Judge purges contempt finding against Hytera, drops proposed global injunction against LMR company

A federal judge purged a recent contempt-of-court finding against Hytera Communications and removed the threat a proposed global injunction against the LMR manufacturer after Hytera last week made a $56.7 million bulk royalty payment to an escrow account for Motorola Solutions.

U.S. District Court Judge Martha Pacold issued the ruling late last week, after Hytera Communications and Motorola Solutions submitted a joint status report last week that Hytera had paid the required royalty amount—plus late-fee interest—for the use of Motorola Solutions’ DMR intellectual property that has been the subject of six years of litigation.

“Hytera has purged the civil contempt found in the court’s contempt order, and the court will not enter the civil contempt injunction described in that order,” Pacold stated in her ruling, which echoed the recommendation of both companies in the joint status report.

Hytera Communications—the China-based parent company of subsidiaries located around the world—informed the court on Sept. 1 that it paid $56.3 million in court-ordered royalties that were due in July 2022 for sales of DMR products using intellectual property that was stolen from Motorola Solutions more than a decade ago.

There was some disagreement between the companies about the amount due. Hytera Communications initially paid the initial $49 million due, as well as 1% interest for each of 13 months that the payment was late. In a legal brief filed last week, Motorola Solutions contended that Hytera should pay an additional $403,000, because it believes the court order calls for the late-fee interest to be compounded each month, not calculated as simple interest as Hytera did.

Hytera Communications disputed the compound-interest claim and indicated it will appeal the matter, but it agreed to pay the additional $403,000 for the moment. As a result, Hytera’s payment for the royalties on its DMR sales between July 2019 and June 2022 totaled $56.7 million.

This royalty payment—along with about $2 million from subsequent quarterly royalties paid by Hytera during the past year—is not immediately available to Motorola Solutions, as the money is being held in an escrow account. When all appeals in the civil case between the companies have been resolved, a judge could order the release of escrow money to Motorola Solutions or return the funds to Hytera Communications, based on the final decisions.

Hytera Communications has indicated its plans to appeal the royalty order, which was established in the aftermath of the LMR manufacturer being found guilty in 2020 civil cast of using stolen Motorola trade secrets and copyrighted software in its popular DMR products. Hytera has appealed that case to the Seventh Circuit Court of Appeals.

In light of Hytera’s full compliance with the royalty order, Motorola Solutions agreed that Judge Pacold’s contempt-of-court finding and proposed global injunction on all Hytera two-way radio sales should be dropped—as it relates to the royalty issue. However, Motorola Solutions’ filings indicate that it could seek other sanctions from the court related to Hytera’s actions during the past year and half, during which Hytera attorneys repeatedly claimed that a “liquidity crisis” within the company meant it had an “inability to pay” even a portion of the three-year royalty.

“Motorola believes additional relief should be granted based on Hytera’s conduct leading to and in connection with the contempt proceedings that resulted in the Court’s contempt order, and specifically reserves any and all rights to request or obtain any such relief without limitation,” according to a Motorola Solutions statement within the joint status report.

Hytera has long claimed in legal filings that the banks have refused to let it make payments toward the royalty, but the court order threatening the global injunction changed that mindset, according to a Hytera filing last week. In the filing, Hytera explains the thought process for the Shenzehn HTI Group (HTI)—the entity that provided most of the money for the royalty payment—and its willingness to change its position on the matter:

“HTI is the guarantor of HCC’s [Hytera’s] $68 million in bonds that are due to be repaid in December 2023 and April 2024,” according to the Hytera filing. “HTI needs HCC to remain a viable going concern, so that HCC can pay back the bonds that HTI guaranteed. Recognizing HCC would be unable to do that under the Court’s [proposed global] injunction, HTI loaned HCC the additional necessary funds.
“For the balance, HCC’s banks partially released their collateral upon learning of HTI’s action and the Court’s August 26, 2023, Order enjoining sales of all two-way radio products. HCC’s banks agreed that HCC may use some of their cash collateral for the royalty payment, so that HCC could remain a financially viable going concern. Prior to the Court’s August 26, 2023, Order, HCC was unable to obtain these concessions from its banks or this additional financing.”

Hytera’s filing also noted that it made the royalty payment quickly, without withholding $8.5 million in taxes owed to Chinese tax authorities. Hytera asked the court to release this amount to it, or release the money to Motorola Solutions to make the Chinese tax payment.

Pacold directed representatives of Hytera Communications and Motorola Solutions to meet in an effort to reach mutual agreement on such remaining disputed matters and report back to her by Oct. 5.

“The parties should each consider carefully, mindful of judicial economy, whether any of the disputes absolutely requires further process,” Pacold stated in her ruling. “The parties should then meet and confer and exhaust efforts to resolve the disputes without court intervention. If any disputes remain, the parties should propose an agreed briefing schedule that presents the issues as clearly and efficiently as possible.

“By 4:00 pm CT on 10/5/23, the parties should file a joint status report confirming that they have exhausted efforts to resolve any disputes without court intervention (or if the parties need more time to confer, requesting another joint status report deadline) and if necessary, listing briefly any remaining requests for relief and proposing an agreed briefing schedule and reasonable page limits.”

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

Motorola Solutions responded to a request for comment from IWCE’s Urgent Communications, but a company spokesperson reiterated the company’s statement from last week on the matter, noting that it is “pleased” Hytera made the royalty payment and plans to “hold Hytera accountable for its illegal conduct” via legal actions.

This royalty order is part of a civil case between Hytera Communications and Motorola Solutions. The case initially included two Hytera subsidiaries in the U.S., but those entities declared bankruptcy in May 2020. The U.S. subsidiaries were reformed into a single entity known as Hytera US, and a bankruptcy judge ruled that the new entity would not have any legal liability in the civil case.

These civil actions should not be confused with the pending criminal case that the U.S. Department of Justice has filed against Hytera Communications and seven former Hytera employees for allegedly conspiring to steal intellectual property from Motorola—their previous employer—and sharing the information Hytera’s DMR development team more than a decade ago. The criminal trial is scheduled to begin on Feb. 5, according to court documents.