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Facing U.S. Demands, Japanese Companies Toughening Patent Stance With BC-Japan-Recent Disputes

October 5, 1992

TOKYO (AP) _ For Sanyo Electric Co. Ltd., going to court to thrash out a patent dispute once seemed like a declaration of animosity to be avoided at almost any cost. Not anymore.

Sanyo recently abandoned its reticence and countersued Texas Instruments Inc. after refusing the Dallas semiconductor maker’s requests for royalties on a disputed patent.

″In the past, Japanese companies were willing to spend extra money to settle patent disputes to avoid conflicts with other companies,″ said Sanyo spokesman Koshiro Tamura. ″But Japanese are becoming more assertive, and are moving toward the American way of doing business.″

In recent months, a slew of highly publicized patent disputes, most initiated by U.S. companies, has convinced many Japanese firms to be more aggressive in defending themselves from such lawsuits and in protecting their own patents.

Many are beefing up patent divisions, training employees in international law and coaching researchers in patent issues.

And as they see U.S. companies demanding steeper royalties, more are viewing patents as a source of income, not just a means of limiting competition or obtaining technologies through cross-licensing.

With Japan now receiving 20 percent of all U.S. patents, that could spell trouble for American industry in the future.

The Japanese corporate offensive so far has been most visible in Asia, said Norman Neureiter, a director of Texas Instruments Japan. ″They’re starting to sue.″

Fujitsu Ltd., Hitachi Ltd. and NEC Corp. recently negotiated large royalties from South Korea’s Samsung Electronics, while Dai Nippon Printing Co. Ltd. asked for licensing fees from foreign and Japanese electronics makers for its liquid crystal display manufacturing techniques.

This is new ground for corporate citizens of a society that tries to minimize conflict and litigation. But now, says Sanyo’s Tamura, ″even smaller companies are becoming very careful about protecting their patents and trademarks.″

Last spring, Matsushita Electric Industrial Co. Ltd., Japan’s largest consumer electronics maker, launched a new patent program in response to the increase in disputes.

Matsushita has about 310 employees dealing with intellectual property rights, twice the number it had five years ago. Employees are trained in patent issues and receive prizes for discoveries that result in patents, said Akira Kokaji, director of the company’s intellectual property center.

Right now, about 1,000 claims by U.S. companies of patent violations by Japanese firms are pending, a sharp rise from recent years, according to the economic journal Nikkei Weekly.

One reason for the increase is that U.S. courts rule much more often in favor of patent holders than they did in the past. With greater chances of winning litigation, U.S. companies are demanding royalties more frequently and are asking for larger amounts.

″U.S. companies are systematically going through their patent portfolios,″ looking for assets, said Steven Myers, an electronics analyst in Tokyo for Jardine Fleming.

Many of the disputes are over basic technologies, and the stakes are huge.

Recent settlements between Honeywell Inc. and six Japanese camera makers over its autofocus technology are likely to total hundreds of millions of dollars. Sanyo’s countersuit, its first ever in a patent dispute, relates to a basic semiconductor patent for which Texas Instruments is demanding millions of dollars from most Japanese chip makers.

″It really was Texas Instruments that has shown Japan how companies can live off of patent income,″ said Myers.

Some Japanese see the increase in disputes as a sign of declining U.S. competitiveness, and worry that money obtained from settlements may go for further patent battles, not new research.

On the flip side of the patent disputes, technical alliances are likely to grow as technology becomes more difficult and expensive to develop. One example is the recent tie-up between International Business Machines Corp., Siemens A.G., and Toshiba Corp. for development of advanced memory chips.

Along with capital and technical expertise, ″intellectual property will become another reason for choosing a partner,″ Texas Instruments’ Neureiter said.

Cultural and historical factors explain why friction over patents is just now surfacing.

During Japan’s postwar economic recovery, its companies were able to license many key technologies for tiny fees from foreign firms that didn’t view them as competitors.

Sony Corp., for example, licensed the transistor from Bell Laboratories for an initial $25,000, then developed the world’s first transistorized radio.

During those years, most major Japanese companies participated in government-sponsored research projects aimed at raising overall technical levels. New technologies were rapidly acquired, shared and applied.

That collectivism has faded as many companies have achieved world-class technical levels and have started zealously protecting their own technology.

And while the emphasis on innovation in the United States is on basic science breakthroughs, Japan’s skill rests in applying technology - ″Turning reasonable ideas into great products through diligence,″ said Mike Jeremy, senior analyst in Japan for Baring Securities.

Japanese officials say those efforts should be given due credit when experts decide patent disputes.

″The merits of a technology are only achieved after something useful is made with it,″ said Matsushita’s Kokaji. ″It’s important to recognize the efforts of companies that are able to develop useful products for the consumer.″

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