Judge orders Hytera to make large royalty payment this month to Motorola Solutions

Hytera Communications must make a lump-sum royalty payment—estimated to be $45 million—by the end of this month, based on the China-based company’s sales of DMR products that utilize Motorola Solutions trade secrets and copyrighted software during the past three years, according to a federal judge’s order.

U.S. Federal District Court Judge Charles Norgle yesterday also issued rulings that denied Motorola Solutions’ requests for a permanent injunction against Hytera, a financial turnover requirement by Hytera, and a finding that the China-based LMR manufacturer be held in contempt of court. Separately, Norgle’s order—also released yesterday—affirmed the terms associated with Hytera Communications’ scheduled ongoing royalty payments of $80.32 per applicable terminal radio and $378.16 per repeater that would be held for Motorola Solutions in an escrow account until legal appeals are exhausted.

Under terms submitted to Norgle in a joint proposal from Hytera and Motorola Solutions, Hytera typically will pay the royalty fees associated from the sale of relevant DMR products for the previous quarter, with payments due on January 31, April 30, July 31, and October 31 of each year.

However, the first financial outlay is scheduled to be a lump-sum payment reflecting the royalties owed on Hytera sales from July 1, 2019, through June 30, 2022. Hytera is required to inform Motorola of the amount owed by July 21, and the payment is due on July 31.

It is unclear how much Hytera is expected to owe in this initial royalty payment, but legal documents filed during the case have estimated the total would be at least $45 million. Motorola Solutions has the right to have an “internationally recognized accounting firm … examine and audit” to ensure the accuracy of Hytera’s sales figures and royalty calculations, according to Norgle’s order.

Whether Hytera will make this payment also is in doubt. To date, Hytera has made no payments toward the adjusted $543.7 million judgment against the China-based firm from March 2020, when Norgle supported the unanimous findings of a jury at the conclusion of a four-month trial conducted in Chicago. Hytera also has refused to secure a bond associated with the judgment—a fact that Motorola Solutions lawyers have noted repeatedly in filings.

Motorola Solutions attorneys repeatedly have filed briefs claiming that they do not believe Hytera will make its required royalty payments. If Hytera is determined to have any “underpayments” of the royalty fees, the China-based LMR company will have to pay a surcharge penalty that is staggered, based on the percentage of the underpayment, according to Norgle’s order.

For example, if Hytera underpays by 5-10% of the due amount, Hytera would pay an additional surcharge of 10% of the underpayment, the order states. The surcharge percentage increases as the underpayment percentage increase on a staggered basis, with Hytera paying a 100% additional surcharge on any underpayment that exceeds 50%.

Motorola Solutions expressed support for Norgle’s order in a statement provided to IWCE’s Urgent Communications.

“We are pleased Judge Norgle has entered a formal order requiring Hytera to pay Motorola Solutions perpetual royalties of $80.32 per unit for Hytera radios and $378.16 per unit for Hytera repeaters that utilize Motorola Solutions’ stolen trade secrets and copyrighted source code,” according to the Motorola Solutions’ statement.

“This is in addition to the $543.7 million in compensatory and punitive damages Hytera owes Motorola Solutions, underscoring the scope of Hytera’s theft and ongoing illegal use of Motorola Solutions’ intellectual property and innovations.”

Hytera Communications did not respond to a request for comment from IWCE’s Urgent Communications in time to be included in this article.

Separately, Norgle denied multiple requests from Motorola Solutions to take actions against Hytera.

Most notably, Norgle denied Motorola Solutions’ request for the judge to reconsider issuing a permanent injunction against Hytera that would have prevented the China-based LMR firm from selling specific DMR products that use the Motorola trade secrets and copyrighted software.

Norgle denied a similar permanent-injunction request in December 2020, when Norgle determined that the only reason not to issue a permanent injunction was that Hytera already was being punished by being required to pay monetary damages in the case.

“Now, says Motorola, Hytera has made it abundantly clear since the court’s order that it does not intend to pay the judgment against it. Indeed, says, Motorola, Hytera claims it has no ability to pay,” Norgle’s ruling states. “Therefore, given that Motorola allegedly cannot be compensated with money, it has been irreparably harmed, and the court should issue a permanent injunction.”

Norgle’s ruling indicates that a permanent injunction against Hytera may be legally appropriate at this time, but the federal judge does not believe he has the power to make such a ruling, because Motorola Solutions already has cross-appealed his previous permanent-injunction ruling to the Seventh Circuit Court of Appeals.

“The court lacks jurisdiction to grant the motion,” Norgle’s ruling states.

“Motorola argued that Hytera’s cited appeal was premature, because the court had yet to finalize the issue of a reasonable royalty, and that the appeal … was dismissed for that very reason. However, a subsequent appeal and cross-appeal were filed last month, after the court determined the amount of the reasonable royalty. The court therefore finds that it lacks jurisdiction to grant the relief Motorola seeks.”

Norgle also denied Motorola Solutions’ motion that would compel Hytera Communications to turnover $168 million that the company has disclosed as its cash assets, as well as find Hytera in contempt of court for failing to begin paying any of the damages it owes in the case.

“While the court has the discretion to order turnover of funds at this time, it declines to exercise that discretion at this time,” Norgle’s ruling states, noting that virtually all key matters have been appealed to the Seventh Circuit Court of Appeals.

“The court anticipates that this significant appeal will be ruled on expeditiously by the Seventh Circuit. Accordingly, the court finds that exercising its discretion to order turnover at this point would be premature. As [Motorola Solutions] states, Hytera continues to be a lucrative corporation that generates significant revenues. Nothing in the record hints that Hytera may become insolvent or judgment-proof. Plaintiff’s motion for turnover is denied without prejudice at this time.”

Hytera needs to continue to produce “relevant document” as required during the case, according to Norgle.

“The court reiterates that Hytera much produce information regarding the amount and location of its assets, including non-public information, if disclosure does not subject Hytera to civil and criminal liability,” Norgle’s ruling states. “Failure to do so may result in Hytera being held in contempt.”

In a March 2020 judgment, Norgle affirmed a unanimous jury finding that Hytera should pay $764.6 million for its use of DMR trade secrets and copyrighted software developed by Motorola. Norgle reduced this initial award amount to $543.7 million in January, noting that collecting $220.9 million of the original ruling “would constitute a double recovery.”

But these damages only addressed Hytera sales of certain DMR products—those that used the stolen trade secrets and copyrighted software developed by Motorola—through June 30, 2019. Hytera has continued to sell these “covered products” even after this date, and the royalty payments established by Norgle are designed to compensate Motorola Solutions for Hytera sales of these products beginning on July 1, 2019.

Norgle’s order stipulates that Hytera’s first escrow payment will be due on July 31, when the China-based LMR firm is required to make a lump-sum payment of all royalties for the three-year period from July 1, 2019, to June 30, 2022.

In legal filings, Hytera has indicated that it may be unable to pay, noting that the company’s finances have been strained further by the fact that the U.S. Department of Justice (DoJ) in February indicted the China-based LMR firm of criminal conspiracy to steal DMR trade secrets from Motorola (before the company was renamed Motorola Solutions). This 21-count indictment against Hytera Communications was followed in April by the identification of seven individuals who participated in the alleged criminal conspiracy.

Both the civil and criminal cases against Hytera 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.