Polaris Industries, Inc. v. Arctic Cat Inc.

Background

Polaris Industries Inc. brought infringement actions against Arctic Cat Inc. and Arctic Cat Sales Inc. Polaris alleged that Arctic Cat’s Wildcat Trail vehicles infringed Polaris’s ’449 and ’501 patents. The ’449 patent concerns the positioning of a generally U-shaped sway bar in side-by-side off-road vehicles. The ’501 patent concerns the placement of air inlets relative to a continuously variable transmission engine in those vehicles.

Polaris moved in both cases to exclude the reasonable-royalty damages testimony of W. Christopher Bakewell under Federal Rule of Evidence 702. Bakewell used market, income, and cost valuation methods to establish baseline values for the patents and then considered the Georgia-Pacific factors, which are factors courts use when evaluating a reasonable royalty. His market analysis relied in part on agreements involving Polaris and third parties, including the North and CFMOTO agreements. His income and cost analyses considered the patents’ contribution to the accused products and the availability of non-infringing alternatives.

Legal standard

Rule 702 permits qualified expert testimony when the expert’s specialized knowledge will help the factfinder, the testimony rests on sufficient facts or data, reliable methods, and a reliable application of those methods to the case. The court has a gatekeeping duty to determine whether expert testimony is relevant and reliable. The party offering the expert testimony must establish those requirements by a greater-than-50-percent showing. Factual challenges generally affect the testimony’s weight or credibility rather than its admissibility, unless the opinion is so unsupported that it could not assist the jury.

Polaris’s challenges

Polaris first argued that Bakewell failed to connect his lump-sum royalty figure to the evidence. The court found that Bakewell supported the figure with six data points, including substitute technologies, expert opinions, the North and CFMOTO agreements, and competitive assessments. Although he did not specifically explain how he moved from the underlying evidence to the final figure in the section where he stated that figure, the court held that this issue was appropriate for cross-examination rather than exclusion.

Polaris also challenged Bakewell’s allocation of value between the two patents because Bakewell relied partly on the allocation made by Polaris’s expert, Dr. Timothy J. Nantell, even though Bakewell disagreed with that allocation. The court held that an opinion may still be grounded in sufficient facts when an expert relies on another expert’s opinion. It found no basis to exclude Bakewell’s testimony on that ground.

Polaris next argued that the North and CFMOTO agreements were not sufficiently comparable to the hypothetical license between Polaris and Arctic Cat. The court explained that the agreements were being used as a basis for Bakewell’s expert opinion, not—at that point—as evidence introduced independently at trial. It concluded that Bakewell reasonably relied on the agreements in forming his opinion. The court also declined to treat the differences identified by Polaris, including the nature of the North dispute and the parties involved, as categorical bars to admissibility. Comparability challenges generally went to the weight of the evidence.

As to the CFMOTO agreement, the court noted that it was reached during litigation after substantial discovery and a claim-construction order. The court found Bakewell’s reliance on the agreement admissible, particularly because Arctic Cat was not seeking to introduce the agreement itself into evidence. It again concluded that Polaris’s comparability arguments affected weight rather than admissibility.

Finally, Polaris argued that Bakewell improperly relied on Dr. Gregory Davis’s opinion that Arctic Cat could design around the patents without reducing performance or increasing costs. The court found that Davis supported his opinions with prior patents and explanations about possible sway-bar and air-inlet positions. Although Davis did not identify a specific design-around, the court held that he cited sufficient evidence and connected his opinions to the patents and Arctic Cat’s implementation of similar technology.

Ruling

Judge John R. Tunheim held that Bakewell’s opinions were properly supported under Rule 702 and that Polaris’s objections principally concerned the weight of the testimony, not its admissibility. The court therefore ordered:

1. Polaris’s motion to exclude Bakewell’s expert testimony in Case No. 15-4129, Docket No. 212, was DENIED. 2. Polaris’s motion to exclude Bakewell’s expert testimony in Case No. 15-4475, Docket No. 320, was DENIED.

The order was filed under seal. The court separately ordered the parties to show cause within 14 days why the order should not be unsealed and to identify any portions warranting redaction.