deliberate omissions of facts material to patentability to the Patent Office.” (Am. Compl.
¶ 145.) These omissions are the same omissions that underlie Arctic Cat’s inequitable
conduct claims, which the Court has already concluded do not adequately allege
materiality and intent. Because these allegations do not support a claim for inequitable
conduct, they are also insufficient to allege Walker Process fraud. See Dippin’ Dots,
Inc., 476 F.3d at 1346 (“A finding of inequitable conduct does not by itself suffice to
support a finding of Walker Process fraud, because inequitable conduct is a broader,
more inclusive concept than the common law fraud needed to support a Walker Process
counterclaim.

To demonstrate Walker Process fraud, a claimant must make higher

threshold showings of both materiality and intent than are required to show inequitable
conduct.” (citation and internal quotation marks omitted)).11

F.

Sham Litigation

In addition to Walker Process fraud claims, a plaintiff can also impose antitrust
liability on a patent holder through a sham litigation claim, by showing “that the
11

The parties dispute whether the Federal Circuit’s heightening of the standard required
to demonstrate inequitable conduct in Therasense, Inc. means that now a showing of inequitable
conduct is sufficient to also show Walker Process fraud. See Cornucopia Prods., LLC, 881
F. Supp. 2d at 1099 n.4 (“Therasense discusses inequitable conduct, which – before Therasense
– operated on a similar but looser standard than Walker Process fraud. Therasense, however,
raised inequitable conduct to match the standard for Walker Process claims based on
omissions.”). Whether the standards for inequitable conduct and Walker Process fraud are now
coterminous is irrelevant, as the Court has concluded that Arctic Cat has failed to adequately
allege inequitable conduct. In other words, whether Walker Process fraud requires a higher
showing of materiality and intent or the same level of materiality and intent as an inequitable
conduct claim, Arctic Cat has alleged neither.

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infringement suit was ‘a mere sham to cover what is actually nothing more than an
attempt to interfere directly with the business relationships of a competitor.’”
Nobelpharma AB, 141 F.3d at 1068 (quoting E. R.R. Presidents Conference v. Noerr
Motor Freight, Inc., 365 U.S. 127, 144 (1961)). 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.” Prof. Real Estate Investors, Inc. v. Columbia Pictures Indus.,
Inc., 508 U.S. 49, 60-61 (emphasis in original) (alteration and internal quotation marks
omitted).
Arctic Cat brings a claim for violation of the Sherman Act based on Polaris’
alleged sham litigation.

Arctic Cat alleges that Polaris’ litigation is “objectively

baseless” and “motivated by a desire to interfere with Arctic Cat’s business
relationships.”

(Am. Compl. ¶ 151.)

Elsewhere, Arctic Cat alleges that “Polaris’s

allegations that Arctic Cat has infringed any enforceable claim of any Patent in Suit are
both objectively baseless and are made with intent not to properly assert any patent
right,” and that the litigation is baseless “because no objective litigant could conclude that
Polaris’s litigation is reasonably calculated to elicit a favorable outcome.” (Id. ¶¶ 83-84.)
The Court concludes that these allegations are merely a recitation of the elements
of a sham litigation claim and do not allege any facts showing that Polaris’ lawsuit is
objectively baseless. Arctic Cat has not alleged any facts supporting a claim that no

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reasonable litigant could realistically expect success on the merits of Polaris’ claim and
therefore fails to satisfy the pleading standards.

See Simon Prop. Grp., Inc. v.

Palombaro, 682 F. Supp. 2d 508, 511 (W.D. Pa. 2010) (finding a sham litigation claim to
be inadequately pled where the counterclaim alleged only that the opposing party
“contacted the U.S. Attorney’s Office without cause and . . . filed a baseless lawsuit with
the intent of inhibiting competition”). For example, Arctic Cat has not pleaded how its
allegedly infringing device does not infringe the patent Polaris has sued upon. Cf. Reg’l
Multiple Listing Serv. of Minn., Inc. v. Am. Home Realty Network, Inc., 960 F. Supp. 2d
958, 979 (D. Minn. 2013) (finding allegations of sham litigation regarding copyrights to
be sufficient where the antitrust plaintiff alleged that defendant “did not take the
photographs over which it claims copyrights, and that it did not obtain the written
assignments of these copyrights from the photographers that are required under the
Copyright Act”). Accordingly, the Court will grant Polaris’ motion and dismiss Arctic
Cat’s sham litigation claim.

ORDER
Based on the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.

Polaris’ Motion to Dismiss [Civ. No. 13-3579, Docket No. 15] is

GRANTED in part and DENIED in part as follows:
a.

The motion is DENIED to the extent it seeks discretionary dismissal

of Arctic Cat’s claims for declaratory judgment (Counts I, II, and III).

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b.

The motion is also DENIED with respect to Arctic Cat’s claim for

breach of contract (Count IV).
c.

The motion is GRANTED with respect to Arctic Cat’s claims for

fraud (Count V), unenforceability of the ‘220 Patent (Count VI), unenforceability
of the ‘125 and ‘405 Patents (Count VII), Walker Process fraud (Count VIII), and
sham litigation (Count IX). These claims are DISMISSED with prejudice.
2.

Arctic Cat’s Motion to Dismiss or in the Alternative To Consolidate [Civ.

No. 13-3595, Docket No. 17] is GRANTED in part and DENIED in part as follows:
a.

The motion is DENIED to the extent it seeks dismissal of Polaris’

complaint.
b.

The motion is GRANTED to the extent it seeks consolidation of the

above-captioned cases.
3.

The Clerk of Court is directed to consolidate the above cases for all

purposes including pre-trial and trial proceedings before Judge John R. Tunheim and
Magistrate Judge Franklin L. Noel. As of the date of this Order, all documents will be
filed in civil case number 13-3579. The caption of civil case number 13-3579 will
remain unchanged: Arctic Cat, Inc. and Arctic Cat Sales, Inc. will remain listed as
Plaintiffs and Polaris Industries, Inc., both the Minnesota and Delaware corporations, will
remain listed as Defendants.
4.

The Clerk is DIRECTED to close civil case number 13-3595.

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5.

Within twenty-one (21) days Polaris may file its patent infringement claim

asserted in civil case number 13-3595 as a counterclaim in the consolidated case.
Nothing in this Order should be construed as prohibiting Polaris from filing additional
proper counterclaims in the consolidated case.

DATED: October 20, 2014
at Minneapolis, Minnesota.

____s/
____
JOHN R. TUNHEIM
United States District Judge

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