Hytera sells radios to Swiss mountain railways and the German army, for example. For the US, the case exemplifies China’s theft of intellectual property. Now there is an indictment.
A Hytera production line in Shenzhen.
The manager had already switched from Motorola to Hytera, and three other employees were to follow him. Before that, they did one more job: stealing trade secrets. “Anything you have in mind while we’re still here?” one of the staff wrote in an email. So far they have only tapped software information, does it say elsewhere whether the manager also needs any hardware information?
This is said to have gone on for several months, and the quartet obviously knew they were doing something illegal. One referred to a non-disclosure agreement that everyone had to sign before leaving Motorola. The email reads: “Some of our lies could cause problems once Motorola finds out.” In another message, one of the four even claims about his new employer Hytera: “This company [ist] created purely by copying. . . haha.”
The correspondence stems from a criminal indictment released by the US Department of Justice earlier this week. It is about a year-long legal dispute between the American telecom group Motorola and its Chinese competitor.
Motorola accuses Hytera of stealing digital radio technology. Hytera again denied the allegations in a statement this week. The company sells its walkie-talkies, whatever the devices are called, to the German army and Swiss mountain railways, for example.
Swiss mountain railways and the Bundeswehr
According to the American interpretation, the case is typical of China’s systematic theft of intellectual property. The FBI estimates the damage to the American economy from such theft, as well as pirated software and counterfeit branded products, at $225 billion to $600 billion annually; However, some experts criticize the definition on which the estimate is based as being too broad.
In 2020, a US Department of Justice chief of justice described China’s modus operandi as stealing American intellectual property, replicating it, replacing the American firm in the Chinese market and eventually in the world market. Washington is fighting against it with the punitive tariffs imposed under President Donald Trump and with the so-called China Initiative of the Justice Department, which recently came under criticism for false allegations against respectable Chinese scientists.
Hytera was founded in 1993 in the southern Chinese tech metropolis of Shenzhen. The company is considered an important supplier to the Chinese Ministry of Public Security, which is primarily responsible for the police. Hytera also grew through the acquisition of foreign companies, for example in Germany, Great Britain and Canada. The company was a Motorola distributor before becoming a competitor.
In 2007, Motorola began selling walkie-talkies based on the then new DMR digital radio standard. Hytera did not yet offer such devices. Hytera’s CEO hired a manager from Motorola’s Malaysian development site in mid-2007, according to the indictment. The other three Motorola employees followed from there in 2008 and 2009. According to the indictment, they previously stole trade secrets “with the knowledge of Hytera, on behalf of Hytera and for Hytera’s benefit”.
Saved a few months of work
One defendant mentioned in an email that 30 gigabytes of data had already been stolen. Overall, the jury found Hytera used five of at least fifteen technologies that Motorola had developed for what was then the new DMR digital radio standard, from software architecture to hardware design. In court, one of the defendants said that Hytera would have saved “no more than six months of work” if 45 engineers had developed the product. In 2010, Hytera also started selling DMR devices.
Another US court sentenced Hytera to damages and a total fine of almost $765 million to Motorola in a civil lawsuit in 2020. A year ago, Hytera’s exoneration amount was reduced to $544 million. Meanwhile, two Hytera companies in the US had filed for bankruptcy. In both cases, as well as in the criminal case against Hytera and the quartet, the final verdict is pending.
Motorola has also accused another Chinese competitor of stealing trade secrets in the past: Huawei. That’s what CEO Greg Brown said in one go in 2018 interview. According to this, Motorola sued Huawei, and the two parties finally reached an out-of-court settlement. Brown said Motorola had more than $3 billion in sales in China in the early 2000s, down from $170 million in 2018.
According to the US trade representative, China has made strides in protecting foreign intellectual property in recent years. There are now specialized courts in cities like Beijing, Shanghai and Shenzhen. However, practitioners complain about the poor implementation. one described a case on the portal “The Diplomat”.in which the Chinese police put themselves in front of a domestic tech company to protect themselves when an American competitor sued.
America once fouted about patent protection
Experts on the history of intellectual property point out that many developing countries, when catching up economically, did not take the protection of foreign knowledge so seriously – especially the USA: The copyright law of 1790 completely ruled out foreign claims. China’s neighbors Japan, Taiwan and South Korea also thrived thanks to copying.
Two authors wrote in the magazine «Foreign Policy» in 2019In order for China to fully respect foreign intellectual property, it must first develop enough intellectual property itself – and thus a strong self-interest in mutual protection. It is therefore in the West’s own interest to support China in its further development.
However, the will to do so is likely to be low if there are more headlines like this week: The world’s only manufacturer of highly specialized machines for chip production, ASML from the Netherlands, warned of a Chinese competitor in its annual report.
ASML had won a patent dispute against XTAL in the USA. Similar to Hytera, it was ordered to pay 845 million US dollars and then filed for bankruptcy. ASML was therefore largely empty-handed. Now, ASML writes, an XTAL-affiliated company called Dongfang Jingyuan is marketing products in China “that could potentially infringe ASML’s intellectual property rights.”