Friday, July 12, 2013

Microsoft sues U.S. Customs & Border Protection to ensure enforcement of ITC import ban against Google's Motorola Mobility

More than a month ago the White House outlined its new, broadbased patent reform initiative, and the last item on the list was about better enforcement of ITC exclusion orders (import bans):

"Strengthen Enforcement Process of Exclusion Orders. Once the U.S. International Trade Commission (ITC) finds a violation of Section 337 and issues an exclusion order barring the importation of infringing goods, Customs and Border Protection (CBP) and the ITC are responsible for determining whether imported articles fall within the scope of the exclusion order. Implementing these orders present unique challenges given these shared responsibilities and the complexity of making this determination, particularly in cases in which a technologically sophisticated product such as a smartphone has been successfully redesigned to not fall within the scope of the exclusion order. To address this concern, the U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of existing procedures that CBP and the ITC use to evaluate the scope of exclusion orders and work to ensure the process and standards utilized during exclusion order enforcement activities are transparent, effective, and efficient."

The last three characteristics -- "transparent, effective, and efficient [standards utilized during enforcement]" -- are precisely what Microsoft wants, but has apparently not experienced, in connection with the enforcement of an ITC exclusion order it won against now-Google-owned Motorola Mobility's Android-based devices in May 2012. That import ban entered into force about a year ago (Google's Motorola appealed in order to get rid of the ban, while Microsoft appealed for the purpose of broadening it with respect to more patents, with a hearing in this cross-appeal scheduled for August 6, 2013). Somehow the force of law doesn't seem to come down on those Motorola devices, based on the facts stated by Microsoft in a complaint filed today. In this fast-paced business, no major player can wait until the President's reform initiative bears fruit. Companies need intellectual property protection now, and litigation is a more immediate option than legislation. In order to ensure that certain U.S. government officials enforce the law (even if they prefer to hold secret meetings with Google) and, which is the ultimate goal, require Google to cease what Microsoft considers continuing unlawful patent violations, Microsoft has filed a federal lawsuit with the United States District Court for the District of Columbia (the court where complaints against the U.S. government must be brought) against

  • the Department of Homeland Security;

  • the Honorable Janet Napolitano in her official capacity as Secretary of the Department of Homeland Security;

  • the United States Bureau of Customs and Border Protection (the government agency in charge of border seizures of imported goods violating ITC exclusion orders);

  • the Honorable Thomas S. Winkowski in his official capacity as Deputy Commissioner of the United States Bureau of Customs and Border Protection; and

  • the United States of America.

Google or its Motorola Mobility subsidiary are not named as defendants. From a legal point of view, the case against them was adjudicated by the ITC and is now before the Federal Circuit. It's a separate issue. But according to Microsoft, Google's Motorola continued to import devices with the scheduling feature that it would have had to remove in order to comply with the ITC exclusion order. And it can do so because of "arbitrary and capricious" action on the part of officials who should enforce the order by holding shipments violating it.

Here's the complaint (this post continues below the document):

13-07-12 Microsoft Complaint Against U.S. Customs & Border Protection by Florian_Muelle_439

The complaint was filed by Sidley Austin, which is also representing Microsoft in the infringement case against Google's Motorola.

It helps to read the prayers for relief first. Microsoft asks the D.C. court

  • to compel the relevant government officials "to exclude infringing Motorola products from entry into the United States immediately";

  • to bar them from "allowing importation of any 'redesigned' Motorola product that includes a calendar application configured to communicate with either Exchange servers and protocols or Google servers and protocols [i.e., Google Calendar]";

  • to compel them "to recall all infringing Motorola products imported into the United States within [their] reach and, if such demand is not complied with, to require [them] to assess liquidated damages in an amount equal to three times the value of the Motorola products not returned or, in the alternative, at least in an amount equal to the value of the Motorola products not returned"; and

  • to compel them "to vacate the April 25 Ruling and the June 24 Ruling, and prohibit any rulings that deny Microsoft notice and a meaningful opportunity to protect its rights in the Exclusion Order".

In other words, Microsoft wants the court to tell these officials to do their job and to comply with proper procedures. The complaint notes something I mentioned on previous occasions: before the ITC and the Federal Circuit, Motorola conceded infringement. It focused its defense entirely on its allegation of invalidity, which the ITC didn't agree with. Microsoft is angry because Customs and Border Protection (CBP) "has allowed the importation of infringing devices based on claims that Motorola has made on an ex parte basis, and that CBP has accepted without providing Microsoft notice of those claims, much less an opportunity to address them". For what I know about these enforcement procedures it's either the duty or at least the usual practice of CBP to be in close contact with right holders. But it appears that, for whatever reason, those CBP officials talked only to Google and then made decisions in favor of allowing entry into the United States of products that came with the banned feature, instead of also talking to Microsoft about it at the right time. Microsoft says that "[m]ost egregiously, CBP has allowed Motorola to re-litigate --in secret-- issues that Motorola lost before the [ITC]".

There's a certain pattern. Google apparently prefers direct access to judges (it hired an active German patent appeals judge) and government officials over a consistent and compliant application of the law.

With CBP this approach has apparently paid off, so far. Among other things, CBP granted Motorola a "transition period" until June 1, 2013, even though the ITC had ordered an import ban that entered into force immediately after the end of the 60-day Presidential review period.

What I found particularly baffling when reading Microsoft's complaint is that Google could persuade CBP that the ITC took no "position" on Motorola's claim that Microsoft had abandoned its infringement allegation against phones that use Google (Calendar) servers in connection with the patent the import ban is based on (U.S. Patent No. 6,370,566 on "generating meeting requests and group scheduling from a mobile device"). I uploaded the related infringement claim chart a long time ago, and the ITC exclusion order clearly prohibited any further infringement of this patent. Based on the documents I saw, Motorola never disputed the alleged infringement of this patent with respect to any particular technology -- it just conceded infringement. Motorola said Microsoft had somehow "abandoned" its claim. But customs authorities are not the proper forum to make this kind of determination alone.

Companies who believe they have a workaround in place can ask the ITC for an advisory opinion. So far I don't see any indication that Google's Motorola even tried to obtain one.

Paragraph 58 of Microsoft's complaint says that "[m]onths after the Exclusion Order went into effect, Microsoft learned that infringing Motorola phones continued to be available in the United States". Google's Motorola said it was importing phones that used software from a company that allegedly had a license to use the relevant patent. Microsoft "disagreed with this claim, but to remove any doubt, it terminated the license on December 1, 2012, and two days later informed CBP of this action". CBP told Microsoft it would exclude the devices, but apparently it didn't.

Microsoft continued to monitor the market and "expressed concern to CBP [in March and April] that Motorola was continuing to import infringing products". It then turned out that Motorola had asked for a transition period. Microsoft found out about the grant of such a grace period only on May 1, 2013. And it gets worse:

During that meeting, "CBP failed to inform Microsoft that it had already issued a written ruling that addressed Motorola's re-design of it calendar function in a different phone". Two days later, "CBP emailed a copy to Microsoft's counsel". This means Motorola was able to import modified devices while Microsoft didn't get the chance to "explain why the re-design did not cure Motorola's infringement".

After some further communication a ruling came down on June 24, adopting Google's position (and rejecting Microsoft's) concerning the alleged workaround. Microsoft is now trying to get a federal court to look at this situation and provide clarification.

So much for "transparent, effective, and efficient" enforcement of ITC exclusion orders.

This is as regrettable as it is unnecessary. The only reason for this Microsoft-Motorola dispute is that Google's Motorola refuses to take a royalty-bearing patent license from Microsoft covering its Android-based devices, as 20 other companies (including market leaders like Samsung, HTC, LG, ZTE and Foxconn parent Hon Hai) have done. Besides the ITC import ban, Microsoft has also won three German injunctions against Google's Motorola. It's quite clear that Motorola needs a license, but Google appears to prefer to game the system.

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