Delivery of spring-ordered 2021 Arctic Cats snowmobiles is in serious peril in Canada after the federal court there rejected a multi-part appeal by Cat and four Canadian Cat dealerships.
In a ruling filed in October, Canadian Federal Court Justice Yvon Roy ruled that deposits placed by customers for 2021 models did not yet constitute a sale, and therefore were not exempt from a June 2020 ruling that banned sales of full-sized Cat snowmobiles that violated a patent owned by Ski-Doo and its parent company, BRP.
The new ruling affects 732 pre-ordered, adult-sized Cat snowmobiles that were reserved by customers in Canada with a $750 deposit. Youth snowmobile sales were not affected by the ruling – which is related to the pyramid subframe beneath ProCross/ProClimb chassis Arctic Cat that the court said violated Ski-Doo’s patent for the original REV chassis.
In its appeal of the original ruling, Arctic Cat argued for a stay of the injunction judgement, saying that:
- Its competitive position in Canada would be irreparably harmed;
- Its Canadian dealers and relationship with Canadian customers would suffer permanent harm;
- Serious reputational harm would follow; and
- Independent Cat dealers in Canada would suffer irreparable harm to their businesses.
With that in mind, Cat asked that it instead pay a “reasonable royalty” instead of not being able to deliver the pre-ordered/reserved 2021 snowmobiles. The dealers in the case were Universe Satellite Sales, Country Corners Rent-All, Valley Moto Sport Kelowna and Morin Sports.
In the ruling, the judge stated that the deposits do not constitute a sale. He said the down deposits were “pre-orders which can be cancelled by customers, with their deposit being paid back. In effect, ‘pre-ordered’ snowmobile sales occur, are complete, only after the delivery is made by the consumer (with warranty documentation finalized).”
He then turned to testimonial evidence.
“As a matter of fact, the [Arctic Cat] Sales Director confirmed in cross-examination that the 732 pre-ordered adult snowmobiles had not been built as of the date of the injunction coming into force. He conceded during cross-examination that title to the snowmobile does not pass from AC to its dealers before final payment has been made and that occurs only once the snowmobile has been manufactured and the dealer is notified that the snowmobile is ready for delivery. The title would pass to the consumer only later.”
Patent Is Expiring, Other Tidbits
Aside from the main ruling, the court paperwork includes many interesting facts not previously written about.
Perhaps most notably, related to the “irreparable harm,” the court pointed out that the Ski-Doo patent in question actually expires in June of 2021.
“As a matter of fact, these [pre-ordered, 2021] snowmobiles can be sold once the 264 Parent expires, in less than one year from now: they will not have been destroyed,” the ruling states. In fact, the ruling states that if the injunction on the pre-sold 2021 models was not enforced, due to the pending expiration of the patent, BRP would in essence not benefit from the original ruling.
Also interesting: The original June language in the injunction said the court provided a “permanent injunction” on Arctic Cat and its officers, directors, employees, distributors and dealers from “selling or offering for sale, making, using or distributing in Canada any snowmobile or component thereof” or “inducing and procuring the sale, the offer for sale, the fabrication, the construction, the use or the distribution in Canada of any snowmobile or component thereof” that violates the BRP patent, effective on July 6, 2020.
In this most recent paperwork, however, BRP is quoted as saying it isn’t going after the full extent of the ruling.
“BRP has already informed Arctic Cat and the Dealers that it would not enforce its injunction on used snowmobiles and would be open to accept a reasonable royalty on the sale of used snowmobiles, as it has already suffered the harm which is to be prevented by the injunction, by the first sale of those snowmobiles to the end customer. BRP’s correspondence to the Dealers expressly stated that it was enforcing the injunction against new snowmobiles, never previously sold to an end-user.”
Arctic Cat has already been ordered to pay $2.83 million for 21,000 snowmobiles that violated the patent between model years 2007 and 2014, with another court ruling expected to determine costs post 2014.
We reached out to Arctic Cat/Textron seeking comment on the ruling and were told that “an official communication would be coming soon.”
Separately, a lawsuit by Arctic Cat against BRP related to personal watercraft patent infringement in which Cat received a big judgement recently received a 40 day extension for BRP to appeal. Historically, when powersports manufacturers go to court against one another, there have been trades made to settle disputes. Only time will tell if this is one of those instances.
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