Motorola’s Trade Secrets Win Shows U.S. Law’s Potential Reach

Feb. 25, 2020, 11:01 AM

Motorola Solutions Inc.’s $764 million trade secrets and copyright win against a Chinese rival could make it easier for companies in similar fights to recover damages based on overseas product sales.

The U.S. District Court for the Northern District of Illinois found that a 2016 federal law, the Defend Trade Secrets Act, may apply to acts of trade secret misappropriation that occur outside the U.S. A jury subsequently issued the huge award.

The court is among the first U.S. tribunals to analyze the DTSA’s geographic scope. If the Jan. 31 ruling survives Hytera’s appeal, the court’s analysis may provide a roadmap for other courts weighing the global reach of the trade secret law.

“I’m likely to think that this is going to be the trend and the direction this continues to grow in, where you apply the statute extraterritorially,” University of Florida law professor Elizabeth Rowe said.

The ruling may embolden companies to more aggressively pursue extraterritorial damages in trade secret disputes involving products that are made or sold abroad, potentially amplifying damages awards.

Still, the question of whether courts will embrace a “full-blown” extraterritorial application of the DTSA - where misappropriation has only a limited connection to the U.S. - remains unanswered, Robin Effron, a Brooklyn Law School professor who studies trade secrets, said.

“A decision like this definitely makes it easier and puts you on the path, but I don’t think that we’re now on an inevitable path there,” Effron said.

Easier To Prove

Motorola, a Chicago-based telecom equipment maker, sued Hytera in March 2017 claiming the Chinese company stole trade secrets for two-way radio technology used by construction workers, school officials, and first responders.

Following a trial that stretched over three months, jurors on Feb. 14 decided in favor of Motorola and awarded the company the full amount that it requested—$764.6 million. Hytera was also found to infringe Motorola’s copyrighted source code.

Hytera argued Motorola shouldn’t be able to recover foreign damages, including for sales of products Hytera made and sold overseas. Those damages accounted for a significant portion of the amount sought by Motorola, Hytera said.

The Economic Espionage Act allows theft of trade secrets that occur abroad to be criminally prosecuted in the U.S. Passed in 2016, the DTSA amended the EEA to create a federal civil action for trade secret misappropriation.

Legal scholars have debated whether the EEA’s extraterritorial reach applies to civil cases under the DTSA. That would give the law a broader scope than other U.S. intellectual property laws, including patent law.

U.S. District Judge Charles Norgle found the DTSA can apply to actions that take place abroad when there was an “act of furtherance” committed in the U.S., and allowed Motorola to argue for extraterritorial damages.

The ruling could make it easier for companies to make a damages case when products are sold in other parts of the world. Alternatively, defendants may have to show any alleged trade secrets misappropriation happened in the U.S., and that any overseas damages flowed from that misappropriation.

“The problem is that’s a little bit more nit-picky to prove,” Villanova law professor Michael Risch said.

State Law Limitations

Hytera, which has denied stealing Motorola’s technology, has said it will appeal the verdict. The court’s ruling about the DTSA’s extraterritorial application is likely to be an issue on appeal.

One challenge for companies has been that trade secret theft doesn’t “really observe boundaries,” Rowe said, creating questions about businesses’ options when people leave the U.S. with trade secrets or have employees overseas.

“The entire purpose of the DTSA was to go after the behavior of companies coming in and doing things in the U.S., and then absconding,” Risch said. In that sense, he said, the DTSA is doing what its supporters wanted it to do.

Before the DTSA, trade secrets claims could only be brought under state law. The potential limitations of these laws were evident in Motorola’s case, where the judge said Illinois’ state trade secret law doesn’t have extraterritorial reach.

“There is a distinction and plaintiffs, if they have a trade secret misappropriation claim, would be well-advised to have one count based on the Defend Trade Secrets Act and one count based on the state law,” Brad Lane, a shareholder at the IP firm Brinks Gilson & Lione, said.

Had Motorola “just picked the state law, their damages claim, under Judge Norgle’s view, could be quite limited,” Lane said.

The case is Motorola Solutions Inc. v. Hytera Communications Corporation Ltd., N.D. Ill.

To contact the reporter on this story: Matthew Bultman in New York at mbultman@correspondent.bloomberglaw.com

To contact the editor responsible for this story: Keith Perine at kperine@bloomberglaw.com

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