Shenzhen seller pleads guilty! Will face a $60 million fine

In recent years, more and more companies have run into difficulties due to intellectual property issues during the process of expanding into the international market, which has brought a huge impact on the development of the companies.

Hytera signs plea agreement

Recently, Hytera signed a plea agreement in the U.S. Federal Court in Illinois, admitting that it had infringed on Motorola Solutions' digital mobile radio technology trade secrets.

According to the agreement, Hytera will face a fine of up to $60 million and will be required to pay compensation to Motorola Solutions for the theft.

Shenzhen Hytera Communications Co., Ltd. is a global leader in the field of dedicated communications. Since its establishment in 1993, it has focused on the research and development, production, sales and service of professional wireless communication equipment such as walkie-talkie terminals and trunking systems, as well as some OEM business. As early as 2001, Hytera embarked on the journey of internationalization.

After years of development, Hytera has become the second largest supplier in the global private network communication terminal market. Together with Motorola, it is in the first echelon of the global private network communication market and has a high reputation and brand influence in the world.

From a financial perspective, Hytera's performance in recent years has been quite impressive. From 2008 to 2023, the company's revenue has increased from 600 million yuan to 5.653 billion yuan, and its non-GAAP net profit has also increased from 44.1 million yuan to 97.51 million yuan.

In the first half of 2024, Hytera continued to maintain its strong growth momentum, achieving operating income of 2.738 billion yuan, a year-on-year increase of 21.28%; net profit reached 162 million yuan, a significant year-on-year increase of 109.79%.

Hytera and Motorola are direct competitors.

The dispute dates back to 2008, when six Motorola Malaysia employees were accused of obtaining and leaking documents and source code of Motorola's digital mobile radio (DMR) products to Hytera.

In 2017, Motorola formally filed a lawsuit against Hytera, claiming that the company poached senior engineers from the company and took away more than 7,000 technical documents to accelerate the development of its own digital two-way radio. The lawsuit ended with Motorola winning the case, and Hytera was ordered to pay approximately $543 million in damages.

In August 2018, Motorola filed a new copyright infringement lawsuit in an Illinois court, claiming that some of Hytera's products infringed U.S. copyrights.

In February 2020, a jury in the United States District Court for the Northern District of Illinois ruled that Hytera had infringed one or more of Motorola's trade secrets and U.S. copyrights and was required to pay a total of US$765 million in damages.

In 2021, the U.S. Department of Justice filed felony charges against Hytera and seven of its employees, including former executive Gee Siong (GS) Kok. The U.S. federal grand jury indictment listed 21 federal criminal trade secret infringement charges, alleging that Hytera participated in a decade-long criminal conspiracy to steal and exploit Motorola's trade secrets and proprietary information.

On February 7, 2022, the U.S. Department of Justice formally filed criminal charges against Hytera, accusing it of conspiring with former employees of Motorola Solutions to steal proprietary business data of digital mobile radios (walkie-talkies).

The next day, Hytera issued an "Announcement on Progress of Major Litigation", expressing its disappointment with the allegations, insisting that the allegations of the US Department of Justice lacked factual basis, and stated that it would actively respond with legal means and factual basis.

In July of the same year , the Northern District Court of Illinois ruled that Hytera must pay Motorola additional trade secret and copyright infringement royalties starting from July 2019.

In 2023, the person involved, Geesiong (GS) Kok, pleaded guilty and is awaiting sentencing.

By 2024, events had escalated further.

On April 2, a judge of the U.S. District Court for the Northern District of Illinois signed an order imposing an injunction and additional sanctions on Hytera, ordering it to suspend the sale of two-way radio technology products worldwide and impose a fine of $1 million per day.

Faced with this situation, Hytera quickly fought back and filed an appeal with the U.S. Court of Appeals for the Seventh Circuit on April 4, U.S. time , regarding the product ban and other orders, requesting the revocation of the original order.

In the early morning of April 17, the Court of Appeal ordered the suspension of the product ban and fine issued by the first instance court, and Hytera immediately resumed its business activities and product sales.

On July 2, the U.S. Court of Appeals for the Seventh Circuit ruled that the district court needed to recalculate copyright damages while maintaining the $135.8 million in compensatory damages and $271.6 million in punitive damages awarded under the DTSA.

Hytera's guilty plea will undoubtedly cause serious damage to its brand image, and may lead to reduced customer trust and reduced market share.

In addition, even if a plea agreement is signed, Hytera may still face continued civil litigation and other potential legal disputes from Motorola, which will be extremely detrimental to its market expansion in the private network communications field in the United States and even the world.

TP-Link's huge settlement

This incident once again highlights the importance of intellectual property rights in the industry and serves as a wake-up call for companies in the industry. When expanding international business, companies must strengthen their intellectual property management and risk prevention awareness to avoid similar legal disputes and losses.

It is worth noting that not long ago, the highly-watched infringement case of Shenzhen's big seller TP-Link in the United States finally came to a conclusion.

The final outcome of this infringement case that lasted more than a year was that TP-Link reached a settlement with US network equipment supplier Netgear.

As part of the settlement, TP-Link agreed to pay Netgear $135 million (approximately RMB 980 million) to end all legal disputes between the two parties and withdraw all pending lawsuits.

It is understood that Netgear was founded in January 1996 by founder Patrick lo and co-founder Mark Merill in Silicon Valley, California, USA. Its main business is to provide innovative products and high-quality smart home wireless solutions for global commercial enterprise users and home personal users. Its products include whole-house Mesh WiFi, WiFi routers, USB WiFi adapters, etc. At present, Netgear has established branches in 34 countries around the world, and its products are sold through 59,000 dealers at 31,000 retail terminals around the world.

TP-Link is a brand of Shenzhen TP-Link Technology Co., Ltd., which was established in 1996. It is a mainstream manufacturer in the industry specializing in the research and development, manufacturing and marketing of network and communication terminal equipment, and is a leading global supplier of network communication equipment.

Netgear and TP-Link have very similar product lines and can be considered direct competitors.

The patent dispute between TP-Link and Netgear ended with TP-Link paying a huge settlement.

Therefore, cross-border e-commerce companies should learn lessons from this and strengthen their compliance awareness and risk management capabilities.

In the course of daily operations, it is important to pay attention to intellectual property issues, conduct market research and risk prevention, and conduct early warning research on trademarks and patents to prevent potential infringements. If there is a possibility of infringement of the patent rights of American companies, the product should be modified in a timely manner to avoid infringement of intellectual property rights.

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