Two Canadian telecommunications companies face possible sanctions after a U.S. court found their China-based owner stole trade secrets from Motorola.

Earlier this month, a U.S. District Court judge ordered Hytera, a radio transceivers and systems manufacturer headquartered in Shenzhen and partly owned by the Chinese government, to cease selling products containing two-way radio technology, including cellular products and mobiles.

The order, which included a US$1-million fine for every day Hytera refused to comply, applied to Hytera’s subsidiaries, which include British Columbia-based Norsat International and Ontario-based Sinclair Technologies, which is a division of Norsat.

On Tuesday, the U.S. Court of Appeals for the Seventh Circuit stayed the order and fine pending Hytera’s appeal of the sanctions, despite ruling that the company “has amassed a record of theft of intellectual property, spoliation of evidence, and other litigation misconduct.”

The ban stems from Motorola’s ongoing intellectual property dispute with Hytera, which is 10 per cent owned by the Chinese government through an investment fund. In 2020, a U.S. District Court awarded the Chicago-based telecommunications company a total of US$764.6 million in damages after finding Hytera had copied source code and stolen trade secrets relating to Motorola’s two way radio technology. The current ban and sanctions came about after Motorola claimed Hytera continued to sell radio products despite the court’s decision.

It is unclear the extent to which the ban, which Hytera referred to as a “worldwide shutdown order,” affects the Canadian companies. Norsat CEO Amiee Chan didn’t respond to a request for comment. Nor did Martine Cardozo, Sinclair’s director of sales for Canada and Latin America. 

In 2017, U.S. officials criticized the Trudeau government’s decision to greenlight Hytera’s acquisition of Norsat, whose customers included several U.S. government entities, including the Department of Defense. In 2022, the RCMP suspended a contract with Sinclair Technologies for radio frequency equipment, though a later security audit found the company didn’t pose a significant security risk.

The office of Innovation Minister François-Philippe Champagne didn’t respond to a request for comment.

Conor Healy, director of government research for IPVM, a Pennsylvania-based surveillance research group, said sanctions as severe as those against Hytera are not common in U.S. courts. 

“Imposing them is not taken lightly and requires an extreme level of non-compliance with court orders,” he said. “To the extent that the question in 2017 was whether Hytera would be a suitable owner of Norsat, we now know that it was not.”