Bombardier Recreational Products, Inc v. Arctic Cat, Inc

U.S. District Court, District of Minnesota November 20, 2017

Trial Court Opinion

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA

BOMBARDIER RECREATIONAL Civil No. 12-2706 (JRT/LIB)
PRODUCTS, INC., and BRP U.S. INC.,

Plaintiffs, MEMORANDUM OPINION
AND ORDER ON ARCTIC CAT’S
v. EQUITABLE DEFENSES

ARCTIC CAT INC., and ARCTIC CAT
SALES INC.,

Defendants.

Harry C. Marcus, LOCKE LORD LLP, Three World Financial Center,
New York, NY 10281, and Kevin D. Conneely and Ruth A. Rivard,
STINSON LEONARD STREET LLP, 50 South Sixth Street, Suite 2600,
Minneapolis, MN 55402, for plaintiffs.

Aaron A. Myers, Diane L. Peterson, and Niall A. MacLeod, KUTAK
ROCK LLP, 60 South Sixth Street, Suite 3400, Minneapolis, MN 55402,
for defendants.

BACKGROUND
Plaintiffs Bombardier Recreational Products, Inc. and BRP U.S. Inc. (collectively
“BRP”) brought this action against Arctic Cat Inc. and Arctic Cat Sales Inc. (collectively
“Arctic Cat”), alleging patent infringement. Arctic Cat asserts four equitable defenses
against BRP: equitable estoppel, laches, waiver, and unclean hands. (Defs.’ Answer,
Affirmative Defenses, and Countercls. to Am. Compl., Defenses to Pls.’ Compl.
(“Answer”) ¶¶ 10-12, Mar. 15, 2012, Docket No. 29.) The Court denied BRP’s motion in
limine to exclude evidence of Arctic Cat’s equitable defenses at trial, but the Court
expressed concern “that Arctic Cat lacks sufficient evidence to support a finding that it
will prevail on its equitable defenses.” (Mem. Op. & Order at 5, Nov. 11, 2017, Docket
No. 990.) The Court ordered Arctic Cat to submit a proffer showing that it could

“present at trial sufficient evidence to support a finding that one or more of the asserted
claims of the patents-in-suit are unenforceable” due to equitable estoppel, laches, waiver,
or unclean hands.” (Id. at 11; Defs.’ Proffer, Nov. 13, 2017, Docket No. 991.) In
response, BRP filed a motion for judgment as a matter of law dismissing Arctic Cat’s
equitable defenses. (Pls.’ Mot. for J. as a Matter of Law, Nov. 14, 2017, Docket No.
1006.)

Arctic Cat has not shown that it can present sufficient evidence at trial to support a
finding that one or more of the asserted claims of the patents-in-suit are unenforceable
due to equitable estoppel, waiver, or unclean hands. The Court will therefore grant BRP
summary judgment and dismiss those equitable defenses. In the event, however, that
BRP prevails at trial and seeks a permanent injunction, the Court will consider Arctic

Cat’s laches defense then.

DISCUSSION
I. STANDARD OF REVIEW
Federal Rule of Civil Procedure 56(f) empowers the Court to grant summary
judgment independent of a motion. It provides that “the court may . . . consider summary
judgment on its own after identifying for the parties material facts that may not be
genuinely in dispute.” Fed. R. Civ. P. 56(f). “Federal district courts have power to grant

summary judgment sua sponte when the losing party is given sufficient advance notice
and an adequate opportunity to submit evidence in opposition.” Barkley, Inc. v. Gabriel
Bros., Inc.,

829 F.3d 1030, 1041

 (8th Cir. 2016) (quoting Chrysler Credit Corp. v. Cathey,

977 F.2d 447, 449

 (8th Cir. 1992) (per curiam)).                          


I.   EQUITABLE ESTOPPEL                                                   
To prove that a patent is unenforceable due to equitable estoppel, an accused 
infringer must show (1) misleading conduct, (2) reliance on that conduct, and (3) material 
prejudice.  A.C. Aukerman Co. v. R.L. Chaides Construction Co.,

960 F.2d 1020, 1028

 
(Fed.  Cir.  1992)  (en  banc),  abrogated  on  other  grounds  by  SCA  Hygiene  Prod. 
Aktiebolag v. First Quality Baby Prod., LLC,

137 S. Ct. 954, 967

 (2017).   
Arctic Cat maintains that BRP unreasonably and inexcusably delayed filing this 

action for four years, and that BRP never notified Arctic Cat of its infringement.  But 
silence can only constitute “misleading conduct” when there is an obligation to speak.  
Aukerman,

960 F.2d at 1028

.  Arctic Cat points to a 2003 letter from BRP to Arctic Cat 
notifying  Arctic  Cat  of  BRP’s  pending  patent  applications,  but  pre-issuance  activity 
cannot give rise to equitable estoppel.  Radio Sys. Corp. v. Lalor,

709 F.3d 1124, 1131

 

(Fed. Cir. 2013).  Moreover, Arctic Cat has not presented evidence of any reliance on 
BRP’s delay – e.g., a change in position that Arctic Cat would not have taken but for 
BRP’s delay.  An accused infringer’s reliance based on its subjective belief of invalidity 
does not suffice for purposes of inequitable conduct.  Hall v. Aqua Queen Mfg., Inc.,

93 F.3d 1548

,  1558  (Fed.  Cir.  1996).    The  Court  will  therefore  dismiss  Arctic  Cat’s 

equitable-estoppel defense.                                               
II.  LACHES                                                               
Laches no longer bars damages in patent cases.  SCA Hygiene,

137 S. Ct. at 967

.  

Rather, laches may apply to equitable relief only, such as a permanent injunction.  See

id.

  
To prove laches, an accused infringer must show (1) unreasonable and inexcusable delay 
in filing suit, and (2) that the delay prejudiced the accused infringer.  Aukerman,

960 F.2d at 1032

.  The Court will permit Arctic Cat to assert its laches defense post-trial if BRP 
prevails on the merits and seeks injunctive relief.  Moreover, BRP has stated that it will 
not object to Arctic Cat arguing “undue-delay-type facts” on any “post-trial injunctive 

relief that BRP may ultimately seek.”  (Pls.’ Mem. in Supp. of Mot. for J. as a Matter of 
Law at 4, Nov. 15, 2017, Docket No. 1008.)                                

III.  WAIVER                                                              
Waiver is a voluntary and intentional relinquishment or abandonment of a known 
right.  Haghighi v. Russian-Am. Broad. Co.,

173 F.3d 1086, 1088

 (8th Cir. 1999).  Arctic 
Cat invokes waiver only to bar BRP from seeking damages for post-model-year 2013 
snowmobiles (Defs.’ Proffer at 7-8), which the Court has already held may not be sought 

at trial (Mem. Op. & Order at 4-5).  Because Arctic Cat does not assert waiver as a 
defense to any BRP’s rights that BRP will assert at trial, the Court will dismiss Arctic 
Cat’s  waiver  defense.    But  Arctic  Cat  may  argue  post-trial  that  BRP’s  right  to 
supplemental damages has been waived, which is a higher standard than the lack of 
diligence  that  the  Court  found  in  denying  BRP’s  request  to  amend  its  infringement 

contentions.  (See Order at 27-29, Oct. 14, 2017, Docket No. 555.)        
IV.  UNCLEAN HANDS1                                                       
In  patent  cases,  unclean  hands  applies  only  in  “extreme  circumstances.”  

Erfindergemeinschaft UroPep GbR v. Eli Lilly & Co., No. 15-1202,

2017 WL 275465

, at 
*7 (E.D. Tex. Jan. 20, 2017) (Bryson, J.); see Therasense, Inc. v. Becton, Dickinson & 
Co.,

649 F.3d 1276, 1287

 (Fed. Cir. 2011).  Such circumstances are those that “shock the 
moral sensibilities of the judge” or are “offensive to the dictates of natural justice.”  iFLY 
Holdings LLC v. Indoor Skydiving Germany GmbH, No. 14-1080,

2016 WL 3675136

, at 
*1 (E.D. Tex. Mar. 25, 2016).  The accused infringer bears the burden of proving unclean 

hands by clear and convincing evidence.  In re Omeprazole Patent Litig.,

483 F.3d 1364, 1374

 (Fed. Cir. 2007).                                                    
Arctic Cat asserts that BRP has unclean hands because BRP has “engaged in a 
course of conduct where it has attempted to . . . patent the prior art, patent subject matter 
not eligible for patent protection, fail to name proper inventors where the inventors are 

not BRP employees, and make material misrepresentations and omissions to and from the 
U.S. Patent Office.”  (Proffer at 8.)  But the specific factual allegations that Arctic Cat 
makes – even assuming that Arctic Cat could prove those facts by clear and convincing 
evidence – do not constitute extreme circumstances that would justify prohibiting BRP 
from asserting its patent rights for uncleans hands.  The Court will therefore dismiss 

Arctic Cat’s unclean-hands defense.                                       


1 Counsel for Arctic Cat represented to the Court that Arctic Cat’s unclean-hands defense 
did not need to go to the jury for an advisory verdict.  The Court is unclear whether counsel’s 
statements constituted a voluntary dismissal of its unclean-hands defense.

ORDER

Based on the foregoing, and all the files, records, and proceedings herein, IT IS 

HEREBY ORDERED that:                                                      
1.   Defendants’  affirmative  defense  of  equitable  estoppel  contained  in 
Defendants’ Tenth Affirmative Defense of Defendants’ Answer, Affirmative Defenses 
and  Counterclaims  to  Amended  Complaint  [Docket  No.  29]  is  DISMISSED  with 
prejudice.                                                                
2.   Defendants’ Eleventh and Twelfth Affirmative Defenses of Defendants’ 

Answer, Affirmative Defenses and Counterclaims to Amended Complaint [Docket No. 
29] are DISMISSED with prejudice.                                         
3.   Plaintiffs’ Motion for Judgment as a Matter of Law [Docket No. 1006] is 
DENIED as moot.                                                           

DATED:  November 20, 2017       _________s/John R. Tunheim_________       
at Minneapolis, Minnesota.             JOHN R. TUNHEIM                    
                                      Chief Judge                    
                                United States District Court