Case 1:13-cv-01063-RWR Document 56 Filed 09/30/13 Page 1 of 26

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA MICROSOFT CORPORATION, Plaintiff, v. UNITED STATES OF AMERICA, et al. Defendants. Case No. 13-1063 (RWR)

MICROSOFT CORPORATIONS OPPOSITION TO GOVERNMENT DEFENDANTS MOTION TO DISMISS

Joseph R. Guerra (D.C. Bar No. 418532) Paul J. Zidlicky (D.C. Bar No. 450196) Brian R. Nester (D.C. Bar No. 460225) SIDLEY AUSTIN LLP 1501 K Street, N.W. Washington, D.C. 20005 Telephone: 202-736-8000 Facsimile: 202-736-8711

Richard A. Cederoth SIDLEY AUSTIN LLP 1 S. Dearborn Street Chicago, Illinois 60603 Telephone: 312-853-7000 Facsimile: 312-853-7036

Counsel for Plaintiff Microsoft Corporation

September 30, 2013

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TABLE OF CONTENTS INTRODUCTION ...........................................................................................................................1 BACKGROUND .............................................................................................................................3 ARGUMENT ...................................................................................................................................4 I. THIS COURT HAS JURISDICTION UNDER THE APA. ..........................................6 A. B. II. The Court Has Jurisdiction Under The APA To Require CBP To Enforce The Exclusion Order..............................................................................................6 Judicial Resolution Of This Case Is Not Barred By The Doctrine Of Primary Jurisdiction. ..........................................................................................................13

THIS COURT HAS AUTHORITY TO REVIEW MICROSOFTS REQUEST FOR DECLARATORY JUDGMENT THAT CBPS GRANT OF A TRANSITION PERIOD WAS UNLAWFUL..........................................................................................17

CONCLUSION ............................................................................................................................20

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TABLE OF AUTHORITIES Page(s) CASES Am. Assn of Cruise Passengers v. Cunard Line, Ltd., 31 F.3d 1184 (D.C. Cir. 1994) .................................................................................................17 Am. Natl Ins. Co. v. FDIC, 642 F.3d 1137 (D.C. Cir. 2011) .................................................................................................5 Am. Rd. & Transp. Builders Assn v. EPA, 865 F. Supp. 2d 72 (D.D.C. 2012) .............................................................................................9 Am. Trading Transp. Co. v. United States, 841 F.2d 421 (D.C. Cir. 1988) ...........................................................................................18, 19 Amador County v. Salazar, 640 F.3d 373 (D.C. Circ. 2011) .............................................................................................6, 7 American Tel. & Tel. Co. v. FCC, 978 F.2d 727 (D.C. Cir. 1992) .................................................................................................15 APCC Servs., Inc. v. Worldcom, Inc., 305 F. Supp. 2d 1 (D.D.C. 2001) .......................................................................................13, 14 Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...................................................................................................................4 Assiniboine & Sioux Tribes of the Fort Peck Indian Reservation v. Norton, 527 F. Supp. 2d 130 (D.D.C. 2007) .........................................................................................13 Atlantic Richfield Co. v. United States, 774 F.2d 1193 (D.C. Cir. 1985) ...............................................................................................18 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ............................................................................4 Bowen v. Massachusetts, 487 U.S. 879 (1988) ...............................................................................................................6, 7 Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667 (1986) ...................................................................................................................6 Bryant v. Pepco, 730 F. Supp. 2d 25 (D.D.C. 2010) .............................................................................................4 Cook v. FDA, 2013 WL 3799987 (D.C. Cir. July 23, 2013) ................................................................3, 10, 11

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Corning Gilbert, Inc. v. United States, 896 F. Supp. 2d 1281 (CIT 2013) ............................................................................................11 Delta Air Lines, Inc. v. Export-Import Bank, 718 F.3d 974 (D.C. Cir. 2013) .................................................................................................10 Eaton v. United States, 395 F. Supp. 2d 1314 (C.I.T. 2005), vacated on other grounds, Eaton Corp. v. United States ..............................................................................................................................2, 12, 15 Fornaro v. James, 416 F.3d 63 (D.C. Cir. 2005) .............................................................................................1, 8, 9 Garcia v. Vilsack, 563 F.3d 519 (D.C. Cir. 2009) ...................................................................................................6 Golden Holiday Tours v. CAB, 531 F.2d 624 (D.C. Cir. 1976) .....................................................19 Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249 (D.C. Cir. 2005) .................................................................................................5 Lee v. United States, 570 F. Supp. 2d 142 (D.D.C. 2008) ...........................................................................................5 National Wrestling Coaches Assn v. Dept. of Educ., 366 F.3d 930 (D.C. Cir. 2004) .................................................................................................12 Norton v. Southern Utah Wilderness Alliance, 542 U.S. 55 (2004) ...................................................................................................................11 Owens v. District of Columbia, 631 F. Supp. 2d 48 (D.D.C. 2009) .............................................................................................5 Reiter v. Cooper, 507 U.S. 258 (1993) .................................................................................................................17 Salmon Spawning & Recovery Alliance v. United States, 532 F.3d 1338 (Fed. Cir. 2008), opinion withdrawn ...............................................................10 Tooley v. Napolitano, 556 F.3d 836 (D.C. Cir. 2009) .....................................................................5 Total Telecommunications Services, Inc. v. American Tel. and Tel. Co., 919 F. Supp. 472 (D.C. Cir. 1996) .......................................................................................................................16 Washington Legal Foundation v. Alexander, 984 F.2d 483 (D.C. Cir. 1993) .................................................................................................12 Weinstein v. Bradford, 423 U.S. 147 (1975)............................................................................18, 19

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STATUTES 5 U.S.C. 702 ..............................................................................................................................6, 8 19 U.S.C. 1337 .................................................................................................................... passim OTHER AUTHORITIES 19 C.F.R. 113.62 .........................................................................................................................14 19 C.F.R. 210.75 .....................................................................................................................8, 14 19 C.F.R. 210.76 .....................................................................................................................8, 15

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INTRODUCTION In their Motion to Dismiss (Motion), the government Defendants (CBP) make the same arguments that they raised in their Opposition to Microsofts Motion for Preliminary Injunction. Microsoft has already refuted these arguments once. See Microsoft Corporations Reply Brief in Support of Its Motion for Preliminary Injunction at 1-2, 3-11 (Aug. 14, 2013) (Filed Under Seal) (Microsoft Reply Br.). Yet CBP simply repeats its jurisdictional claims a second time, without even acknowledging, much less addressing, most of the defects Microsoft previously identified. Thus, CBP once again fails to acknowledge the strong presumption favoring judicial review of agency action under the Administrative Procedure Act (APA), and CBPs burden to identify clear and convincing evidence that Congress had a contrary intent with respect to CBP decisions permitting imports. CBP once again claims that remedies before the International Trade Commission (ITC) foreclose judicial review of its import-permitting decisions, yet CBP nowhere addresses, much less refutes, Microsofts showing that the ITC has no authority to review CBPs decision or to provide the full relief Microsoft seeks. Indeed, CBP once again fails to cite any case that even suggests that APA review of one agencys action is foreclosed by a remedy administered by a different agencyan agency that has no authority to consider the propriety of the first agencys actions or provide the full relief sought in Court. Instead, CBP again relies on Fornaro v. James, 416 F.3d 63 (D.C. Cir. 2005), a case it describes as strikingly similar to this one. Motion at 9. Yet, CBP does not refute Microsofts showing that the underlying statute in that case created an exclusive remedial schemea showing CBP does not and cannot make with respect to 337. Indeed, it is telling that, in its proposed amicus brief, the ITC does not endorse CBPs claims that the administrative remedies the ITC has adopted to implement 337 foreclose judicial review of CBPs decisions in this case.

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The primary jurisdiction arguments raised by CBP and the ITC are equally groundless. In fact, the ITC confirms that the scope of its prior ruling can be resolved based on preclusion principles, ITC Br. at 3precisely the kind of issues that courts routinely decide, and that require no specialized patent expertise. In Eaton Corp. v. United States, 395 F. Supp. 2d 1314 (C.I.T. 2005), vacated on other grounds, Eaton Corp. v. United States, Fed. Cir. Dkt. No. 051565 (Oct. 28, 2005) (Attacment B to Defendants Opposition to Microsofts Motion for a Preliminary Injunction), the ITC submitted a letter explaining the scope of its prior decision to the Court of International Trade (CIT). Instead of taking that same helpful approach here, however, the ITC argues that Microsoft should be subjected to a 12 to 15 month delay (during which infringing Motorola products can enter the United States with impunity) and forced to relitigate before the ITC an issue that Microsoft already won. The ITC claims such delay is reasonable, notwithstanding the facts that (1) it cannot address CBPs conduct or its refusal to enforce the exclusion order, (2) it cannot provide Microsoft the full relief it seeks in this proceeding, and (3) it acknowledges that patented technology is subject to rapid change. ITC Br. at 2. In the end, the various arguments that CBP and the ITC advance cannot disguise, or justify, the extraordinary immunity from oversight asserted by CBP. If accepted, these arguments would lead to the conclusion that no onenot this Court, the ITC, or the CITcan review CBPs decisions refusing to enforce an exclusion order. CBP thus contends that a statute that requires CBP to enforce such orders, see id. 1337(d)(1) (CBP shall . . . refuse . . . entry), somehow grants CBP unreviewable discretion to allow the import of infringing products. The D.C. Circuit recently rejected a materially identical argument, holding that there was jurisdiction to review FDAs refusal to exclude imported non-complying drugs because the governing statute

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included clear guidelines for FDA to follow. See Cook v. FDA, 2013 WL 3799987, at *5 (D.C. Cir. July 23, 2013) (agreeing that the ordinary meaning of shall is must). Here, too, CBPs decisions allowing the import of Motorolas infringing products in violation of the mandatory requirements of the Exclusion Order and 19 U.S.C. 1337 are subject to judicial review. CBPs Motion should be denied. BACKGROUND CBPs Motion largely ignores the allegations set forth in Microsofts Complaint, which, at this stage, are accepted as true and viewed in the light most favorable to Microsoft. In this action, Microsoft seeks to compel CBP to comply with its mandatory statutory obligation to exclude from import articles that the ITC ruled violate Microsofts patent rights under federal law. Complaint (Compl.) 3. As a remedy for Motorolas violation of Microsofts patent rights, the ITC issued an Exclusion Order that mandates the exclusion from entry into the United States of Motorola devices that infringe Microsofts patent rights. Id. 4. CBP has violated its mandatory duty by allowing the importation of infringing Motorola devices. Id. CBP has allowed Motorola to re-litigate in secret issues that Motorola lost before the ITC, thereby granting Motorola precisely the relief that the [ITC] expressly refused to grant after full, fair and open litigation. Id. First, Motorola asked the ITC to grant it a transition period during which it would continue to import infringing devices while it tried to develop a non-infringing alternative. Compl. 5. Although the ITC rejected Motorolas request for a transition period, CBP granted Motorola relief that the ITC had expressly denied. Id. Second, Motorola asked the ITC to limit the Exclusion Order so that it would not bar importation of phones that provide the infringing calendar function using Google servers and synchronization components. Id. 6. Although

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ITC denied Motorolas request to narrow the Exclusion Order to allow the import of such devices, CBP issued rulings that granted Motorola the same relief that the ITC had denied. Id. Prior to seeking relief in this Court, Microsoft requested that CBP revoke its April 25, 2013 ruling (April 25 Ruling) which allowed the import of Motorola devices in violation of the Exclusion Order. Id. The basis of the April 25 Ruling was that Motorola had redesigned its mobile phones so that they no longer included a calendar application that performed the step of generating email requests. In its revocation request, Microsoft showed that this rationale was demonstrably wrong because Motorolas redesigned devices still included a calendar application that generated e-mail meeting requests through the use of Google servers. Id. 69. In response, CBP issued a ruling on June 24, 2013 (June 24 Ruling) that nowhere disputes Microsofts showing that Motorolas redesigned products continue to infringe Microsofts patent rights because they still generate e-mail meeting requests. Id. 72. The June 24 Ruling nevertheless refuses to revoke CBPs April 25 Ruling and allows Motorola to continue to import infringing devices. Id. 73-78. As a result of these rulings, CBP is violating its mandatory obligations by allowing Motorola to import infringing products in violation of the Exclusion Order and 19 U.S.C. 1337. ARGUMENT The standards governing motions to dismiss under Federal Rule of Civil Procedure 12(b)(1) and 12(b)(6) are well established. A motion to dismiss should be denied if the plaintiff has alleged facts to state a claim to relief that is plausible on its face. Bryant v. Pepco, 730 F. Supp. 2d 25, 28 (D.D.C. 2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). All material factual allegations in the Complaint are accepted as true and construed in favor of the plaintiff. See Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). As this Court has explained, [i]n passing on a motion to dismiss, whether on the ground of lack of jurisdiction over the subject 4

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matter or for failure to state a cause of action, the allegations of the complaint should be construed favorably to the pleader. Lee v. United States, 570 F. Supp. 2d 142, 146 (D.D.C. 2008) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)); accord Am. Natl Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011). So long as the pleadings suggest a plausiblescenario to show that the pleader is entitled to relief, a court may not dismiss. Owens v. District of Columbia, 631 F. Supp. 2d 48, 53 (D.D.C. 2009) (quoting Tooley v. Napolitano, 556 F.3d 836, 839 (D.C. Cir. 2009)). And although the district court may consider materials outside the pleadings in deciding whether to grant a motion to dismiss for lack of jurisdiction, . . . the court must still accept all of the factual allegations in [the] complaint as true. Jerome Stevens Pharms., Inc. v. FDA, 402 F.3d 1249, 1254 (D.C. Cir. 2005). Application of these standards compels the conclusion that CBPs Motion should be denied. The APA authorizes the Court to review CBPs rulings that allow import of infringing Motorola devices and CBPs failure to recall such Motorola products already imported into the United States. See Compl. 19 (citing 5 U.S.C. 551(13)). Microsoft has suffered legal wrong and has been adversely affected and aggrieved by agency action through CBPs refusal to enforce Microsofts Exclusion Order issued by ITC pursuant to 19 U.S.C. 1337. Id. 80. Contrary to CBPs arguments, no statute or regulation precludes judicial review of CBPs conduct, and enforcement of the Exclusion Order is not committed to CBPs discretion by law. Id. 81. Rather, Section 337 and the Exclusion Order impose mandatory obligations that CBP has violated through (i) the grant of an unauthorized transition period, (ii) the April 25 Ruling and June 24 Ruling, which allow the import of infringing Motorola articles, and (iii) the refusal to recall infringing products that CBP has allowed into the United States. Id. 82-85. As a

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result, the Court has jurisdiction under the APA to set aside CBPs rulings and to compel CBP to comply with its obligations under Section 337 and the Exclusion Order. I. THIS COURT HAS JURISDICTION UNDER THE APA. A. The Court Has Jurisdiction Under The APA To Require CBP To Enforce The Exclusion Order.

As set forth fully in Microsofts Reply in Support of Preliminary Injunction, the APA provides that a person suffering legal wrong because of agency action, 5 U.S.C. 702, may obtain judicial review of any [a]gency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court. Id. 704 (emphasis added). There is a strong presumption that Congress intends judicial review of administrative action. Bowen v. Mich. Acad. of Family Physicians, 476 U.S. 667, 670 (1986). Accordingly, the APAs limitations on review must be construed narrowly. Amador County v. Salazar, 640 F.3d 373, 379-80 (D.C. Cir. 2011). Indeed, the Supreme Court has stressed that 704s adequate remedy exception should not be construed to defeat the [APAs] central purpose of providing a broad spectrum of judicial review of agency action. Bowen v. Massachusetts, 487 U.S. 879, 903 (1988). To overcome the strong presumption of reviewability, therefore, a court must find clear and convincing evidence of a contrary legislative intent, Amador County, 640 F.3d at 380 (quoting Mich. Acad. of Family Physicians, 476 U.S. at 67172) (internal quotation marks omitted; emphasis added), such as where statutes . . . defined the specific procedures to be followed in reviewing a particular agencys action, and an APA action would duplicate the previously established special statutory procedures relating to specific agencies, Bowen, 487 U.S. at 903; see also Garcia v. Vilsack, 563 F.3d 519, 523 (D.C. Cir. 2009) (requiring a showing of clear and convincing evidence that Congress intended an alternative remedy to restrict access to judicial review under the APA).

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These governing principles foreclose CBPs jurisdictional arguments. Microsoft has alleged that it has suffered legal harm because CBPs April 25 Ruling and June 24 Ruling are final agency action that violates CBPs mandatory obligation to enforce the Exclusion Order issued by the ITC. Compl. 79-87. As a result, CBP has permitted (and is permitting) the import of Motorola devices that infringe Microsofts patent rights in violation of the Exclusion Order and CBPs statutory obligations under 19 U.S.C. 1337. Compl. 88-95, 96-103, 104109. In response, CBP notes that Congress provided for judicial review of ITC decisions under 337, and authorized suits by importers to challenge CBP decisions to exclude products. Motion at 7. But these provisions do not divest this Court of jurisdiction here. Microsoft does not challenge any ITC decision, nor does it challenge a decision by CBP to exclude products. Because Congress has not defined the specific procedures to be followed in reviewing a CBP decision that permits imports, this APA suit cannot duplicate the previously established special statutory procedures relating to such CBP decisions. Bowen, 487 U.S. at 903. And it is well established . . . that the existence of a judicial review provision covering certain actions under a statute does not preclude judicial review of other actions under the same statute. Amador County, 640 F.3d at 381. Undaunted, CBP argues that APA review is barred because Microsoft can seek an enforcement order from the ITC and then obtain review of the ITCs decision in the Federal Circuit. Motion at 7-9. This claim fails at the outset, however, because no statute defines the ITCs administrative remedies as specific procedures to be followed in reviewing a [CBP] action. Bowen, 487 U.S. at 903. The mere fact that these remedies are a permissible

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implementation of 337 is not evidence that Congress intended such remedies to be eclusive or to foreclose judicial review under the APA of CBP decisions permitting imports. In addition, CBPs argument rests on an inaccurate portrayal of the ITCs regulations, which do not provide for any review of CBPs decision or authorize the ITC to compel CBP to demand the return of items improperly admitted. First, the informal enforcement proceedings defendants cite are irrelevant. Id. at 8. They can be initiated only by the ITC, not Microsoft. Compare 19 C.F.R. 210.75(a) (informal proceedings may be conducted by the [ITC]) with id. 210.75(b) (ITC may institute formal enforcement proceedings upon the filing by the complainant in the original investigation . . . of a complaint setting forth alleged violations of any exclusion order). Second, formal proceedings would involve de novo litigation against Motorola, including full discovery to develop a new factual record. 19 C.F.R. 210.75, 210.76. CBP would not be a party to these proceedings, and the ITC would not review CBPs rulings or the propriety of the procedures CBP used to render them. Id. Nor could the ITC require CBP to demand the return of articles that CBP improperly admitted. See id. 210.75(b)(6). Thus, CBP claims that a regulation promulgated by the ITCthat does not empower the ITC to review CBP decisions or to compel CBP to order the recall of products that were improperly admitted under the April 25 Ruling and June 24 Rulingprovides clear and convincing evidence that Congress intended to foreclose APA review of CBP decisions allowing imports. None of CBPs authorities supports this claim. CBP argues that Fornaro v. James, 416 F.3d 63 (D.C. Cir. 2005), is strikingly similar to this case. Motion at 9. But Fornaro did not even turn on 704s adequate remedy provision. Instead, the D.C. Circuit ruled that 702 of the APA did not waive sovereign immunity for a challenge to an Office of Personnel Management (OPM) benefits policy

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because another statute, the Civil Service Reform Act (CSRA), barred the relief sought. See Fornaro, 416 F.3d at 66 (quoting 702s proviso that the APA confers no authority to grant relief if any other statute . . . expressly or impliedly forbids the relief which is sought). The Court stressed the exclusivity of the remedial and review provisions of the CSRA, which authorized OPM to adjudicate all claims for benefits, and provided for review of OPM decisions, first, by the Merit System Protection Board, and then by the Federal Circuit. Id. at 66-68. Because this statutory regime was exclusive, it could not be supplemented by the recognition of additional rights to judicial review having their sources outside of the CSRA. Id. at 66 (emphasis added). Here, by contrast, no opinions from the Supreme Court [or the D.C. Circuit] make clear that the ITC regulations CBP cites are exclusive, and may not be supplemented by an APA suit. Because the ITC has no authority to review CBP decisions, Microsoft is not seeking relief that is the sole province of the ITC, Motion at 11, and this suit cannot erode the primacy, or fractur[e] the unifying authority, of the ITC with respect to CBP decisions, id. at 10 (quoting Fornaro, 413 F.3d at 69). Nor can this suit undermine the primacy of the Federal Circuit. Id. (quoting Fornaro, 413 F.3d at 69). Because the CIT and the ITC have no authority to review CBP decisions permitting imports, the Federal Circuit has no authority to review such CBP decisions. Thus, the statutory and regulatory provisions that channel[] review of CIT and ITC decisions to the Federal Circuit, Motion at 6, cannot eliminate APA review of CBP importpermitting decisions. By contrast, in the decisions that CBP cites, APA challenges were barred because the plaintiff could challenge in the court of appeals the decisions they sought to challenge in District Court. See Am. Rd. & Transp. Builders Assn v. EPA, 865 F. Supp. 2d 72, 81 (D.D.C. 2012) (statute provided for review of EPA action in the court of appeals, and

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plaintiffs failure to follow those procedures did not render them inadequate). Here, Microsoft cannot obtain review of CBPs rulings in the CIT, the ITC or in the Federal Circuit. CBP seeks to patch this gaping hole in its adequate remedy argument by raising an even more flawed committed to agency discretion by law argument. Motion at 16-19. This proviso in 701(a) is a very narrow exception to the general rule of reviewability, and applies only in those rare instances where statutes are drawn in such broad terms that in a given case there is no law to apply. Cook, 2013 WL 3799987 at *5 (internal quotation marks omitted). This exception does not apply where a statute imposes mandatory obligations on [an] agency. Delta Air Lines, Inc. v. Export-Import Bank of the United States, 718 F.3d 974, 977 (D.C. Cir. 2013) (citing Amador County, 640 F.3d at 381) (emphasis added). For example, in Cook, the D.C. Circuit explained that this narrow exception did not apply to FDAs failure to refuse admission into the United States of shipments of misbranded and unapproved drugs because the governing statute set forth clear statutory guidelines for the agency to follow in exercising its enforcement powers. 2013 WL 3799987 at *8. That is the exact situation here, where the statute provides that CBP shall . . . refuse such entry to products subject to an exclusion order. 19 U.S.C. 1337(d)(1) (emphasis added). Thus, contrary to CBPs assertion that this case lacks the legislative direction in the statutory scheme, Motion at 19 (internal quotation marks omitted), the statutory scheme in this case is materially identical to the one in Cook, and therefore, as in Cook, the argument that the agency exercised unreviewable agency discretion should be rejected. See 2013 WL 3799987 at *5-*7 (statute providing that imported drugs violating U.S. standards shall be refused admission imposed a mandatory duty on FDA) (emphasis added).1

CBPs cases, Motion at 16-17, do not show otherwise. None establishes that CBP has unreviewable discretion to decline to enforce an exclusion order. In Salmon Spawning & Recovery Alliance v. United States, 532 F.3d 1338

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Nor does this case involve a discretionary action that CBP has unlawfully withheld. Motion at 16-17. Microsoft is challenging express rulings, including a final order denying its revocation request. As the Supreme Court explained in Norton v. Southern Utah Wilderness Alliance, 542 U.S. 55 (2004), [a] failure to act is not the same thing as a denial. The latter is the agencys act of saying no to a request; the former is simply the omission of an action without formally rejecting a request. Id. at 63. CBPs June 24 Ruling said no to [Microsofts revocation] request, and is thus an order, see id. at 62, subject to APA review. As Cook makes clear, moreover, once this Court rules that CBPs reasons for not complying with its mandatory duty to refuse entry are invalid, it can enjoin CBP to refuse entry and to require redelivery of items improperly admitted. See Exh. Q to Pl. Reply Mem. in Support of Preliminary Injunction (permanently enjoining FDA from permitting the entry of non-compliant drugs and ordering it to recall admitted drugs).2 CBP claims that Cook is distinguishable because CBP was faced with importations of new merchandise that did not exist at the time of the ITCs exclusion order. Motion at 19. The whole premise of CBPs June 24 Ruling, however, was that the relevant features of the redesign were present on the accused devices at the time of the ITC Investigation. June 24 Ruling at 11. Moreover, what did exist at the time CBP acted was an ITC ruling rejecting the premise of Motorolas re-design claim. Motorola had asked the ITC to limit the scope of its
(Fed. Cir. 2008), opinion withdrawn and replaced 550 F.3d 1121 (Fed. Cir. 2008), the court held that enforcement decisions under the Endangered Species Act were unreviewable because provision at issue made clear the discretionary nature of the defendants enforcement powers stating only that officers may detain for inspection and inspect any package, crate, or other container . . .; may make arrests; and may search and seize. Id. at 1129 (emphasis in original). In Corning Gilbert, Inc. v. United States, 896 F. Supp. 2d 1281 (CIT 2013), the CIT simply noted that CBP may sometimes have to look at evidence and analyze whether the importer, particularly a non-party [to the ITC proceedings], has established non-infringement, and that CBP has discretion to compel an importer to substantiate its claims. Id. at 1289. The CIT did not state that CBP has unreviewable discretion to decline to enforce exclusion orders. In Cook, the Court reversed the District Courts recall order not because agencies cannot be compelled to comply with mandatory duties, but because the relief affected absent indispensable parties. See 2013 WL 3799987 at *10.
2

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exclusion order so that it would not extend to the accused products use of Googles servers and Googles synchronization protocol to synchronize calendar objects. Compl. 50 (quoting Commn Op. at 24 n.12). It is indisputable that the ITC rejected that request. Id. 50-53. The ITCs ruling establishes that the Exclusion Order does, in fact, cover devices that have been redesigned to use . . . Googles servers and synchronization protocols to synchronize calendar objects, whether or not those redesigns existed at the time that the ITC denied Motorolas request and issued its Exclusion Order. That ruling is binding on CBP unless and until it is overturned by the Federal Circuit or altered in some fashion by the ITC itself. See 19 U.S.C. 1337(d); see also Eaton, 395 F. Supp.2d at 1327 (ITCs opinion and resultant orders have set the substantive law of this case). Finally, CBP argues that APA review is foreclosed because Microsoft has sued Motorola for infringement under the patent laws. Motion at 13. In cases such as Washington Legal Foundation v. Alexander, 984 F.2d 483 (D.C. Cir. 1993), and National Wrestling Coaches Assn v. Dept. of Educ., 366 F.3d 930 (D.C. Cir. 2004), the court concluded that a direct right of action against third-parties that engage in unlawful discrimination foreclosed an APA suit against the government for failing to enforce Title VIs antidiscrimination rules against those third-parties. In so ruling, the D.C. Circuit emphasized that Congress considered private suits to end discrimination not merely adequate but in fact the proper means for individuals to enforce Title VI. Washington Legal Found., 984 F.2d at 486 (emphasis in original). Here, Microsoft already pursued a direct remedy against Motorola under 337. It is suing under the APA because CBP failed to enforce the exclusion order Microsoft obtained in that direct action, depriving Microsoft of the benefit of its 337 victory. There is no evidence that Congress viewed an infringement suit for damages to be the proper means for a patentee

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to enforce 337. To the contrary, treating an infringement suit as an adequate remedy is tantamount to ruling that an exclusion order is, in essence, a gratuitous benefit that CBP can nullify with impunity. Congress plainly did not share that view when it conferred rights under 337 in addition to any other provision of law. 19 U.S.C. 1337(a) (emphasis added). In short, there is no evidencemuch less clear and convincing evidencethat Congress intended to foreclose APA challenges to CBP failures to enforce such orders. B. Judicial Resolution Of This Case Is Not Barred By The Doctrine Of Primary Jurisdiction.

CBP and the ITC are wrong to contend that the doctrine of primary jurisdiction bars judicial resolution of Microsofts claims. Motion at 13-15; ITC Br. 1-10. The doctrine of primary jurisdiction is to be invoked sparingly. Assiniboine & Sioux Tribes of the Fort Peck Indian Reservation v. Norton, 527 F. Supp. 2d 130, 137 (D.D.C. 2007); APCC Servs., Inc. v. Worldcom, Inc., 305 F. Supp. 2d 1, 13 (D.D.C. 2001). Here, CBP and the ITC argue, in essence, that Microsoft should be subjected to a year of delay and required to re-litigate an issue it has already won once before the ITC. The arguments they advance do not justify such an unjust result. Because the ITC has no authority to review CBP decisions, issues such as whether CBP acted arbitrarily and capriciously cannot lie within the agencys discretion or require[] the exercise of agency expertise. APCC Servs., 305 F. Supp. 2d at 13. In attempting to show otherwise, the ITC claims that the case involves highly complex issues of patent infringement, a voluminous administrative record and findings concerning the structure and operation of Motorola products as well as disposition of Motorolas affirmative defenses. ITC Br. 5. All of these factors are irrelevant here. As the ITC acknowledges on the very next page, [t]he core of Microsofts argument is found in paragraph 8 of its complaint, in which Microsoft alleges that

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CBP must exclude Motorolas redesigned products because the ITC ruled that Motorola had waived its abandonment claim. Id. at 6 (quoting Compl. 8). Thus, Microsofts claim presents straightforward issues of preclusion, see id. at 3, 7issues that courts decide on a routine basis and that are thus well within the conventional expertise of judges. APCC Servs., 305 F. Supp. 2d at 13. The ITC nevertheless claims that [i]t would be a straightforward matter for the Commission to characterize its own decisions. ITC Br. at 7. But this argument overlooks several critical facts. First, although the ITC can explain its ruling, it has no authority to review the propriety of CBPs decisions or to grant the full relief Microsoft seeks. The ITCs procedures are designed only to determine disputes between private parties involving unfair methods of competition and unfair acts in the importation of articles. Id. at 1 (quoting 19 U.S.C. 1337). The procedures that ITC points to as the option most like the relief Microsoft seeks are acknowledged to be limited to provide relief only against those who were parties to the first Commission investigation. Id. at 3 (discussing 19 C.F.R. 210.75(b)). Thus, the ITC could only issue yet another order in new proceedings in which CBP would not be a party.3 And even if ITC could review CBPs unlawful determinations, ITC only has the authority to grant prospective relief and could not order the recall of imported infringing products that Microsoft seeks in this proceeding. See Compl. 31, Prayer for Relief at iii; 19 C.F.R. 113.62 (mandating that CBP shall order the recall of infrining products improperly imported within the past 30 days).

ITC has no authority (1) to rule that CBP violated its legal obligation to enforce the ITCs exclusion order, Compl. 88-95; (2) to rule or declare that CBPs April 25 Ruling and June 24 Ruling were arbitrary and capricious, id. 96-103, 110-112; or (3) to declare that CBPs grant of a transition period was unlawful, id. 104-109.

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Second, the process of obtaining an ITC explanation of its decision is unnecessary (because Courts can resolve preclusion and waiver issues) and, contrary to the ITCs claim, there is ample reason to believe that Commission proceedings will be . . . time-consuming. Id. at 8. Indeed, Microsoft previously explained that it typically takes the ITC more than a year to resolve challenges to the enforcement of an exclusion order, and that the agency has only employed its procedures for temporary emergency relief once in three decades. Microsoft Reply Br. at 10. The ITC nowhere refutes these facts. Having previously declined to clarify its ruling at the request of the CBP, and having failed to submit an explanation of its decision to this Court (despite providing such an explanation to the CIT in a similar case, see Eaton, 395 F. Supp. 2d at 1326 & n.13), the ITC seeks a referral of the matter without providing any commitment that it would address Microsofts claims on an expedited basis. To the contrary, it argues that a delay of 12 to 15 months is perfectly acceptable. ITC Br. at 9. That contention is belied by its own recognition that [p]atents protect technology, and technology is, by nature, marked by rapid change. Id. at 2. And a delay of over a year is patently unfair given the administrative law shell game, American Tel. & Tel. Co. v. FCC, 978 F.2d 727, 732 (D.C. Cir. 1992), Microsoft has already endured. After Microsoft prevailed on its claims before the ITC, Motorola could have appealed the ITCs refusal to narrow the exclusion order or subsequently sought relief from the ITC. See 19 C.F.R. 210.76 (authorizing importers to seek modification of exclusion orders). Instead, CBP allowed Motorola to engage in secret relitigation of issues it had lost, then permitted Motorola to import devices without guidance from the ITC. ITC Br. 3 (the issue has not been presented to [ITC]). Now that its conduct has been challenged, CBP claims that while it was free to decide the scope of the exclusion order without guidance from the ITC, this Court cannot do so in order to determine the propriety of CBPs

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actions. Similarly, CBP effectively argues that importers who lose 337 cases can evade the ITC and seek relief from CBP, with a further right to appeal CBPs decisions to the CIT. But patentees who win 337 cases cannot challenge CBP rulings that deprive them of their victory, and must instead re-litigate before the ITC. Such an obviously inequitable result should not be permitted where, as here, this Court possesses the judicial expertise to resolve the straightforward legal issues of preclusion raised by Microsoft. Nor has Microsoft contributed to the delay. In Total Telecommunications Services, Inc. v. American Tel. and Tel. Co. 919 F. Supp. 472 (D.C. Cir. 1996), for example, an extended period of delay for a primary jurisdiction referral was permissible because the plaintiff had brought and then voluntarily dismissed a similar action in a separate jurisdiction all the while recognizing that the agency had to resolve the underlying merits. 919 F. Supp. at 482. Here, the ITC does not need to resolve the underlying merits because it has already done so. ITC Br. 3 (only issues are claim preclusion and issue preclusion). Microsoft promptly challenged CBPs final ruling that denied Microsoft its requested relief.4 Finally, APA review does not create a risk of a split of authority. Motion at 14; ITC Br. at 7. If this Court invalidates CBPs April 25 and June 24 Rulings, CBP will be required to bar entry of Motorolas phones. If Motorola subsequently obtains modification of the exclusion order by the ITC, the exclusion order at issue here would be replaced by a modified exclusion order. The courts decision would have no impact on such a modified order, and thus, no conflict could arise.

ITC misleadingly claims that Microsofts concerns trace back to at least early May. ITC Br. at 9. Microsoft expeditiously requested that CBP revoke its ruling because it was precluded by the ITCs decision. Without obtaining input from the ITC, CBP denied Microsofts request on June 24, 2013, when CBP issued the ruling identifying entirely different grounds that Microsoft now challenges. Microsoft then expeditiously prepared a Complaint and Memorandum in support of a preliminary injunction.

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At the very least, if this Court finds that referral to the ITC is required to clarify the scope of the ITCs Exclusion Order, this case should be stayed pending ITCs resolution. Reiter v. Cooper, 507 U.S. 258, 268 (1993) (primary jurisdiction . . . requires the court to enable a referral to the agency, staying further proceedings so as to give the parties reasonable opportunity to seek an administrative ruling); Am. Assn of Cruise Passengers v. Cunard Line, Ltd., 31 F.3d 1184, 1187 (D.C. Cir. 1994) (In general, when primary jurisdiction lies with an administrative agency, the district court should stay the proceedings in front of it, not dismiss the suit). A stay, rather than dismissal, would be required because Microsoft would be unfairly disadvantaged if this case were dismissed. Reiter, 507 U.S. at 268. Indeed, referral to the ITC would preclude review of CBPs unlawful actions. Microsoft could not seek a declaratory judgment that CBPs grant of a transition period violated its statutory obligations and was arbitrary and capricious or that CBPs April 25 and June 24 Rulings were unlawful. Compl. 88-112. Microsoft also could not seek the recall of previously imported infringing products. Any proceeding before the ITC without relief in this Court would only allow for Motorola to relitigatein secretissues that Motorola lost before the Commission and for CBP to grant precisely the same relief that the ITC expressly denied. Id. 4. For these reasons, if this Court finds that a referral is required, we request that this Court stay proceedings to permit Microsoft to obtain the ultimate relief that only this Court can provide. II. THIS COURT HAS AUTHORITY TO REVIEW MICROSOFTS REQUEST FOR DECLARATORY JUDGMENT THAT CBPS GRANT OF A TRANSITION PERIOD WAS UNLAWFUL. CBP contends that Microsofts request for a declaratory judgment that CBPs grant of a transition period to permit the import of Motorolas infringing devices was unlawful is now moot and unreviewable because the transition period has expired. Motion at 15. This contention is wrong. CBP cannot evade review through issuance of unlawful orders that expire before review 17

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can be sought. Far from mooting a plaintiffs claim, a reques[t] to review short-term agency orders capable of repetition mandates prospective declaratory relief in appropriate cases. Am. Trading Transp. Co. v. United States, 841 F.2d 421, 426 (D.C. Cir. 1988) (emphasis added). Microsofts request satisfies the standards for a declaratory judgment in review of short-term agency orders capable of repetition. First, CBPs transition period was in its duration too short to be fully litigated prior to cessation or expiration. Id. at 425 (quoting Weinstein v. Bradford, 423 U.S. 147, 149 (1975)). CBP granted Motorola a transition period without providing notice to Microsoft of Motorolas request, much less an opportunity to address it. See Compl. 4. In fact, CBP informed Microsoft on January 11, 2013 that it would exclude Motorolas infringing devices. Id. 59. However, in April 2013, after engaging in ex parte communications with Motorola, CBP granted a transition period during which Motorola could import devices that violated ITCs Exclusion Order. Id. 5. Microsoft did not learn of the transition period until the following month on May 1, 2013, at which time Microsoft immediately requested that CBP exclude Motorolas phones until and unless it made a determination with respect to Motorolas proposed redesign. Id. 64-65. Despite CBPs promise to resolve Microsofts request before expiration of the transition period on June 1, 2013, the transition period expired by the time that CBP issued its June 24 Ruling. Id. 70-71. CBPs grant of a transition period is reviewable because it was too short to be litigated fully. Courts have found far longer periods to be prohibitively short in duration. See, e.g., Atlantic Richfield Co. v. United States, 774 F.2d 1193, 1198 (D.C. Cir. 1985) (finding that a six-month permit was too short to be fully litigated). Second, there is a reasonable expectation that [Microsoft will be] subjected to the same action again. Am. Trading Transp., 841 F.2d at 425 (quoting Weinstein v. Bradford, 423 U.S.

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147, 149 (1975)). CBP has engaged in a pattern of ex parte discussions with Motorola in issuing rulings, namely the rulings that granted Motorola a transition period and that permitted Motorola to import redesigned devices. Compl. 4-5. Microsoft has a reasonable expectation that CBP will continue this practice and, without prior notice to Microsoft, may grant Motorola future unlawful transition periods. Such an expectation is even more reasonable given that CBP has changed its position in the past. CBP originally informed Microsoft that it would exclude Motorolas infringing imports only to then, a mere two months later, grant Motorola the permissions it had told Microsoft it would deny. Id. 59. Thus, based on CBPs conduct, including its ex parte discussions with Motorola and its decisions, and changes of position, without prior notice, Microsoft has a reasonable fear that CBP will consider, and grant, additional grace periods to Motorola without prior notice to Microsoft. Id. 107. Without a declaratory judgment from this Court, Microsoft will remain exposed to the risk that the agency will simply accept, on faith, Motorolas assertions that a new transition period is necessary without notice or opportunity for Microsoft to respond. See Am. Trading Transp., 841 F.2d at 426. Microsoft has properly sought a remedy . . . in the nature of a declaration that the action taken was wrongful, in hopes that that will deter similar acts in the future. Id. (quoting Golden Holiday Tours v. CAB, 531 F.2d 624, 626 (D.C. Cir. 1976)). This Court has authority to grant Microsofts request.

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CONCLUSION For these reasons, and those set forth in Microsofts Memorandum and Reply in Support of Its Motion for Preliminary Injunction, Microsoft respectfully requests that CBPs Motion to Dismiss pursuant to Rule 12(b)(1) and Rule 12(b)(6) be denied. Dated: September 30, 2013 Respectfully Submitted,

Richard A. Cederoth SIDLEY AUSTIN LLP 1 S. Dearborn Street Chicago, Illinois 60603 Telephone: 312-853-7000 Facsimile: 312-853-7036

/s/ Brian R. Nester Joseph R. Guerra (D.C. Bar No. 418532) Paul J. Zidlicky (D.C. Bar No. 450196) Brian R. Nester (D.C. Bar No. 460225) SIDLEY AUSTIN LLP 1501 K STREET, N.W. Washington, D.C. 20005 Telephone: 202-736-8000 Facsimile: 202-736-8711

Counsel for Plaintiff Microsoft Corporation

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CERTIFICATE OF SERVICE I hereby certify that on this 30th day of September, 2013, I filed MICROSOFT CORPORATIONS OPPOSITION TO GOVERNMENT DEFENDANTS MOTION TO DISMISS with the U.S. District Court for the District of Columbia via CM/ECF, which will cause to be served upon: Stephen C. Tosini U.S. Department of Justice, Civil Division 1100 L Street, N.W. Room 1266 Washington, D.C. 20530 Paul F. Brinkman Quinn Emanuel Urquhart & Sullivan, LLP 1299 Pennsylvania Avenue, N.W. Washington, D.C. 20004

/s/ Brian R. Nester Brian R. Nester