High-Stakes IP Misappropriation Leads to Trade Secret Lawsuit
This episode of the podcast delves into a high-stakes trade secret infringement case between Motorola Solutions and Hytera, a Chinese company accused of stealing proprietary information related to high-value walkie-talkies. These walkie-talkies are essential tools for emergency services such as police, fire departments, and military operations. The discussion highlights how Hytera allegedly recruited engineers from Motorola, offering substantial stock incentives, and obtained around 10,000 documents, including software code that later appeared in Hytera’s products. Critical evidence of misconduct included not only the replication of mistakes in Motorola’s code but also the circulation of internal documents that still bore Motorola’s logo.
Trade Secret Appeal Outcomes and Implications for Multinational Companies
The appeal in this case centered on Hytera’s attempts to minimize damages and argue jurisdictional points, given that much of the alleged theft occurred overseas via mirrored servers. Despite these arguments, the court upheld a $407 million damages award for trade secret theft, emphasizing that global sales stemming from the theft could be included in the calculation. This distinction between copyright, limited to U.S. damages, and trade secrets, which can account for worldwide impact, underscores the unique power of trade secret laws for global asset protection.
A key element of the case was the denial of a permanent injunction by the trial court, which the appellate court questioned. The potential for permanent injunctions to prevent companies from making, using, or selling products incorporating stolen trade secrets is significant, especially in high-value industries. Hytera’s failure to comply with royalty payments added further weight to Motorola’s argument for stronger enforcement measures. The case thus highlights the complexities of balancing cash damages with equitable remedies like injunctions.
This case sets a critical precedent for international trade secret protection, particularly for multinational companies navigating global operations. The jurisdictional challenges posed by mirrored servers and cross-border theft amplify the need for companies to proactively safeguard their assets. The court’s decisions in this case offer a roadmap for leveraging U.S. trade secret laws to hold perpetrators accountable, even when the theft occurs overseas. As businesses operate across increasingly interconnected markets, the implications for how trade secrets are protected—and litigated—are vast and far-reaching.
収穫：
- This is a high-stakes trade secret misappropriation case.
- The case involves high-value walkie-talkies used by emergency services.
- Evidence of misconduct included mistakes in code and documents with logos.
- The appeal focused on minimizing damages and jurisdictional arguments.
- Trade secret laws allow for global damages calculations.
- The court affirmed a significant damages award for trade secret theft.
- Permanent injunctions can prevent companies from using stolen trade secrets.
- The case sets a precedent for international trade secret protection.
- Jurisdictional challenges arise with global operations and mirrored servers.
- Future implications for multinational companies are significant.
Transcript:
Tim (00:01.294)
Hey Chris, episode number 10. We’re in the double digits. Amazing. I’m going to make a commitment to you and our listeners—we’re going to have a jingle by episode 11. We’ve got to figure it out. Anyway, we figured out the name in real time on episode one, so don’t you think we can do a jingle in real time?
Chris Buntel (00:02.421)
I too. We’re in double digits. Awesome. Time flies.
Tim (00:29.582)
Episode 10 here, but by episode 11, we’ll have a jingle. Promise. Awesome. Yeah, maybe around episode 15 or 20, we’ll worry about a logo. So, you picked today’s case based on some feedback from last week’s conference. This is the 2017 case of Motorola Solutions.
Chris Buntel (00:32.395)
Okay. Jingle first, then logo comes next. So professional. Set your milestones!
Tim (00:59.8)
Versus Hytera. It was a trade secret misappropriation case filed under the DTSA, along with a copyright infringement case. It was filed in the Northern District of Illinois. Basically, we’re talking about walkie-talkies, right?
Chris Buntel (01:16.784)
It is, and it’s high-value walkie-talkies used by police, fire departments, ambulances, military—anyone like that. Definitely not like the walkie-talkies we used as kids.
Tim (01:25.89)
Yeah. Not the walkie-talkies we used to use.
Tim (01:34.514)
In fact, quick sidebar—one of our mutual friends, I was telling him he should get walkie-talkies for his kids. They live out in the country. I said, “It’s hours and hours of entertainment, just running around.” He said, “Is this the one?” and sent me a link. I said, “Yeah, that’s the one.” We went down that rabbit hole and found there are so many manufacturers now. That probably makes sense after hearing about this case.
Anyway, Motorola Solutions is basically half of the old Motorola, the half we used to all have in our pocket or use as our cell phone. Motorola split into two companies—Motorola Solutions and Motorola Mobility.
Actually, Motorola Solutions is no stranger to high-stakes trade secret cases. They had a big case against Huawei in 2011 that made a lot of headlines. We might touch on that at some point, but today we’re focusing on this Hytera case.
What we’re going to talk about today is the decision on the appeal. This was filed in December 2023, and we just got a decision in July 2024. The original trial court awarded $765 million.
Chris Buntel (03:02.398)
Yep.
Tim (03:24.178)
And they denied a permanent injunction. Maybe, Chris, with that setup—and noting this is really a software case at its core—why don’t you walk us through it? And I’ll just say, there’s some juicy stuff in this one. Real bad behavior, so I’m excited to go through it with you.
Chris Buntel (03:50.385)
Yeah, a lot of people at the Boston and CASACO trade secret event were talking about this case. It’s fascinating and could have real implications, especially for international and multinational companies.
What happened isn’t the main interest. What makes it interesting is where. Most US laws focus on bad behavior happening in the US, but here, most things happened overseas. There were three employees in Malaysia—one recruited by Hytera, which is based in China. That guy then recruited two colleagues, and they downloaded around 10,000 documents from a server in Malaysia, not the one back in Chicago. All the activity happened outside the US, but when Hytera started marketing and selling in the US, it triggered US jurisdiction.
Tim (05:22.162)
I’d say there’s also something special about the “what” here. The engineer was recruited by Hytera for some serious money, in the form of stock shares.
Chris Buntel (05:41.965)
Oh yes.
Tim (05:49.102)
600,000 shares of Hytera stock, worth about $2.5 million—serious money for an engineer or engineering manager, I’m guessing.
Chris Buntel (06:11.342)
Yeah, and he was double-dipping, working for both companies at the same time, so financially, he was doing pretty well.
Tim (06:20.182)
It’s amazing. It’s like he discovered working for two companies before everyone figured that out during COVID. Incredible. We’ll also talk about the evidence, like what was downloaded, the code, and so on.
Chris Buntel (06:44.505)
Yeah, so they ultimately downloaded about 10,000 documents. It’s interesting because a lot of it was the software code that Hytera then used to incorporate into its products.
One of the things we always wonder about is evidence of use. How do you prove someone stole your trade secret and used it in their own product? Here’s where it gets kind of interesting—or entertaining—there were mistakes in the Motorola code, and the exact same mistakes showed up in Hytera’s product. It’s a great way to show that someone copied. Not only did they copy the good stuff, but they also copied things that were coded poorly or miscoded. They didn’t even fix the mistakes.
Tim (07:34.339)
That’s amazing. I guess if you’re ever looking for a smoking gun, that’s the one, right?
Chris Buntel (07:43.8)
Absolutely. Another great one was that they downloaded a ton of documents, and of course, a lot of them had Motorola logos or names printed on them. A lot of those documents were circulated within Hytera with the Motorola logo still up in the corner. They didn’t even try very hard to conceal it—it’s just a Motorola document that happened to be circulating around. Pretty good smoking gun.
Tim (08:14.798)
So, in the way the decision reads, it’s as though Hytera isn’t arguing that they didn’t take the information. Is that right?
Chris Buntel (08:30.167)
Yeah, there’s no discussion or argument about what transpired. Normally, people will deny it, saying, “I didn’t do it,” or, “These documents were publicly available.” None of that here. There was no argument about whether they actually did it, which again makes this case kind of special.
Tim (08:42.892)
Right.
Tim (08:58.018)
So, on appeal, they were more concerned with minimizing damages and using arguments about territory or location?
Chris Buntel (09:12.459)
Exactly. Any appeal really looks at what the trial court did, checking for mistakes—whether they misunderstood a law, came to the wrong answer, or miscalculated a number. They usually don’t get into the facts; that’s more of a trial court issue.
This appeal focused on how to calculate damages for both copyright and trade secret, given the very international nature of the story. That’s ultimately what makes it interesting. It’s great news for a trade secret owner operating internationally.
For copyright, the appeal court limited damages to US sales, which is normal because US laws govern US behavior. But for trade secrets, the appeal court said global sales resulting from the theft of the trade secret could be considered for damages.
Tim (10:24.088)
Right. So, for copyright, only US damages, but for trade secrets, global damages?
Chris Buntel (10:37.812)
Exactly. Since the initial theft of the trade secret tainted everything stemming from it, they could use global sales for the damages calculation. The copyright damages will go back to the trial court to be recalculated for US sales only.
Tim (11:07.382)
Fascinating. So, on appeal, the trade secret damages of $407 million were affirmed?
Chris Buntel (12:18.03)
Yes. The appeal court affirmed the $407 million in DTSA damages, calculated using worldwide sales.
There were three main rulings: first, the copyright damages are being sent back to the trial court for recalculation, and they’ll be much smaller. Second, the $407 million trade secret damages were affirmed, which is a big win for trade secret owners. Third, they addressed the permanent injunction, which had been denied twice by the trial court.
Tim (12:52.077)
Got it.
Chris Buntel (13:07.262)
The trial court initially denied a permanent injunction during the normal course of litigation. Then, after Hytera was supposed to pay a royalty to Motorola as an alternative, they didn’t pay. Motorola went back to request a permanent injunction again, but the trial court denied it a second time.
The appeal court essentially told the trial court they should reconsider and likely grant the injunction. That’s a nice way of saying, “You need to do a permanent injunction.”
Tim (13:59.79)
So, the permanent injunction would mean Hytera can’t ship products that use the trade secrets?
Chris Buntel (14:09.332)
Correct. They wouldn’t be allowed to make, use, sell, or import products that infringe on Motorola’s trade secrets.
Tim (14:20.012)
I wonder—maybe this predates the ITC enthusiasm around trade secrets—but this feels like it could have an ITC element as well.
Chris Buntel (14:34.778)
It could. Motorola has used the ITC previously against Hytera, but those cases were on patent infringement, not trade secrets. Motorola is no stranger to the ITC, but the ITC doesn’t provide cash damages. Their only power is to block imports, which can be valuable, but here, Motorola wanted both cash damages and an injunction.
This case has been a long slog—they’ve been at it for many years. Meanwhile, ITC proceedings are much faster.
Tim (15:22.732)
Is Hytera going to have to pay Motorola’s legal fees? We’re talking serious money at this point, right? Seven years in?
Chris Buntel (15:30.459)
Yeah, I’m not sure. There wasn’t a discussion about legal fees in this appeal. I didn’t go back and review the trial court decisions in detail. But you’re right—this has been anything but quick and inexpensive litigation.
Tim (15:48.206)
I was talking to someone at DLA Piper recently, a trade secret litigator, and he said he worked on a single case for 12–14 years. Incredible to think about the time commitment.
Chris Buntel (16:08.741)
Wow, that’s amazing.
Tim (16:17.136)
Yeah. The time commitment for these things is huge.
Chris Buntel (16:17.872)
And tangibly, this case shows one of the great things about trade secrets—they’re a global asset. Unlike patents, which are country-specific, trade secrets operate globally.
In this case, the theft happened in Malaysia, one company was in China, and they enforced the case in Chicago. It’s truly a global asset, and global sales came under the damages. If I were a trade secret holder operating internationally, this case would be fantastic. That’s why there was so much buzz about it at the conference.
Tim (17:04.308)
One last question. There was some discussion about mirrored servers—data sitting in Illinois but also mirrored in Kuala Lumpur. How did that factor into the decision?
Chris Buntel (17:26.51)
It goes back to the question of where the activities occurred. There was a lot of discussion about mirrored servers. The main server was presumably in Chicago, but the engineers accessed it from Malaysia. They didn’t log into Chicago or physically go there. All of their activity was based in Malaysia.
The court didn’t fully buy the argument that the mirrored servers made the theft US-based.
Tim (18:01.57)
I see.
Tim (18:05.176)
So they were trying to argue the theft happened in Malaysia, not the US. That’s an interesting argument. I wonder if that’s common.
Chris Buntel (18:17.39)
It’s becoming more relevant because companies now have servers around the world. Depending on how things play out, that argument could help or hurt a case. It’s an interesting point I hadn’t thought about much before this case.
Tim (18:32.386)
Yeah, this case seems to set an important precedent for companies with mirrored data.
Chris Buntel (18:38.989)
Exactly. Another interesting angle—what if Hytera had decided not to sell into the US at all? If they sold in 180 countries except the US, they might have avoided the jurisdiction needed for a US case.
Tim (18:58.424)
Interesting.
Chris Buntel (19:09.009)
If they had avoided US markets entirely, this could have played out differently. It might have gone to a court in China or Malaysia instead of Chicago. The court didn’t discuss this, but it’s something companies might consider—avoiding sales in certain territories to limit liabilities.
Tim (19:32.042)
So, if they stole the information via the Malaysia server mirror but didn’t do business in the US, would that have blocked a DTSA case?
Chris Buntel (19:43.146)
I’m not sure. It’s a tough question. I think the story would have been less compelling without US marketing or sales activity.
Hytera did have a small Chicago office, attended conferences, and promoted their products in the US. That activity helped establish jurisdiction in Chicago. But with even less presence, the outcome could have been very different.
Tim (20:52.694)
Yeah. Okay. Well, I’ve got to go make a jingle. Any ideas for the next case? I think we need to revisit Boeing.
Chris Buntel (21:02.888)
Definitely. Boeing’s story was already interesting, and now it’s even more so. Let’s revisit it.
Tim (21:13.39)
Great. Episode 11 with a jingle will be our Boeing revisit. Let’s do it.
Chris Buntel (21:20.168)
Sounds good. I’ll start thinking about the logo for episode 15 or 20.
Tim (21:23.886)
Sounds great. Thanks, Chris. See you later.
Chris Buntel (21:25.914)
Awesome, thanks. Catch you later.
