IP: Holding the Right Cards in Japan -- another view

[Dave Farber <farber () central cis upenn edu>]

From: BBCW52A () prodigy com ( THOMAS FLANNIGAN)
To Peter Kirby:


     Thank you for your thoughtful comments. You state that: "I am
unaware of any government-sponsored cartels that shield against
foreign competition in pharmaceuticals and consumer nondurables."
In March, 1988, I read a remarkable article in the Yomiuri that
described Koseisho penalties imposed on Japanese companies for
importing heart pacemakers without a license. Of course, import
licenses would not have been granted in any case. The article
stated that Japanese companies were in the process of trying to
acquire the technology to make such devices, and imports from
America would be banned during this catch-up period.
     Fukuzawan Brendan Hagerty is exactly right in citing the
identical mindset in barring Baxter blood-heating machines that
could have prevented hundreds of hemophiliac Japanese from
contracting AIDS.  It is not accurate to claim that "this guy"
acted in his "quest to raise funds to help hemophiliac patients".
The Nikkei Weekly noted on February 26, 1996: "Abe was one of at
least six senior ministry officials to have found post-retirement
jobs in the blood industry.  The document revealed last week that
the ministry was worried about the effects of the ban on unheated
blood products would have on the domestic industry." The Koseisho
is ostensibly charged with safeguarding the health and welfare of
its citizens, but it is willing to led thousands of its citizens
die if that can help increase the trade surplus with America down
the road.
     I am not so sure that Japanese success in consumer electronics
is "primarily the result of willingness to invest for the long
term". Phillips took great risks in inventing the cassette and CD,
Carrier Vision in inventing the home VCR, and Motorola in inventing
the pocket cell phone.  By the time MITI had decided to sit on such
patent applications until it didn't matter, and fund Japanese
competition, the risks were much lower. It is less risky to bet on
a sure winner than bet the company on a new concept.  MITI wears
two hats; it runs the Patent Office and helps Japanese companies
get foreign technology. Putting MITI in charge of the Patent Office
is like putting Nero in charge of the Fire Department.
     Speaking of Motorola, I differ with your horror that the "US
told a sovereign nation that it should use a standard developed by
a private US company".  Your viewpoint, which is really the only
one that the Wall Street Journal would print, ignores the history
preceding the trade talks.  Motorola tried to sell its cell phone
in Japan, and this could have helped reduce the explosive trade
deficit. The US sells cell phones and Japan sells DRAMs, and Adam
Smith smiles from above.  But the Japanese government is only
interested in increasing its consolidated trade surplus, and it had
to draw the line in the sand.
     MITI cobbled together 18 different companies and told them to
develop an alternative to the Motorola system. The genesis of this
consortium was widely reported in the Japanese press. No secret was
made of Japan's intention to copy the technology and keep the
Americans out.  Meanwhile, Japan, and its American amplifiers,
executed a series of measures to stop the barbarians at the gate.
Surely you remember the claptrap about Japanese radio waves being
unique, and that there were no more radio frequencies to be had
(unless you had the proper corporate birth certificate).
     To hear you tell the story, Japan had a creation over in the
next county, and the big bad Americans forced Japan to abandon its
unique invention. Cell phones were an American invention that Japan
copied, just like cassettes were European inventions that Japan
copied. It is easy to do if you don't give patent protection and
the rest of the world lets you get away with it.
     The American computer market is still fragmented by "maker-
specific incompatible designs" but that doesn't seem to prevent
Japanese manufactures from making a bundle here.  Why do such
externalities always make Japan richer and America poorer?
Shouldn't market forces even these things out over the long run
rather than always favoring Japan?
     Concerning language, I have been using Japanese-language
software on a PC since 1988, and it was an old program then. You
don't really think that was the reason Akihabara only sold
Japanese-made computers until 1992, do you?
     Finally, is your WSJ piece really meant to counter a perceived
flood of revisionist theory in the press? I have been reading the
Journal for 23 years, and the editorial page is more pro-Japan than
the Nihon Keizai Shimbun's, which is at least candid enough to
admit on occasion that Japan is in an economic struggle, and
doesn't care about what Adam Smith said unless it helps its public
relations campaign.  Mind you, your article was carefully
researched and compelling, but I don't think it is a voice in the
wilderness. Every week the Journal runs a story like this, yet
another shovel of dirt on the grave of the American middle class.


Thomas Flannigan
Attorney in Chicago