Anatomy of a Chinese tech theft

Hytera was desperate to upgrade its analogue technology after the US Federal Communications Commission set a deadline of 2013 for all radio devices to operate on a narrow channel bandwidth and ultimately all become digital.

Thanks to a criminal indictment written by FBI agent Damien Colon published in April last year, and Gee Siong’s admissions in a plea agreement we know in granular detail how Hytera stole Motorola’s proprietary mobile radio software code.

Gee Siong, who pleaded guilty to a conspiracy to conceal trade secrets, joined Hytera on a salary 78 per cent more than what Motorola was paying him plus stock options worth 22 times his annual salary.

He admits in his guilty plea that he became the person responsible for raiding Motorola’s office in Malaysia for other recruits familiar with the digital radio mobile technology and with access to computer servers containing the source code.

When Motorola first pursued Gee Siong about six years ago he took the Fifth Amendment, which means he said he couldn’t answer questions because he might incriminate himself.

It was not until there was a criminal indictment issued and Gee Siong was extradited from the UK to the US, that he finally rolled over. His co-operation may contribute to leniency in sentencing which will happen later this year.

All the recruits employed by Hytera in Malaysia won huge pay rises compared to what they got at Motorola and some were paid living allowances after they moved to Shenzhen.

Motorola alleges the team poached by Hytera downloaded more than 7,000 confidential files. The long arm of the American judicial system was able to come after Gee Siong because the Malaysian servers were all connected back to servers in the US.

Fortunately, the Australian end of the fight landed in the lap of Nye Perram, the federal court judge responsible for Westpac’s famous “wagyu and shiraz” judgement.

As well as being well known for his sense of humour, Perram loves the written word, which means his judgements are usually accessible to the average punter. He distils complex issues into elegant and readable analysis of the pertinent legal issues.

Separate allegations

In Motorola v Hytera, Perram had to consider two separate sets of allegations.

First, Motorola claimed Hytera infringed three of its DMR patents. It alleged that Hytera imported into Australia DMRs which infringed the methods of the three patents and sued for secondary infringement.

Second, Motorola alleged that Hytera developed its source code by copying Motorola’s source code in 2008 when several former employees of Motorola went across to Hytera to help it develop its DMR products. Motorola says that 11 of its computer programs have been copied by Hytera.

The judgement did not go all Motorola’s way.

Perram found that Hytera did infringe a patent labelled 355, but he accepted “that Hytera did not infringe the patent after November 2019 when it took steps to ensure that existing mobile stations were upgraded before reprogrammed base stations were supplied to end users (the upgrade removing the infringement)“.

“In the course of reaching this conclusion, I have rejected Hytera’s submission that any infringement was required by the relevant European Telecommunications Standards Institute standard,” Perram said.

“I have rejected Motorola’s infringement case on the 764 Patent. Motorola’s construction of that patent is not correct.

“If it had been correct, I would have concluded that the patent was invalid as it would not have been fairly based.

“I have also rejected Motorola’s infringement case on the 960 Patent. Although Motorola’s construction of the patent is correct, the patent is invalid for want of an inventive step.

“In the case of all three patents, I have rejected Hytera’s contention that no manner of manufacture is involved. I have rejected Motorola’s claim for additional damages for patent infringement.”

Substantial copying

On the copyright allegations, Motorola had much greater success.

“I have concluded that Motorola has succeeded in proving that Hytera copied a substantial part of 6 of the 11 computer programs and is liable for copyright infringement,” Perram said.

“Motorola also alleged that Hytera’s actions constituted a substantial industrial theft.

“I have accepted this submission and the allied contention that Motorola is entitled to additional damages on account of the flagrancy of the infringements.

“The programs which Motorola alleges were copied by Hytera consisted of source code which was compiled into firmware to be installed on its DMR devices.

“The development of this firmware was a lengthy and complicated process of software engineering involving a large number of engineers.

“The entire undertaking was known as ‘Project Matrix’. Taking its cue from the movie The Matrix, the individual projects within Project Matrix were known as Project Neo, Project Morpheus and Project Cypher.

“As the Oracle observed to Neo in the third film, The Matrix Revolutions, ‘everything that has a beginning has an end’. Despite some misgivings along the way, these reasons will eventually affirm the truth of this observation, although not until paragraph 2315.”

Those looking forward to Perram guiding them through the intricacies of digital mobile radio tech, which utilise Time Division Multiple Access technology, will have to be patient.

His entire 582-page judgement will likely be published in mid-February. This will give both parties time to work out how much commercially sensitive information needs to be redacted.

Spinning not winning

In a classic case of spin doctoring, Hytera published a press release following the judgement and it was headlined as follows: “Australian Court Dismisses Half of Motorola Solutions’ Copyright and Patent Infringement Allegations against Hytera.”

The press release said: “Hytera is currently reviewing the judgment and considering available options, including possible grounds for appeal in respect of the copyright infringement findings. The legal processes may take two or more years to finally resolve.

“In light of certain matters raised in the legal proceedings, Hytera has enhanced its corporate governance and added new policies and procedures related to intellectual property and the onboarding of new employees. In addition, Hytera has rolled out updated software and firmware to the marketplace, including for legacy devices that were at issue in this proceeding.”

But it is hard to see this case as a victory for Hytera given it will have to pay Motorola’s costs, and it will be up for more expenses as it, inevitably, appeals to a full bench of the federal court.

A loss in front of three judges could result in the case heading to the High Court.

It is clear from the pile of court judgements, indictments and Gee Siong’s guilty plea admissions that bringing Chinese industrial theft to book requires deep pockets, patience, excellent lawyers in many countries and grudging acceptance that every legal avenue will be exhausted by the alleged perpetrator.

The significance of the Australian case is that Motorola is entitled to an order permanently restraining Hytera from continued infringement. The products affected by this are yet to be revealed.

Also, Motorola is entitled to pecuniary relief, including additional damages for copyright infringement, with the amount yet to be determined.

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