Hytera’s U.S. Subsidiaries Ask Bankruptcy Court to Schedule Hearing on Sale Following Stay
Friday, November 06, 2020 | Comments

Hytera Communications’ U.S. subsidiaries asked a U.S. bankruptcy court to expedite its consideration of a proposed sale of their assets to a recently formed Hytera entity.

Earlier this year, the court put a stay on the sale until December due to ongoing litigation between Hytera and Motorola Solutions in the U.S. District Court for the Northern District of Illinois. In 2017, Motorola sued Hytera for theft of trade secrets, later adding a copyright infringement claim. Motorola alleged that Hytera had stolen proprietary information and incorporated it into its Digital Mobile Radio (DMR) products, which it then used to compete with Motorola.

In February, a jury awarded Motorola $764.6 million in damages after determining that Hytera had stolen and used Motorola trade secrets. Following that judgement, Motorola asked the court to implement a permanent injunction that would prevent Hytera from selling or distributing any products determined to include Motorola’s trade secrets.

Hytera America and Hytera America (West), Hytera’s two U.S. subsidiaries, filed for bankruptcy in the United State Bankruptcy Court for the Central District of California in May, citing the large amount of damages as the key factor for declaring bankruptcy. Hytera later asked the court to approve a sale of the two entities to the newly formed Hytera US after seeking other potential buyers.

The bankruptcy court was set to hold a hearing to approve the sale but delayed the decision based on a request from Motorola, as well as on recommendations from U.S. Trustee for Region 16, to dismiss the bankruptcy case or at least stay the case until the after-trial proceedings in the Illinois case had concluded. Under bankruptcy law, the proceedings in the Illinois case were stayed pending the outcome of the bankruptcy case.

Motorola argued that Hytera was inappropriately delaying the Illinois case so it could continue to sell products infringing Motorola’s solutions and accused Hytera of trying to ‘launder’ the assets of its U.S. subsidiaries. In August, Hytera and Motorola agreed to a limited lifting of the stay on the Illinois case.

In its request to expedite the sale, Hytera argued that Motorola had misled Hytera and the court when the parties agreed to the limited lifting of the stay. Hytera said that Motorola’s attorneys had said that a hearing on permanent injunction was scheduled for Sept. 25.

“No hearing had been scheduled for Sept. 25, 2020,” Hytera said. “The docket in the trade secrets case does not reflect such and there was never any communication from the Illinois court suggesting there might be one.”

Hytera noted that then on Sept. 23, Motorola filed a request for a hearing on Oct. 2 to schedule another hearing on injunctive relief.

“Shortly thereafter, the Illinois court denied Motorola’s request for a hearing,” Hytera said. “No ruling on the injunction motion is imminent. Motorola’s requested injunction is, in any event, irrelevant to the debtors’ proposed sale. The property being sold is not subject to Motorola’s intellectual property infringement judgment.”

Hytera’s subsidiaries said in their motion that they had also removed certain assets from its request for the sale to ensure that nothing on the list would be affected by any injunction that went into effect.

“Motorola’s real object in seeking a continuance was to eliminate the debtors as competitors,” Hytera’s subsidiaries wrote in their request. “Immediately after the court’s continuance, Motorola issued misleading statements to the press about the continuance and the scope and purpose of the stipulation regarding limited stay relief. Motorola’s misleading statements were intended to further erode the debtor’s dealer network.”

Hytera argued that Motorola is attacking Hytera’s network of dealers by serving subpoenas to dealers “under the guise of enforcing its judgement against Hytera China.” Hytera argued that because those dealers buy from the U.S. subsidiaries and not the Chinese corporation, those dealers have no information relevant to the judgement.

“Motorola’s pursuit of the dealers is causing them to incur unnecessary expenses,” Hytera said. “As a result the dealers are directing their business to other two-way radio suppliers and withholding money they owe to the debtors. Motorola’s actions are nothing short of exercising control over the debtors’ property of the estate, which is an automatic stay violation.”

Right now, the bankruptcy court is set to consider the sale of the subsidiaries assets on Dec. 17. The Illinois court has not indicated when it plans to rule on Motorola’s request for a permanent injunction. The Illinois court recently denied a Hytera motion for a new trial and reduction of damages.

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