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Motorola Accuses Huawei of Conspiring to Steal Trade Secrets

The Motorola Inc. Droid X is shown during a media event. Photographer: Jin Lee/Bloomberg
The Motorola Inc. Droid X is shown during a media event. Photographer: Jin Lee/Bloomberg

July 22 (Bloomberg) -- Motorola Inc. sued Chinese rival Huawei Technologies Co. for allegedly conspiring with former employees of the U.S. maker of mobile phones and two-way radios to steal trade secrets.

Huawei began receiving the information as early as 2001, Schaumburg, Illinois-based Motorola claimed in an amended lawsuit filed July 16 in federal court in Chicago. Huawei said the complaint has no merit. Motorola originally sued five former workers in 2008 for allegedly taking trade secrets with them when they left to join Lemko Corp., which has a reseller agreement with Huawei.

The suit comes as security concerns undermine Huawei and ZTE Corp., China’s two biggest network-gear makers, in their ability to expand in some markets. India blocked domestic phone companies from buying equipment made by Chinese vendors, people familiar with the matter said, and U.S. government concerns over national security led Huawei to abandon a joint bid to buy 3Com Corp. in 2008.

“Chinese equipment makers aiming to maintain growth are increasingly forced to look at developed markets such as the U.S. and Japan, where security concerns are the greatest,” said Le Ping Huang, a Hong Kong-based analyst at Nomura Holdings Inc. “ZTE and especially privately-held Huawei have to make greater efforts at increasing transparency and addressing these issues.”

Recovered E-mail

In the amended complaint, Motorola claims a staff engineer shared information about a new transceiver and other Motorola technology with Ren Zhengfei, the founder of Shenzhen, China-based Huawei. Motorola said it has recovered e-mail showing transmission of Motorola product specification documents marked “confidential” to Huawei.

“The complaint is groundless and utterly without merit,” Charlie Chen, Huawei’s senior vice president of North American marketing, said in an e-mailed statement. “Huawei has no relationship with Lemko, other than a reseller agreement. Huawei will vigorously defend itself against baseless allegations.”

Motorola accused Huawei of civil conspiracy and “threatened or actual” misappropriation of trade secrets and demanded the return of all proprietary information and damages.

“Huawei and its officers knew they were receiving stolen Motorola proprietary trade secrets and confidential information without Motorola’s authorization and consent,” according to the complaint.

The case is Motorola Inc. v. Lemko Corp., 08-cv-05427, U.S. District Court, Northern District of Illinois (Chicago).

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net; Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.

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