On April 7, it was reported that recently, Shenzhen Hytera Communications Co., Ltd. (hereinafter referred to as "Hytera") issued an announcement through the company's official website, saying, "According to the order of the U.S. court, until further notice, Hytera shall not sell any products containing walkie-talkie technology anywhere in the world." ”
According to the original text of the decree issued by the U.S. District Court for the Northern District of Illinois provided on Hytera's official website, Hytera issued a contempt order for the court to withdraw and withdraw its lawsuit filed with the Shenzhen Intermediate People's Court in June 2022 (which sought a declaratory judgment that its H series products do not infringe Motorola's trade secrets and copyrights).
The sanction order requires Hytera to stop selling products containing two-way radio communication technology worldwide, pay a daily fine of US$1 million to the court, and prohibit it from enforcing or relying on the judgment rendered in the Shenzhen Intermediate People's Court before complying with the relevant anti-suit injunction. The order will take effect from April 2, 2024, until Hytera fully complies with the court's order or the court directs otherwise.
At present, Hytera's related products on domestic shopping platforms have been fully removed from the shelves.
On the morning of April 8, Hytera issued an announcement in response to the injunction, saying, "The company has withdrawn the lawsuit in the Shenzhen case, suspended the sale of two-way radio technology products as required, and has applied to the U.S. court to revoke the above order, and is currently conducting hearings in the U.S. court." The Company will take further countermeasures to revoke the above order in the shortest possible time. ”
The course of the case
In March 2017, two wholly-owned subsidiaries of Hytera, Hytera Inc. (USA) and Siemens Solutions (USA) and Siemens West Coast, Inc., received a complaint from the Illinois State Court in the United States, whereby Motorola Solutions Inc. and Motorola Solutions Malaysia Inc. sued Hytera Inc. for trade secret infringement, arguing that some of Hytera's products infringed Motorola Solutions' trade secrets.
Motorola Solutions claims that its former employees downloaded thousands of classified documents and brought them out of the company while working at Motorola. During this period, Hytera paid the employee without Motorola's knowledge. During the trial, Motorola finally made it clear that it claimed that some of Hytera's DMR products infringed Motorola's 21 trade secrets and 4 US copyrights, and demanded that Hytera, the US company and the US West Company pay corresponding compensation for their infringement.
(On a note that Motorola Inc. was split into Motorola Mobility and Motorola Solutions on January 4, 2011.) Lenovo previously acquired Motorola Mobility, and Motorola Solutions remains an independent company. ）
On February 14, 2020, a jury of the Northern District Court for the Northern District of Illinois made a first-instance verdict, finding that Hytera had infringed one or more of Motorola Solutions' trade secrets and U.S. copyrights, and sentenced it to pay Motorola US$345,761,200 in infringement damages and US$418,800,000 in punitive damages, totaling US$764,561,200, or approximately RMB5.334 billion.
On February 21, 2020, the Northern District Court of Illinois heard Motorola Solutions' motion for a temporary injunction with respect to the products in question.
On March 5, 2020, a judge in the Northern District Court of Illinois issued a first-instance judgment in the case, upholding the jury verdict and ordering Hytera, U.S. and Maxima to pay $345,761,200 in damages and $418,800,000 in punitive damages to Motorola Solutions, totaling $764,561,200.
On March 8, 2020, Hytera announced that in response to the first-instance judgment, Hytera will file an application for a retrial of the case and a motion for the court to change the judgment in accordance with the law, and if the court does not support the company's motion, the company will appeal to the appellate court to protect the company's legitimate rights and interests. The appeal process generally lasts 2-3 years.
After the first-instance judgment, the parties held a hearing on the payment method of the license fee and related matters, and Hytera provided a license fee guarantee of approximately US$56 million in cash to the court-supervised condominium account in accordance with the court's requirements.
On January 12, 2021, Hytera issued another announcement stating that the judge of the Northern District of Illinois recognized Hytera's opinion that the amount of compensation for R&D expenses proposed by Hytera in the post-trial procedure was a duplicate amount of damages, and reduced the amount of compensation previously awarded, of which the amount of damages for trade secrets was reduced by US$73.6 million, the amount of punitive damages for trade secrets was reduced by US$147.2 million, and the overall amount of damages was reduced from US$765 million to US$543 million, a decrease of US$222 million. At the same time, the judge also rejected Motorola Solutions' motion for additional compensation in the post-trial proceedings, but upheld Motorola Solutions' motion for interest compensation, after which the parties should submit their opinions to the court on the amount and manner in which the interest was calculated.
On September 8, 2021, Hytera announced that it had appealed to the U.S. Court of Appeals for the Seventh Circuit the results of the first-instance judgment and the subsequent motion judgment in the trade secret and copyright infringement lawsuit with Motorola Solutions. The scope of appeal includes, but is not limited to, the judgment of the first instance, the judgment on the license fee, the judgment on interest, the judgment on litigation miscellaneous expenses, and the judgment on attorney's fees (the amount to be determined).
On February 7, 2022, the U.S. Department of Justice also announced a criminal indictment against Hytera, accusing it of conspiring with a former employee of Motorola Solutions to steal proprietary business data for its digital mobile radio, known as "walkie-talkie".
In response to the U.S. Department of Justice's allegations, on the evening of February 8, 2022, Hytera issued the "Announcement on the Progress of Major Litigations", stating that "the company is deeply disappointed by the allegations and believes that the content of the U.S. Department of Justice's allegations has no factual basis, and the company should not be included in the allegations." The company strongly opposes the accusations made by the U.S. Department of Justice, and will resolutely respond to this matter with legal means and factual basis, and resolutely safeguard the legitimate rights and interests of the company. ”
However, Hytera also said at the time that "if the charges are ultimately established, the company may be fined no more than three times the value of the trade secrets." ”
In July 2022, the Northern District Court of Illinois also ruled that Hytera should also pay Motorola additional trade secret and copyright infringement royalties since July 2019.
Litigation with Motorola in China
On November 14, 2017, Hytera extended the litigation between the two parties to China, suing Motorola Solutions (China) Investment Co., Ltd., Motorola Solutions (China) Co., Ltd., and Motorola Solutions (China) Co., Ltd. Beijing Branch (hereinafter referred to as "Motorola") to the Beijing Intellectual Property Court, requesting the court to order Motorola to stop its monopolistic behavior of abusing its dominant market position and compensate for losses of 60 million yuan and reasonable expenses of 500,000 yuan.
On November 26 and 27, 2019, the case was heard at the Beijing Intellectual Property Court. It is understood that because the case involved some trade secrets, the court held a closed hearing of the case.
Hytera claimed that Motorola had a dominant market position in the private metro network communication market in a specific city (in this case, it was clearly defined as the Chengdu subway private network communication market), and that Motorola's refusal to open the interconnection interface to Hytera and the realization of system-level interconnection without justifiable reasons eliminated and restricted competition in the subway private network communication market, which was a monopolistic act of abusing its dominant market position as stipulated in Article 17 of the Anti-Monopoly Law, which caused substantial damage to Hytera and should bear corresponding legal liability.
Accordingly, Hytera requested that Motorola be ordered to cease the above-mentioned monopolistic behavior of abusing its dominant market position, and that Motorola be ordered to compensate for losses of RMB 49,266,000 and reasonable expenses of RMB 1,056,184.
Motorola argued that the relevant market in this case should be the national market for wireless communication equipment for urban rail transit, that Hytera asserted that an open interface was not a necessary facility for interconnection, that Motorola's refusal to open an interface was a legitimate exercise of its legitimate rights to intellectual property rights, and that there were reasonable reasons, that Motorola itself did not have the ability to restrict transactions, and that there was no objective fact that transactions were restricted, and that Hytera did not suffer any losses due to any of Motorola's actions. Motorola said that Hytera's claims had no factual basis or legal basis, and therefore requested that all of Hytera's claims be dismissed.
On January 19, 2020, the Beijing Intellectual Property Court rendered a first-instance judgment in the case, finding that although Motorola had a dominant position in some of the relevant markets claimed by Hytera, it did not constitute an abusive act, and rejected all of Hytera's claims.
Hytera also sued Motorola in Guangzhou and Shenzhen. On October 22, 2019, the Guangzhou Intellectual Property Court rejected Hytera's claim in the first instance. On December 10, 2020, Hytera v. Motorola was heard in the Shenzhen Intermediate People's Court.
On July 10, 2020, the Supreme People's Court held a joint hearing to hear the appeal case of Hytera, Motorola Co., Ltd., and Guangzhou Tengyuan Communication Equipment Co., Ltd. (hereinafter referred to as "Tengyuan Company") over infringement of invention patents and utility model patents. Hytera claimed that Motorola and Tengyuan manufactured, sold and offered to sell products suspected of infringing its patent rights, and requested that the defendant be ordered to pay RMB 50 million in compensation and bear other reasonable expenses.
On December 7, 2020, the Second Court of the Intellectual Property Tribunal of the Supreme People's Court held a public hearing on the case of utility model patent infringement between Shenhai Terta Communications Co., Ltd., Motorola Solutions (China) Co., Ltd. and Guangzhou Tengyuan Communication Equipment Co., Ltd.
Reasons and main contents of the sanction order:
In June 2022, Hytera filed a lawsuit with the Intermediate People's Court of Shenzhen, China, seeking a declaratory judgment finding that its H series products did not infringe the trade secrets and copyrights of Motorola Solutions Inc. ("Motorola") (China litigation). The Shenzhen Intermediate People's Court agreed to hear Hytera's claim in February 2023 and required Motorola to provide rebuttal evidence by April 1, 2024.
Motorola believes that this is an "unreasonable" attempt by Hytera to circumvent the authority of the Northern Illinois District Court, and asked the judge to prohibit Hytera from filing a lawsuit in China. Motorola also argued that it could not trust the Shenzhen court to protect any trade secrets it presented as rebuttal evidence. "There are currently no safeguards in place to prevent Motorola's trade secrets and source code from being improperly disclosed, nor can there be any assurance that Shenzhen courts will impose restrictions on access to these materials to adequately protect Motorola," it said in court filings. ”
Hytera countered that the H-series radio products were launched in October 2021 and are therefore not subject to either the 2019-2020 trial or the court's 2022 royalty order.
In addition, Hytera, in response to Motorola's motion for contempt of court proceedings, argued that "there is nothing wrong or vexatious in Hytera's pursuit of a judicial determination on the justification of its conduct in its own country." It took nearly a year for the parties to litigate against Motorola's contempt charges based on royalties, which Motorola never proposed to apply to the H-Series. Hytera also argued that Motorola's accusation that the Shenzhen court was untrustworthy was a malicious argument, saying there was no reason to believe that China's judiciary would not provide Motorola with the same protections it enjoys in the United States.
On March 25, 2024, the U.S. District Court for the Northern District of Illinois instructed Hytera to "refrain from further initiating or enforcing its lawsuit against Motorola in China" and ordered Hytera to "withdraw from the lawsuit" on March 29, 2024...... including the withdrawal of the indictment ......".
With regard to the reasons for the "contempt order" against Hytera, the U.S. District Court for the Northern District of Illinois found that Hytera had violated the order (Dkt.15041508), including the order discussed at the teleconference on April 2, 2024, and that it had not complied with the court's request to withdraw and withdraw its lawsuit filed with the Shenzhen Intermediate People's Court in June 2022, and therefore issued a contempt order:
1. Sales and distribution bans:
Until Hytera fully complies with the anti-suit injunctions of the Northern District Court for the Northern District of Illinois (Dkts.1504, 1508), Hytera and all of its officers, agents, employees, affiliates, subsidiaries, distributors and resellers, as well as all persons actively cooperating with or participating in the order who have received actual notice from it through personal services or otherwise, are temporarily prohibited from performing any of the following acts:
(1) It is prohibited to sell, sell, import, export or otherwise distribute any two-way radio product anywhere in the world. In order to encourage compliance with this ban, Hytera shall, no later than three calendar days after the entry into force of this ban, notify in writing all of its agents, affiliates, subsidiaries, distributors and resellers of any type of distributors and resellers, customers and potential customers of its two-way radio products anywhere in the world, using the last known means of electronic communication of the entity or individual (or, if such one does not exist, by sending a hard copy of the order to its last known physical address) to such entities and/ or the individual is required to comply with the injunction, including an accompanying proforma notice.
In addition, Hytera shall, within three calendar days of the effective date of this ban, publicize the effective date of this ban by prominently posting the following notice on the home page of its website and on any page on which it sells any two-way radio product (including all pages of Hytera's website maintained in any region or language, in the language of that region): "Notice: Pursuant to an order of a U.S. court, Hytera is prohibited from selling any product containing two-way radio technology anywhere in the world until further notice", with a link to a copy of this order.
Within five calendar days after this prohibition takes effect, Hytera shall submit to the Court evidence that it has complied with the above notification requirements, including a list of all persons to whom it has provided notice, including its notified agents, affiliates, subsidiaries, distributors, distributors, distributors of any kind, customers and potential customers, copies of its communications with such entities and/or individuals, copies of its press releases issued, and confirmation by providing screenshots that it has placed the required notices on all necessary website pages.
Motorola will be permitted to notify the public, including but not limited to the effective of the ban imposed on Hytera by its agents, distributors, dealers, customers and potential customers.
2. Daily fines:
Until Hytera fully complies with the court's injunction, Hytera will have to pay a fine of US$1 million per day to the court.
3. Prohibition of reliance on any order or judgment of litigation in China:
Hytera was ordered not to enforce or rely on any order or judgment issued by the Shenzhen Intermediate People's Court in the PRC litigation until the contempt proceedings in this case in respect of the H-Series were concluded, and the court could consider and make further orders to remedy any adverse effects that Motorola may suffer.
The above prohibition has been in effect since April 2, 2024, until Hytera fully complies with the court's order or the court directs otherwise.
Hytera responded: It is actively applying to revoke the above order
In recent years, China's telecommunications companies have been the focus of the United States. For example, ZTE was once included in the Entity List by the United States, but eventually paid a fine of about $2.29 billion and was subject to financial supervision by the United States before finally being removed from the Entity List. Since Huawei was included in the entity list in 2019, the United States has also increased sanctions against Huawei several times, making it not only impossible for Huawei to manufacture its own chips, but also severely restricted the purchase of third-party non-American chips. In addition, Chinese telecommunications companies such as Hytera and Fiberhome Communications have also been included in the "blacklist" by the United States.
In order to block Chinese telecommunications equipment companies, on June 30, 2020, the FCC issued an official statement officially listing Huawei and ZTE as companies that so-called "pose a national security threat", prohibiting U.S. telecom operators from using government subsidy funds to purchase any equipment from Huawei and ZTE. In March 2021, the FCC announced that it would blacklist five Chinese companies, including Huawei, ZTE, Hytera, Hikvision, and Zhejiang Dahua, in accordance with the Secure and Trusted Communications Network Act of 2019. In November 2021, U.S. President Joe Biden officially signed a bill prohibiting U.S. regulators from granting new equipment licenses to Chinese companies such as Hytera and Huawei, which are deemed "security threats."
On the morning of April 8, Hytera issued an announcement in response to the injunction, saying, "The company has withdrawn the lawsuit in the Shenzhen case, suspended the sale of two-way radio technology products as required, and has applied to the U.S. court to revoke the above order, and is currently conducting hearings in the U.S. court." The Company will take further countermeasures to revoke the above order in the shortest possible time. ”
The announcement also disclosed that according to Hytera's audited financial data for 2022, the company's professional wireless communication equipment manufacturing revenue accounted for 83.31% of operating income, of which two-way radio technology-related products were the main components. Obviously, the ban has a great impact on Hytera's business.
Hytera emphasized, "At present, the company is actively applying for the revocation of the above-mentioned judgment, but there is some uncertainty about the follow-up progress of the case. The company will strictly comply with the requirements of securities laws and regulations, timely fulfill the obligation of information disclosure, please make prudent decisions and pay attention to investment risks. ”
It is worth noting that in order to stabilize the stock price, Hytera also issued the "Announcement on the Voluntary Commitment of the Controlling Shareholder and Actual Controller not to reduce the Company's Shares" at the same time as the above-mentioned response announcement, in which Mr. Chen Qingzhou, the controlling shareholder and actual controller of the Company, voluntarily promised: within 6 months from now on (i.e., from April 8, 2024 to October 7, 2024), he will not reduce his holdings of the company's shares by centralized bidding and block trading, including the conversion of this part of the shares into share capital due to capital reserve during the commitment period. Shares increased due to the distribution of stock dividends, allotments, additional issuances, etc.
Source: Xinzhixun
Editor: Sharon