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Motorola and Huawei settle trade secret dispute


Visitors look at a video display at the Motorola booth on the second day of the Consumer Electronics Show (CES) in Las Vegas January 7, 2011. REUTERS/Rick Wilking
Visitors look at a video display at the Motorola booth on the second day of the Consumer Electronics Show (CES) in Las Vegas January 7, 2011. REUTERS/Rick Wilking

By Paul Thomasch

NEW YORK (Reuters) - Motorola Solutions Inc and China's Huawei Technologies Co have settled a legal dispute over trade secrets, clearing the way for Motorola to complete the sale of one of its business units to Nokia Siemens Networks.

The settlement puts to rest charges by Huawei that Motorola, one of its long-standing partners, could disclose a variety of its trade secrets in selling a networks business to rival Nokia Siemens Networks.

Motorola agreed to pay an unspecified transfer fee to Huawei as part of the settlement, it said on Wednesday.

Motorola, in a separate announcement, also said it had lowered the sale price of the networks business to Nokia Siemens to $975 million from $1.2 billion. That should help ensure the deal goes through by April 29, Motorola said.

While Motorola and Nokia Siemens can now press ahead with their deal, Huawei will likely use the legal settlement to help improve relations with the U.S. business community and government.

Huawei is one of the world's largest makers of telecommunications equipment but has said its ability to do business in the United States has been hurt by a series of unproven allegations and misperceptions.

Legal disputes have not helped its reputation, particularly when they involve a long-term partner such as Motorola. Last summer, Motorola filed suit against Huawei alleging theft of trade secrets via former Motorola employees who gave information to Huawei's founder.

"Huawei hopes the recognition of the value of its intellectual property and withdrawal of claims about it would help put behind rumors of its association with the Chinese government," said Robert Haslam, an attorney at Covington & Burling, who is representing Huawei.

Concerned about its reputation, Huawei recently challenged the United States to launch a formal investigation into its business, It was a highly unusual moved and followed a recent U.S. government foreign investment review that is forcing Huawei to sell assets it bought from 3Leaf, a small U.S. company. Three years ago, Huawei had to pull back from a bigger proposed investment in 3Com, in similar circumstances.

Huawei says it has been the victim of misperceptions about its relationship with the Chinese military because its founder, Ren Zhengfei, served in the People's Liberation Army until 1983.

In its case again Motorola, Huawei demanded that the deal with Nokia Siemens be altered to avoid infringing intellectual property rights. It said that Motorola, its partner since 2000, had information including its plans for future products and technical specifications related to product performance and testing.

Huawei wanted assurances that none of that would be transferred to Nokia Siemens, a venture of Finland's Nokia Oyj and Germany's Siemens AG.

Nokia Siemens, or NSN, had grown impatient to close the deal, originally due to occur by the end of last year. For Nokia Siemens, the delayed Motorola deal was intended to strengthen it against Chinese rivals and make it the second-largest mobile telecom gear maker ahead of Huawei.

The delay, according to analysts, may also have been holding up plans by the parent companies of Nokia Siemens to sell a minority stake in the venture. Nokia and Siemens said last August they had been approached by private equity firms interested in buying a stake.

"This is a good thing for Nokia as they have been able to cut a new deal, which will be closed in the second quarter," said Swedbank analyst Jari Honko. "This means they can proceed with selling of minority stake in NSN."

Shares of Motorola were up 31 cents at $44.14.

(Additional reporting by Tarmo Virki in Helsinki and Kenneth Li in New York; editing by Dave Zimmerman)

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