Updated: Motorola Solutions CEO Greg Brown questions Hytera’s future in U.S. after DoJ indictment unveiled

[Editor’s note: This article has been updated to reflect a statement from Hytera that was provided to IWCE’s Urgent Communications on Sunday, Feb. 13.] 

Motorola Solutions Chairman and CEO Greg Brown yesterday said DMR rival Hytera has “effectively shut down” in three countries and questioned whether Hytera will be “able to continue to operate” in the U.S. in the wake of civil-litigation judgments and the recent unveiling of a 21-count criminal indictment against the China-based firm. Hytera has denied Brown’s assertion, noting that the company “remains committed to ensuring competition in all markets.”

Brown made his comments about Hytera during Motorola Solutions’ conference call on Wednesday with financial analysts to discuss Motorola Solutions’ performance during the fourth quarter of 2021.

Brown made his statements while responding to a question that referenced the 21-count indictment filed by the U.S. Department of Justice (DoJ) against Hytera for conspiring to steal DMR trade secrets from Motorola Solutions. Brown said he was “happy to see” the unsealing of the DoJ criminal indictment announced on Tuesday, but he noted that the DoJ action is separate from the civil litigation that Motorola Solutions has been pursuing against Hytera for almost five years.

But the combination of the civil and criminal legal issues will impact Hytera’s business, Brown predicted.

“Now, as a result of a series of judgments, they [Hytera] owe us in excess of $670 million, separate from the criminal actions that the DoJ just announced,” Brown said during the conference call yesterday. “They are effectively shut down in the U.S. and Australia and Germany, and I think this [the DoJ indictments] will put incrementally more pressure on them.”

“I’m just saying that, in the main, I think the pressure on this company is so great, in the U.S., I’d be surprised if they’re able to continue to operate going forward. We’ll see, but we’re going to pursue all of our collections—and if that includes asset seizure, we’ll do that, too. But we’re not going to let anybody steal our product, trade secrets or intellectual property.”

IWCE’s Urgent Communications provided Hytera officials with an opportunity to respond to Brown’s statements, and the company sent the following statement on Sunday, Feb. 13.

“Hytera Communications Corp., Ltd. continues to provide high-quality, innovative products and services to its customers throughout the world, including in the U.S., Australia, and Germany,” according to the Hytera statement. “Hytera is disappointed by the recent false comments of Motorola’s CEO attempting to suggest otherwise. Hytera’s customers, dealers and partners may rest assured that it remains committed to ensuring competition in all markets with its multiple product lines, including through offering innovative new products like its recently launched H-Series DMR line.”

Hytera US—the new U.S. subsidiary of China-based Hytera Communications Corp.—yesterday issued a statement on its website that the U.S. operations of Hytera are not subject to the civil and criminal proceedings. Hytera US was created last year after the Chapter 11 bankruptcy sale of assets held by Hytera’s previous U.S. subsidiaries.

“Hytera US Inc. is aware of the recent unsealing of an indictment against Hytera Communications Corporation (“HCC”),” according to the Hytera US statement. “The indictment is grounded in activities that allegedly occurred in China 15 years ago—well before Hytera US was founded.

“Hytera US Inc is not a party to the indictment and has not been accused of any wrongdoing.

“The allegations underlying the indictment were the subject of a civil case brought by Motorola against HCC that targeted certain higher end legacy models.

“Neither the civil case nor the indictment relates to the Hytera products most popular in the United States. Most importantly, neither relates to Hytera’s new H-Series DMR Radios.”

Hytera announced the launch of its H-Series family of DMR radios in December.

Several industry analysts who spoke with IWCE’s Urgent Communications expressed surprise about Brown’s bold predictions about Hytera, particularly given the fact that they were delivered during the Motorola Solutions quarterly earnings call. In such settings, corporate executives typically do not address the performance prospects of rival companies—in many cases, they respond in a manner in which they carefully avoid even mention the name of competitors, the analysts noted.

Brown emphasized the need for Motorola Solutions to protect the company’s trade secrets and copyrighted software—stolen assets that the company has alleged that Hytera has used to build its DMR business that has claim market share from Motorola Solutions.

“There’s nothing more important—nothing—than our intellectual property and the innovation that we invest in,” Brown said. “We will continue to defend it. We will fiercely continue to pursue collection. I don’t mind spending the money, and we’ll do what we need to do to get appropriate remuneration back from Hytera.

“It was a very concerted multiyear campaign where they stole, and we’re going to get them to pay for it.”

Motorola Solutions appeared to be well on its way to receiving a big payday from Hytera almost two years ago, when a four-month trial resulted in a unanimous jury verdict, followed by a federal district-court judge affirming the judgment in March 2020 that Hytera owed Motorola Solutions $764.6 million in damages.

But Motorola Solutions has not received any money from the case to date, and Hytera has not secured a bond to ensure that Motorola Solutions would be paid after appeals have been exhausted, according to legal filings by Motorola Solutions attorneys.

Since the federal-court ruling was finalized, Hytera’s U.S. subsidiaries declared bankruptcy, and the company’s U.S. assets were sold to the new Hytera US entity, which is not a party to the civil lawsuit. Hytera formally appealed the ruling in September 2021, and Motorola Solutions has filed cross-appeals in the case.

Meanwhile, the total amount that Hytera owes Motorola Solutions in the civil case has changed numerous times. In January 2021, the federal judge reduced the damages amount by more than $220 million, to $543.7 million. Since then, the judge has ordered Hytera to pay attorneys fees, interest payments, and other items—for instance, royalty fees on applicable Hytera products sold since July 2019—that have caused the total amount due to Motorola Solutions to exceed $670 million, Brown said.

In addition to the massive financial liability associated with the Motorola Solutions civil suit, Hytera Communications Corp. also faces the prospect of a significant fine, if the China-based Hytera parent company is found guilty in the 21-count DoJ indictment that was unsealed yesterday after being filed in May 2021.

“If convicted, Hytera faces a potential criminal fine of three times the value of the stolen trade secret to the company, including expenses for research, design and other costs that it avoided,” according to a DoJ press release about the indictment. “A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.”

Although the civil and criminal cases against Hytera are separate, both center around allegations that Hytera developed much of its successful DMR product line using trade secrets and copyrighted software that was stolen from Motorola Solutions about 14 years ago.

During the federal-court trial that began in November 2019, Hytera attorneys acknowledged that three former Motorola (the company had not yet changed its name to Motorola Solutions at the time) employees—Samuel Chia, Y.T. Kok and G.S. Kok—accessed more than 7,000 Motorola documents prior to each of them leaving and joining Hytera shortly in 2008. However, Hytera attorneys described the three engineers as “bad apples” who did not share with anyone else at Hytera that the DMR trade secrets and software were taken from Motorola.

All three of the former Motorola employees that were hired by Hytera invoked the Fifth Amendment when interviewed as part of the civil-suit proceedings. The DoJ indictment notes that there are individual defendants charged in the Hytera criminal conspiracy case, but all of those names were redacted from the publicly available version of the indictment.