Hytera, Motorola Solutions refile appeal, cross-appeal in civil case

As expected, Hytera Communications again has appealed a $543.7 million judgment against it to the 7th Circuit Court of Appeals, while Motorola Solutions this week filed for second time a cross appeal in the case that was initiated more than four years ago.

There was little surprise in the filings, because both Hytera and Motorola Solutions, as both companies had taken similar actions last year. However, the September 2021 appeal by Hytera and the cross-appeal filed by Motorola Solutions just a couple of weeks later in September 2021 effectively were nullified, because it was determined that an appeal could not be accepted until the district-court case before Judge Charles Norgle was complete.

Specifically, the unfinished business at the district-court level was the establishment of a royalty arrangement between Hytera and Motorola Solutions, the terms of which were finalized in April. Details of the royalty arrangement were negotiated by lawyers for Hytera and Motorola Solutions after Norgle ruled in December that Hytera must pay Motorola Solutions $80.32 per radio and $378.16 per repeater that were sold after July 1, 2019.

Hytera is due to make its first and largest royalty payment—a lump-sum payment estimated to be at least $45 million, reflecting sales during the past two years—on July 31, and the royalty arrangement assesses significant penalties against Hytera if payments are not made on time.

Although the royalty arrangement requires Hytera to make the ordered payments, Motorola Solutions is not expected to receive any of the money in the near term. Instead, Hytera is scheduled to make royalty payments to an escrow account, and the money would be released to Motorola Solutions only after all appeals have exhausted.

In legal filings, Hytera has indicated that it may be financially 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.

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.

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.