Indictment: China-based Hytera stole trade secrets from Motorola

The 21-count indictment alleges Hytera Communications of Shenzhen, China, conspired from 2007-20 to steal the digital mobile radio technology that underpins Motorola’s walkie-talkie radio products for its own use. Hytera did so by recruiting and hiring Motorola employees and encouraging them to take propriety information with them when they left Motorola to work for Hytera, the Department of Justice (DOJ) said. In some cases, the thefts happened while the employees were still working for Motorola, according to the indictment.

The indictment was filed in May 2021 in U.S. District Court for the Northern District of Illinois but unsealed by court order Monday.

The case named several defendants beyond Hytera, which the DOJ said in a press release included the names of the former Motorola employees involved in the theft of trade secrets. Those names were redacted by the court.

If convicted, Hytera faces potential criminal fines three times the value of the allegedly stolen information to the company, including expenses for research, design, and other costs avoided, according to the DOJ.

Theft of U.S. trade secrets and intellectual property is one of the biggest threats posed by China, according to a January speech by Federal Bureau of Investigation Director Christopher Wray.

“[T]here is just no country that presents a broader threat to our ideas, our innovation, and our economic security than China,” he said.

The U.S. Trade Representative estimated in 2018 that China’s intellectual property theft costs the U.S. economy between $225 billion and $600 billion per year.

The indictment said prior to a U.S. government order that walkie-talkies operate on a narrow bandwidth, both Motorola and Hytera products used analog technology to transmit and receive communications. The Federal Communications Commission (FCC) passed a rule in 2004 that all mobile radios would have to communicate on a narrow bandwidth by 2013, “effectively requiring manufacturers to shift from analog to digital technology,” the indictment said.

The shift required Motorola to develop digital walkie-talkies that complied with the FCC mandate. The technology Motorola used was proprietary and not known to the general public, the indictment said.

Motorola began selling digital walkie-talkies operating on the narrower bandwidth in the United States in 2007. Hytera began selling similar products in the United States in 2010, the indictment said.

Compliance takeaways

The case contains several lessons for compliance departments, specifically in the scope of intellectual property protections.

Motorola maintained its trade secrets on a restricted database, which could be accessed by Motorola employees around the globe. Before being hired, all Motorola employees had to sign confidentiality agreements promising they would not disclose the company’s confidential information to others. Employees received annual training on the contents of the agreements and how to properly handle confidential documents.

Starting in June 2007, Hytera’s chief executive officer recruited individual Motorola employees while they were still employed at Motorola, the indictment said, promising them higher salaries and benefits if they would steal documents and items containing Motorola’s trade secrets. Hytera used the information to develop its own line of walkie-talkies using Motorola’s technology, the indictment alleged.

Many of the documents were accessed by Motorola employees working at a facility in Malaysia. All Motorola employees seeking access to documents in the corporate database must have “needed supervisory approval, a Motorola laptop, and a security token, in addition to the log on and password requirements,” the indictment said.

When employees left Motorola, they signed nondisclosure agreements promising they understood the confidentiality agreement they had signed and would not violate it. Motorola also conducted exit interviews with each of the employees named in the indictment to determine why they were leaving and future employment. Those employees concealed the fact Hytera was hiring them, the indictment said.

Motorola responds

“The criminal charges filed by the U.S. Department of Justice against Hytera underscore the calculated and deliberate character of Hytera’s illegal activity directed at Motorola Solutions,” said Mark Hacker, executive vice president, general counsel and chief administrative officer at Motorola Solutions, in an emailed statement. Motorola is also pursuing civil claims against Hytera’s “serial infringement,” seeking to collect “hundreds of millions of dollars in damage it owes to Motorola Solutions,” he said.

In an emailed statement, a Hytera spokeswoman said the company is “disappointed to read the charges in the indictment and respectfully disagrees with the allegations. The indictment purports to describe activities by former Motorola employees that occurred in Malaysia more than a decade ago. Hytera looks forward to pleading not guilty and telling its side of the story in court.”