Motorola Accuses Hytera of Filing Anticompetitive Practices Lawsuit as Retaliation
Thursday, March 15, 2018 | Comments

Motorola Solutions filed a pair of motions in Hytera Communications’ anticompetitive practices lawsuit against it, arguing that Hytera brought the lawsuit only as retaliation for lawsuits Motorola has filed against Hytera.

One motion asked Judge Esther Salas to completely dismiss the case while the other asked Salas to transfer the case from the U.S. District Court for the District of New Jersey to the U.S. District Court for the Northern District of Illinois, which is handling theft of trade secrets and patent infringement cases Motorola brought against Hytera.

Because the two motions would conflict with each other if Salas granted both, it will be up to the judge to determine which, if any, to grant.

Motorola began the legal battle last year, when it filed the two cases against Hytera in Illinois. Shortly after, Motorola filed a patent infringement complaint against Hytera with the U.S. International Trade Commission (ITC).

The Illinois patent infringement case is on hold pending the outcome of the ITC’s investigation. The ITC held a hearing on that case in January, and a determination is expected this summer.

Motorola followed up the ITC case by filing patent infringement lawsuits against Hytera in two German regional cases and in the Federal Court of Australia.

Hytera responded with a pair of lawsuits of its own — a patent infringement case in Ohio last August and the anticompetitive practices case in New Jersey.

The original complaint Hytera filed in New Jersey in December accused Motorola of four forms of anticompetitive practices:
• Motorola engages in de facto exclusive dealing with independent distributors through a mix of incentives and threats of termination to vendors that might promote competing products.
• Motorola uses its Project 25 (P25) maintenance contracts in the public-safety market to influence distributors to exclusively purchase and resell Motorola’s Digital Mobile Radio (DMR) equipment, which competes with Hyera’s DMR line. This stifles competition in the more “price-sensitive” business and industry market by giving dealers no choice but to not carry Hytera’s DMR products, Hytera said.
• The company uses sham litigation to drive up Hytera’s costs and destroy its reputation within the U.S. market.
• Motorola has abused the standards-setting process by refusing to license any intellectual property claims it has over the DMR standard on fair, reasonable and non-discriminatory (FRAND) terms. Instead, Motorola has caused competitors and users to adopt Motorola-promoted standards and then engaged in licensing with unreasonable and discriminatory royalty terms to deter competition, Hytera said.

“[Motorola’s] acts are designed to and have the effect of, eliminating effective competition for mission-critical radios sold to public-safety customers and for business-critical professional radios sold to business and industry customers,” Hytera’s complaint said. “This conduct results in less choice and higher costs for customers, destroys competition and harms Hytera individually in the form of lost sales and profits.”

In the motion to dismiss, Motorola argued that Hytera filed the lawsuit in retaliation out of fear that the Illinois and ITC cases could shut down its LMR sales in the U.S. and said that its actions against Hytera have been to prevent Hytera from illegally taking and using its intellectual property for gain.

“No doubt Hytera is displeased by the fact that its attempt to gain a foothold into the U.S. market by pirating off Motorola’s technology has been exposed by litigation in Illinois and the ITC,” the motion to dismiss said. “But the antitrust laws do not require Motorola to license its technology to a Chinese competitor, let alone after it has been pilfered by that competitor.”

In response to Hytera’s complaint, Motorola argued that the litigation it filed around the world is not sham litigation aimed at impeding Hytera’s business but merely an attempt to protect its own business interests and intellectual property.

On the claim that it has created a de facto exclusivity program with dealers, Motorola argued Hytera had failed to prove that Motorola’s incentive program excludes dealers from selling products from other manufacturers.

“Motorola’s points program is no more illicit than any typical rewards or mileage program,” the filing said. “The antitrust laws are concerned with ‘the protection of competition, not the competition.’ ”

In its original complaint, Hytera accused Motorola of circulating a memo at a 2017 tradeshow saying that it would take away business from dealers that began representing Hytera. Motorola noted in its motion that Hytera had not included proof of that memo in its complaint.

“Assuming such a memo exists, Motorola has every right to inform its dealers of ongoing litigation over Hytera’s infringement of its patents and trade secrets,” the motion said. “There is nothing anticompetitive about a patent holder enforcing its intellectual property rights.”

Additionally, the alleged threats were not directed at dealers that carried all competing products but dealers that sold Hytera products that Motorola has accused of patent infringement, the motion said. “In short, Motorola’s so-called ‘threats’ were nothing more than an attempt to enforce its intellectual property rights and are not actionable antitrust claims.”

As for Hytera’s claim that Motorola had limited competition in the business and industry market because of its P25 business, Motorola argued that Hytera had not provided specific numbers or identities of dealers Motorola allegedly threatened or other information about the market that could show Motorola limited competition.

“Because of Hytera’s failure to allege facts about so many facets of the dealer market, the impact of the alleged exclusive dealing agreements on competition in the consumer market is a complete mystery,” the motion said.

Motorola also argued that the law does not exist to allow a competitor to take advantage of another company’s work in developing dealers. For Hytera to have a justifiable claim under that argument, it would have to prove that the dealers Motorola has an exclusive agreement with were vital to competing in the market, which Hytera had failed to do in its complaint, the motion said.

“Rather than invest in and develop its own dealer network to sell its products, Hytera suggests it is entitled to use Motorola’s independent dealers to sell its own LMRs,” the motion said. “But the law does not permit Hytera to leech off of Motorola’s efforts unless Hytera can allege that the dealers constitute an ‘essential facility’ required to compete in the market.”

On the P25 issue, Motorola argued that Hytera failed to produce any sort of contract that shows Motorola had a duty to disclose any intellectual property that may be relevant to a European Telecommunications Standards Institute (ETSI) standard, such as DMR.

The motion acknowledged that Hytera referred to an ETSI intellectual property right (IPR) policy in its complaint but argued that Hytera did not prove such a policy is a binding contract that would require Motorola to license its patents to Hytera.

Motorola’s motion to transfer the case from New Jersey to Illinois accused Hytera of looking for a venue to help its case and argued that under the law, Hytera should have filed the case as a counterclaim to Motorola’s Illinois lawsuits instead initiating a new lawsuit.

The case overlaps with many aspects of the patent and trade secret cases filed in Illinois including involving the same parties, the same products and services, the same customer base and markets, the same patents and the same conduct by the parties, the motion to transfer said.

“Hytera specifically cites the Illinois actions to support its claim that Motorola is filing ‘sham litigation’ to harm Hytera’s position in the market for LMR products,” the motion said. “The outcome of the Illinois actions will therefore have a direct effect on the merits of Hytera’s antitrust claims, regardless of whether Hytera or Motorola prevails.”

Motorola cited Rule 13(a) of the Federal Rules of Civil Procedure, arguing that it requires a claim “be brought in an ongoing action as a compulsory counterclaim if it arises out of the transaction or occurrence that is the subject matter of the action.”

In previous similar instances, the precedent has generally been to bring related litigation together in one venue because it allows for more efficient discovery, conservation of witnesses’ time, potentially reduces involved parties expenses and potentially avoids inconsistent results, Motorola’s motion said.

Additionally, most of the claims Hytera alleges in its lawsuit did not occur in New Jersey, meaning that there is not a good reason to keep the case in New Jersey, Motorola argued.

“Here, the operative facts have little to do with New Jersey; many of them occurred in the Northern District of Illinois,” the motion said. “Motorola’s headquarters is based in Chicago. All of Motorola’s business plans and strategies underlying Hytera’s allegations were developed by employees and executives who are based in Motorola’s Chicago offices.”

Meanwhile, while one claim is “tangentially involves the New Jersey Transit Authority,” none of the claims in the suit occurred in New Jersey, and there is little connection between Hytera and New Jersey, Motorola’s motion argued.

Because most of Hytera’s involved parties will be traveling thousands of miles regardless of whether the case is in New Jersey or Illinois because they are based in other areas, it makes sense to have the case occur in Illinois because those people will already be traveling to venue for the patent infringement and theft of trade secrets cases, Motorola concluded.

A Hytera response to the motion to dismiss is due March 19 with a Motorola reply to that due April 10. For the motion to transfer, Hytera has until March 19 to file a response, and Motorola’s reply is due March 30.

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