How long and how domineering is the hand of the US courts? An injunction has led Hytera, China's largest walkie-talkie company, to ban the sale of two-way radio technology products worldwide and impose a daily fine of $1 million until the anti-suit injunction is fully complied with.
Under the majesty of the U.S. court, Hytera had no choice but to comply, consciously removed all two-way radio technology products, as soon as the news came out, the stock price fell to the limit, and continued to fall the next day, and the fall limit was opened half an hour before the close, which was a life and death disaster for Hytera, and the risk of bankruptcy rose sharply.
1. Motorola was sued in court, and the U.S. court ordered a fine of $760 million
On March 15, 2017, Motorola and Rotorola's Malaysian subsidiaries sued Hytera and Hytera's U.S. subsidiaries as plaintiffs for patent, trade secret and copyright infringement.
Three years later, on February 14, 2020, the jury ruled that Hytera and its subsidiaries infringed Motorola's trade secrets and U.S. copyrights, and should pay Motorola US$346 million in damages and US$419 million in punitive damages, totaling US$765 million, at the exchange rate at the time of about RMB5.33 billion.
In 2019, although Hytera's revenue was 7.8 billion yuan, its net profit was only more than 80 million, and the most profitable year in history was less than 500 million yuan, when the company's net assets were only 6.1 billion yuan and monetary funds were 1.26 billion.
This is a "bankruptcy-style judgment", which Hytera cannot afford anyway, of course, Hytera still has its own reasons for believing that it has not infringed, so it filed two motions with the court in April of the year of the judgment, the main contents of which include:
1. Request a new trial of the case;
2. Motorola has not proved that the asserted technology meets the requirements of trade secrets and should not be awarded damages, Motorola's claim for trade secrets has exceeded the statute of limitations and should not be supported, and the company has not intentionally or maliciously infringed Motorola's trade secrets, and should not be awarded punitive damages;
3. It should not have extraterritorial effect, and the calculation of damages should be limited to profits generated in the U.S. market;
4. Motorola's negligence in exercising its rights led to the expansion of losses, and it is extremely unfair to require the company to bear all the losses of Motorola, and the judgment amount should be reduced;
5. There is evidence that Motorola has waived its rights to so-called "trade secrets", and it should not be unduly compensated for this.
On the same day, Motorola also filed two motions with the court, the main contents of which include:
1. Request an increase of $145.7 million in interest on compensation as of April 2, 2020, and continued interest on compensation payments thereafter at the rate of $45,400 per day;
2. US$400 for each product sold after April 2, 2020;
3. Apply to the judge to issue a global permanent injunction prohibiting Hytera from selling the products involved in the lawsuit worldwide.
Motorola's series of lawsuits is basically to bankrupt Hytera, not only high compensation, but also issued a global hunt (ban) order, judging from Hytera's motion, Hytera's confidence is not enough, and the purpose of the pursuit is mainly to reduce the amount of compensation and punishment.
2. Hytera's motion was partially supported, and the amount of compensation and penalties was lowered from US$765 million to US$543 million
After Hytera submitted the two motions, it received partial support from the court and lowered part of the damages in January 2021, specifically, the partial damages for trade secrets were reduced by US$73.6 million, the compensatory damages for trade secrets were reduced by US$147.2 million, for a total of US$222 million, and the total damages were reduced from US$765 million to US$543 million, which was about RMB3.56 billion at the exchange rate at the time, accounting for 58% of the net assets at the end of 2020 That's about 2.57 times the company's monetary funds, which is still a very high compensation.
What did the court view of the two motions submitted by Motorola at that time? It did not support the content of the motion to increase the compensation, but it supported the motion to compensate for interest, and required both parties to submit to the court the specific calculation method of interest, and finally the court decided, which is equivalent to subtracting a part and adding a part, and the case is still not over here.
In December 2020, the U.S. court rejected Motorola's motion to issue a global injunction to prohibit Hytera from selling the products involved in the lawsuit worldwide, but agreed to an appropriate and reasonable royalty, the specific amount of which was to be negotiated by both parties.
In August 2021, Hytera announced that the court rejected Motorola's proposal to calculate the compensation interest, and adopted the calculation proposal provided by Hytera itself, with a total compensation interest of US$51.13 million. However, Hytera did not agree with the amount of the court's first-instance judgment, so it did not agree with the judgment of the amount of compensation interest, but only provided a reasonable calculation method for the interest, and the judge accepted it.
In September 2021, Hytera appealed the first-instance trial and other motion judgments to the U.S. Court of Appeals for the Seventh Circuit, and the case entered the appeal stage again.
In October 2021, the court ordered Hytera to pay Motorola 34.24 million US dollars in legal fees, which is about 230 million yuan when converted into RMB. From the beginning of 2017 to the end of 2021, the case has not yet been understood.
3. Hytera can't escape the long-arm jurisdiction?
The law is Motorola's weapon, and it will also become a sharp weapon for Hytera to fight back, on the one hand, appealing, and at the same time, bankruptcy reorganization of subsidiaries or grandchildren in the United States.
In May 2020, Hytera's three subsidiaries (grandchildren) in the United States took the initiative to apply for bankruptcy reorganization with the local bankruptcy court, and at the same time, through business and asset restructuring and the construction of new channels, the normal development of business in the United States was guaranteed. In January 2022, the liquidation draft was approved by a vote of all creditors.
In February 2022, the U.S. Department of Justice also stepped in, accusing Hytera of conspiring with former Motorola employees to steal technology and filing criminal charges against Hytera. If the charge is confirmed, a fine of up to three times the value of the trade secret will be imposed.
In July 2022, the U.S. Illinois State Court made a decision on the pending motions filed by the parties after the first-instance judgment, rejecting Motorola's motions filed after the first trial, including the motion to reconsider the court to grant a permanent injunction and the motion to force the transfer of the company's funds.
In September 2023, Hytera paid a license fee guarantee of US$56 million to the court's condominium account, and at this point, the first instance ended and Hytera entered the appeal stage. Hytera's products involved in the lawsuit have also been basically discontinued, and the H series products are fully replacing the previous generation of products and are not affected by the lawsuit.
At this point, it can be seen that Hytera's response is to appeal at the judicial level and file for bankruptcy reorganization at the operational level in the United States. In China, the traditional products involved in litigation have been completely discontinued, and the old products have been completely replaced by H series products, so as to avoid intellectual property disputes.
In 2022, Hytera applied to the Shenzhen Intermediate People's Court for the H series products not to infringe Motorola's trade secrets and copyrights. It is hoped that Chinese law will be used against American law.
After entering the trial session at the Shenzhen court, Motorola could not sit still and submitted a motion for an anti-suit injunction to the U.S. court, that is, it must not use Chinese law against U.S. law.
On March 25, 2024, a U.S. court granted Motorola's motion for an anti-suit injunction.
Hytera should not agree with this anti-suit injunction and did not fully comply with it, so there was a recent anti-suit injunction, which temporarily prohibited Hytera from selling two-way radio technology products worldwide on the grounds that Hytera failed to fully comply with its anti-suit injunction, and imposed a fine of US$1 million per day until the anti-suit injunction was fully complied with.
Hytera is scared because according to the data of 2022, the company's professional wireless communication equipment manufacturing revenue accounts for 83.31% of operating income, of which two-way radio technology-related products account for the main component. This is equivalent to banning the sale of most of Hytera's products, and if the ban cannot be revoked as soon as possible, Hytera will suffer huge losses.
Through this matter, we can see the hegemony of the U.S. law and how long the hand is, to be able to casually order a Chinese company to ban the sale of major products globally, note, not only the products involved in the lawsuit, but all products, this is the long-arm jurisdiction, during Yellen's visit to China, so decided, this is the next step, Hytera is China's largest two-way radio technology company (walkie-talkie), and it was banned by the United States on a piece of paper.
If according to the judgment of the first instance of the U.S. court, Hytera has to shed its skin even if it is not dead, and the annual net profit is hundreds of millions, and now the penalty amount and interest are 600 million US dollars, accounting for two-thirds of the company's net assets.
I'm not a legal person, but after combing through the litigation between the two sides, I feel that Motorola just wants a huge amount of compensation, and the US court also supports it, and it is difficult for Hytera to avoid such a huge amount of compensation through other means, from anti-suit injunctions to anti-sale injunctions, which is a whip that will train all disobedient companies in other countries to be obedient.