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天价赔偿!解析摩托罗拉海能达案的陪审团裁决及实践经验
2020-04-03 16:07:24 阅读次
On March 5, 2020, the US District Court for the Northern District of Illinois entered judgment in favor Motorola and against Hytera based on a February 14, 2020 jury verdict. Dkt. 947. The jury verdict came after a trial that spanned over several months and found Hytera liable for trade secret misappropriation and copyright infringement and awarded Motorola $345.8 million in compensatory damages and $418.8 million in punitive damages, for a total of $764.6 million. Dkts. 894, 898. The jury deliberated for only a little more than two hours before reaching the unanimous verdict and awarded the maximum amount requested by Motorola.
Like many other high-stakes litigations involving intellectual property rights, this case has been hard fought. By the time the parties started jury selection on November 6, 2019, almost two and a half years had passed since Motorola filed its initial trade secret misappropriation claim and fifteen months had gone by since Motorola amended its complaint to also allege copyright infringement. Although the trial transcripts are yet to become available to the public, we can nevertheless get a sense of the parties’ litigation strategies and the reason for the significant amount of total damages awarded based on publicly available documents. We discuss below the global battle between these two major competitors, the facts and strategies relating to the Illinois trade secret case and trial, and some lessons to be learned for Chinese technology companies.
The Illinois judgement is the latest chapter in a global war between Motorola and Hytera spanning at least six legal proceedings in theU.S.and Europe over the last four years. This reflects a growing trend where litigation disputes between companies are often not confined to just one case, but become part of a world-wide multi-jurisdictional campaign.
Motorola filed its complaint for trade secret misappropriation against Hytera in Illinois on March 14, 2017. While that case has been pending, Motorola secured wins against Hytera in Germany in two patent infringement actions (one in Mannheim and the other in Düsseldorf) and a partial win in a Section 337 investigation at the U.S. International Trade Commission (Inv. No. 337-TA-1053), each time forcing Hytera to either disable and/or redesign certain features and functionalities in its accused products.
The legal battle between the parties is far from over. Motorola is also pursuing another patent infringement action against Hytera in the US District Court for the Northern District of Illinois (Case No. 1-17-cv-01972), which involves the same seven patents that were previously in dispute between the parties in the ITC investigation. Fact discovery is scheduled to close on May 18, 2020 with no set trial date.
In response to the series of legal actions filed by Motorola around the globe, Hytera has counterattacked. It filed its own patent infringement action against Motorola in the US District Court for the Northern District of Ohio (Case No. 1-17-cv-01794), alleging infringement of Hytera’s patent covering an “Intelligent Audio” feature in certain Motorola two-way communication devices. Expert discovery in that case is scheduled to close on March 24, 2020 and no trial date has been set.
Additionally, Hytera filed an antitrust and unfair competition action against Motorola in the US District Court for the District of New Jersey on December 4, 2017 (Case No. 2-17-cv-12445), which has since been transferred to the Northern District of Illinois at Motorola’s request (Case No. 1:19-cv-00176). However, due to the transfer and multiple reassignments of the case to different judges, no discovery schedule is in place and none will be set until the Court rules on Motorola’s pending motion to dismiss.
The most important chapter of this global battle began with Motorola’s complaint in Illinois in 2017. Motorola and Hytera are competitors in the digital two-way radio market. As the parties stipulated in jury instructions filed in the case, Motorola launched its MotoTRBO professional digital radios in 2006 and first sold them in early 2007. Hytera then launched its DMR professional radios in early 2010. Dkt. 895. Motorola’s complaint in this case revolved around the activities of three former Motorola employees Gee Siong Kok (“G.S. Kok”), Yih Tzye Kok (“Y.T. Kok”), and Samuel Chia (“Chia”), who joined Hytera and subsequently worked on Hytera’s competing DMR products.
The parties agreed that at the time they left Motorola to join Hytera, G.S. Kok was a Senior Engineering Manager, Y.T. Kok was a Senior Software Engineer, and Sam Chia was an Engineering Section Manager. Dkt. 895. Motorola alleged that given their senior positions at the time, each of them worked on developing DMR products for Motorola and worked extensively with Motorola’s proprietary and confidential information related to MotoTRBO products. Dkt. 435. Despite each signing two Non-Disclosure Agreements (“NDA”) that specifically prohibited disclosure of any confidential information of Motorola—one as part of Motorola’s Employment Agreement and the other as part of their exit materials—Motorola alleged that each of them secretly accessed and downloaded thousands of Motorola’s confidential technical documents that contained Motorola’s trade secrets shortly before their departure from Motorola in 2008, including Motorola’s source code for its DMR products, and that these trade secrets were later incorporated into Hytera’s products and business strategies. Dkt. 435.
In addition to the downloading of Motorola’s confidential information, Motorola alleged that one of these individuals, Y.T. Kok, started working for Hytera on June 10, 2008 even before his official departure from Motorola on October 3, 2008, and that he downloaded, copied, and/or transmitted Motorola documents at some point during this almost four-month period of double employment. Dkt. 878. As for Sam Chia, Motorola alleged that he spent a day at Hytera while still employed at Motorola and met with G.S. Kok, before downloading a massive amount of documents. Dkt. 878.
The case was bitterly contested, as evidenced by the more than nine hundred docket entries, numerous motions to compel, multiple extensions of the case schedule, and the voluminous documents produced. After two and a half years, the case finally proceeded to a trial before an Illinois jury. The trial was an unusually lengthy one—the jury heard evidence and arguments on November 6, 7, 12-14, 18-21, 25-27, 2019, December 2-5, 9-12, 16-19, 2019, January 13, 21-23, 27-29, and February 3-5, 10-14, 2020.
Motorola’s trial strategy was to tell the jury a story about a competitor company building its business on valuable proprietary information stolen from it, through (1) damaging internal communications from the defendants, (2) key individuals’ refusals to answer questions based on their constitutional rights against self-incrimination, and (3) circumstantial evidence and testimony suggesting potential evidence destruction by the defendants. In support of its punitive damages claim, Motorola focused, among other things, on the alleged involvement of Hytera’s senior management members in the misappropriation scheme and again, the alleged intentional destruction of relevant evidence.
At trial, Motorola presented evidence that Hytera used more than 10,000 confidential technical documents and millions of lines of source code that had been lifted from Motorola’s databases. Further, documents produced by Hytera containing internal communications between Hytera employees, including the former Motorola Employees, showed concerns about “using a lot of Moto[rola’s] code” and the need to “re-write softwares [sic] to look different from Motorola.” There was also another Hytera document created by Sam Chia on August 1, 2008 stating that “[O]ption 2 is the best...[it] also had a low chance of detection if the code was dissembled by Moto[rola].” Dkt. 435.
The jury was also permitted (although not required) to draw adverse inferences based on the fact that G.S. Kok, Y.T. Kok, and Sam Chia declined to answer dozens of questions concerning how they shared Motorola’s confidential information with other Hytera employees and the involvement of other senior managers at the company with the theft, citing their Fifth Amendment right to decline to respond to questions that could incriminate them. The jury was also allowed to draw adverse inferences from the fact that Peiyi Huang and Sam Chia “lost” three laptops that undisputedly contained thousands of confidential Motorola documents and source code files. Dkt. 878. Motorola further pointed out that “Hytera’s expert Mr. Grimmett admitted that Hytera employees ‘either deleted the records of [using Motorola’s RAF concept document] or they went to a lot of trouble to make sure there wasn’t a record showing how they were passing these things back and forth.’” Dkt. 827.
To support its punitive damages claim at trial, Motorola argued that Hytera engaged in “willful and malicious misappropriation” of trade secrets, which included “an intentional misappropriation as well as a misappropriation resulting from the conscious disregard of the rights of another.” Dkt. 878. Motorola alleged that Hytera’s President and CEO Mr. Chen—along with multiple Hytera engineers—knew of and participated in the misappropriation of Motorola’s trade secrets, and Hytera then “attempted to cover up the theft by intentionally destroying evidence, including Motorola source code and documents.” Dkt. 878. Motorola further argued that “Hytera is vicariously liable for the misappropriation of its employees and agents” because “Hytera ratified and approved of G.S. Kok, Y.T. Kok, Sam Chia, and Peiyi Huang’s conduct by retaining the benefit of the misappropriation and continuing to sell the accused products that admittedly have Motorola’s source code in them, attempting to delete or failing to produce evidence of the theft, and denying Motorola’s claims through this litigation—until trial started in November 2019.” Dkt. 878.
Hytera mounted several defenses in this case. Dkt. 762. For example, although Hytera did not deny that the former Motorola employees stole confidential documents from the plaintiff, during trial it rejected Motorola’s claim that the improperly obtained information had spread beyond those individuals and disputed the significance of the information to the development of Hytera’s products. Hytera argued before the jury that Motorola was attempting to hold the entire company responsible for the bad acts of only a few employees and intentionally delayed bringing the case in order to reap a large profit from Hytera’s commercial success.[1] Hytera’s lawyer was quoted as arguing that Motorola “want every single dollar that Hytera has earned” from the sales of its radios “going back to 2010, plus more.”[2]
Another key issue in this case is that, in view of Motorola’s significant damages claims, Hytera moved during trial to “preclude Motorola from relying on extraterritorial damages.” Dkt. 834. This was a legal issue to be decided by the Court. Although the Court agreed with Hytera that the Illinois Trade Secrets Act does not have extraterritorial reach, it ruled in favor of Motorola that the federal Defend Trade Secrets Act can apply extraterritorially if the requirements of 18 U.S.C. § 1837 are met and that Motorola was entitled to recover damages flowing from exploitation abroad of the domestic acts of copyright infringement committed by Defendants. Dkt. 834.
While Motorola also claimed copyright infringement, the core of its case was based on alleged trade secret misappropriation. As explained in the jury instructions in this case, Motorola claimed trade secret misappropriation under both the Illinois Trade Secrets Act (“ITSA”) and the federal Defend Trade Secrets Act (“DTSA”), which share several common elements. Under the Illinois Trade Secrets Act, in order to establish a claim for misappropriation of trade secrets, Motorola has the burden of proving: (1) Motorola owned the information at issue; (2) the information at issue is a trade secret; (3) the information at issue was misappropriated by Hytera in Illinois; and (4) the information was used by Hytera in its business. Similarly, under the federal Defend Trade Secrets Act, in order to establish a claim for misappropriation of a trade secret, Motorola has the burden of proving: (1) Motorola owned the information at issue; (2) the information at issue is a trade secret; (3) the information at issue was misappropriated by Hytera; and (4) the trade secret is related to a product used in, or intended for use in, interstate or foreign commerce. Dkt. 895.
Further, both the ITSA and DTSA make available exemplary/punitive damages in an amount not more than twice the amount of the compensatory damages if the misappropriation is “willful and malicious.” According to the jury instructions, the jury was to assess exemplary damages only if it found that Hytera’s conduct was malicious or in reckless disregard of Motorola’s rights. Dkt. 895. Specifically, Hytera’s conduct would be “malicious if it is accompanied by ill will or spite, or it is done for the purpose of injuring Motorola” and Hytera’s conduct is “in reckless disregard of Motorola’s rights if, under the circumstances, it reflects complete indifference to Motorola’s rights, and not simply that Hytera was aware that the information was a trade secret.” Dkt. 895.
After instructions and closing arguments by Motorola and Hytera, the jury started its deliberations. As noted above, the jury deliberated for only a little more than two hours before rendering its unanimous verdict, finding Hytera liable for trade secret misappropriation and copyright infringement and awarded Motorola the maximum it sought, $345.8 million in compensatory damages and $418.8 million in punitive damages, for a total of $764.6 million. The short deliberation by the jury in combination with the substantial damages award suggest that the jurors found Motorola’s evidence at trial overwhelming. However, during trial, both sides moved for judgment as a matter of law which the Court took under advisement. In other words, Hytera in particular is arguing that the evidence presented by Motorola was insufficient and the case should not have gone to a jury verdict. Thus, we can expect that barring a post-trial settlement, the battle is almost guaranteed to continue in the court of appeals. In addition, as of the writing of this article, the Court has not ruled on Motorola’s post-verdict motion for preliminary injunction.
This case suggests many lessons to be learned and practical considerations for Chinese technology companies:
Given the front-and-center role of the activities of former Motorola employees in this case, companies should pay extra attention to the hiring process and regular training of new employees, especially those hired from a competitor. It is common nowadays to include provisions in both the employment agreement and the employee’s handbook prohibiting the new hire from using any confidential and/or propriety information from his/her prior employer or any other third parties. But companies should not stop there. Technology companies in particular should also implement regular training programs emphasizing an employee’s confidentiality obligation to all former and current employers to protect its confidential and/or propriety information and reduce or eliminate potential exposure to third party claims.
If the company discovers any misappropriation or misuse of any third party trade secrets or proprietary information by an employee, it should immediately contact the legal department or outside counsel to evaluate its options to remedy the situation. Any failure to take appropriate remedial measures can potentially lead to claims that the employer ratified or approved the employee’s wrongful acts.
The failure to preserve potentially relevant documents can be extremely damaging to a party’s position inU.S.litigation. Even inadvertent deletion or destruction of evidence might give rise to adverse inferences that the deleted or destroyed evidence would have been harmful to a party’s position. As soon as litigation begins, or even the possibility of a claim arises, steps should be taken to ensure relevant evidence is not lost or destroyed. Litigation holds are routinely sent out by counsel during a pending litigation or sometimes in anticipation of a potential litigation to ensure that all employees who may possess relevant evidence are aware of their obligations. It is paramount for all company personnel to follow the instructions in the litigation hold and make sure that any potentially discoverable materials are preserved.
In view of the Illinois Court’s holding that the DTSA and the Copyright Act may allow a plaintiff to recover damages for extraterritorial acts that occur outside of theUnited States, Chinese companies withU.S.subsidiaries or commercial activities in theU.S.should be mindful of potentially broadened damages exposure. On the other hand, the extraterritorial reach of these statues could be extremely valuable for a Chinese company seeking to enforce its rights under these statutes through litigation in theU.S.courts.