Dronemaker Loses Lawsuit Against US Department of Defense

Almost a year after DJI filed a lawsuit against the US Department of Defense over its designation as a ‘Chinese Military Company’, the courts have reached a decision… and the drone maker won’t be happy with it. Judges, unsurprisingly, determined that there was not enough evidence separating DJI from the Chinese Communist Party to overrule the DoD’s claims.

The court acknowledged that it could not confirm whether DJI is directly or even indirectly owned by the Chinese Communist Party. Still, US District Judge Paul Friedman ruled that Section 1260H gives the DoD the authority to decide what qualifies as a military-linked company. Evidence of state involvement in DJI’s operations was enough to keep the designation in place.

The referenced evidence includes recognition from China’s National Development and Reform Commission, which designates DJI as a National Enterprise Technology Center. The title comes with generous subsidies, financial incentives, and tax breaks. State-owned conglomerate Chengtong is also known to hold at least some stake in the company. Together, those ties allowed the Pentagon to brand DJI as a “military-civil fusion contributor.”

Not every argument from the Defense Department held up. Friedman criticized the agency for confusing separate industrial development zones and dismissed several claims as unsubstantiated. He maintained that the DoD’s “broad discretion” was the deciding factor, whether or not similar companies receive such treatment.

That inconsistency was a main point in DJI’s case. The dronemaker’s lawyers pointed to foreign firms like Volkswagen and Nokia, which also benefit from Chinese state support but face no blacklist. The judge refuted that the government is not required to uphold the same standards across the board.

The loss comes at a difficult time for DJI, as a looming import ban on new products set to take effect in December has already led US customs to restrict shipments. The company has stopped releasing new drones in the American market… though resellers and counterfeitters have been quick to fill this gap with a heavy upcharge.

In a statement, DJI said it is reviewing its options and may appeal. It noted that the court rejected most of the Pentagon’s justifications but left the designation intact anyway. In the meantime, the world’s largest civilian drone maker will keep its title.

FMI: www.dji.com