Sanctions on Hytera halted by appeals court

By Lauren Davis
Thursday, 18 April, 2024

Sanctions on Hytera halted by appeals court

Hytera Communications Corporation celebrated something of a win this week, after a US appeals court granted a request to stay federal district-court sanctions that temporarily prevented the LMR manufacturer from selling its two-way radio products worldwide. The sanctions in question, issued by the US District Court for the Northern District of Illinois, enjoined Hytera and all of its officers, agents, employees, affiliates, subsidiaries, distributors and resellers from selling, importing, exporting or distributing any products containing two-way radio technology anywhere in the world, pending Hytera’s full compliance with the court’s anti-suit injunction orders.

The sanctions were the latest chapter in a years-long trade secrets and copyright infringement dispute between the Shenzhen-based Hytera and Illinois-based Motorola Solutions, which began in 2017 when Motorola accused Hytera of infringing on the former’s trade secrets. In February 2020, the Illinois court ruled that Hytera pay Motorola a total of US$765 million in compensation for damages and royalties for trade secrets and copyright infringements (this amount was eventually reduced to US$543 million, plus further royalties). Attorneys representing Motorola had previously requested an injunction blocking global sales of Hytera DMR products in order to coerce the company to begin making payments; indeed, Hytera narrowly avoided such an injunction back in September 2023 after making a US$56 million royalty payment into an escrow account for Motorola (the funds of which will only be released once all appeals have been resolved).

With Hytera having already appealed the 2020 ruling to the Seventh Circuit Court of Appeals, the company filed a lawsuit in the Shenzhen Intermediate People’s Court in June 2022 that sought a declaratory judgment that Hytera’s H-Series DMR products do not infringe Motorola Solutions’ trade secrets and copyrights, and therefore should not require royalty payments. The Shenzhen court agreed to hear the claim in February 2023 and requested that Motorola provide rebuttal evidence by 1 April 2024.

Motorola subsequently filed a motion for injunction in the US court, requesting that Hytera withdraw its complaint in the Shenzhen case. The US court granted the motion on 25 March 2024, at which point US District Court Judge Martha Pacold directed Hytera Communications to “refrain from further pursuing or enforcing” the case in the Chinese court. On 2 April, Pacold found that Hytera had violated these orders and placed sanctions that blocked global sales of the company’s two-way radio products (Hytera announced the suspension of sales on 7 April). Pacold also ordered Hytera to pay a daily fine of US$1 million until it was in full compliance with the anti-suit injunction orders.

Hytera was quick to say it was dropping its case with the Chinese court, with a three-judge panel in Shenzhen verbally agreeing on 7 April that the H-Series lawsuit would be withdrawn. But while Pacold refused for several days to drop the injunction order without a written statement from the Shenzhen court, the Seventh Circuit Court of Appeals was satisfied with Hytera’s request to halt the worldwide ban and further accumulation of the daily fine.

“The Shenzhen court’s actions of April 7 certainly seem to have ended the proceedings related to Hytera’s H-Series products, which is the result the district court sought through the contempt sanctions and anti-suit injunctions,” the appeals court’s order said.

“Even if the Shenzhen court were to issue an order reopening the case, the anti-suit injunction remains in place to prevent Hytera from taking advantage of such an order. And both the district court and this court could be expected to react even more harshly in that scenario.”

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