* Spring 1993 Inside this issue: Feature Article: Owning Your Ideas Profiles: Ivex Intnational Insights: Setting Your Watch to Japanese Decision-Making Time Business Tips: Business Tips Culture: Owning Your Ideas JAPAN'S PATENT SYSTEM REQUIRES CAREFUL STRATEGY Intellectual property is inherently complex, and even the most well-designed patent system cannot prevent conflicts from arising among its users. These conflicts are compounded by the cultural differences that come into play when firms use the patent systems of other countries to protect their intellectual property abroad. Not surprisingly, quite a bit of friction has arisen between the U.S. and Japan over patents. The U.S. and Japanese patent systems evolved out of almost diametrically opposed cultural orientations toward intellectual property ownership; they were designed to meet different purposes and consequently demand different strategies for use. While reconciliation of the two systems is one goal of the current bilateral trade negotiations, in the meantime it is important that firms on both sides of the Pacific understand the differences between them. Further, as patent lawyer Bruce Sunstein of the firm Bromberg & Sunstein advises, "Firms should incorporate their business objectives into their patent strategy." Japanese companies entering the American market learned the hard way about the litigious nature of American society. Failing to take the rigorous measures of legal protection that U.S. firms consider a matter of course, many Japanese firms found themselves embroiled in expensive and time-consuming lawsuits in U.S. courts. However, they recently began changing their approach. Every year since 1986, a Japanese firm has received the most U.S. patents per year, and Japanese firms typically hold the top four or five positions in this area. The Japanese are also better preparing themselves for lawsuits by training future company lawyers in America. States Isamu Kubota, Chief of the Intellectual Property Department at Minolta Camera (which recently lost a major patent suit to Honeywell), "We see now that we must cultivate people who can function in [U.S. courts] with confidence." Likewise, U.S. firms must study how the Japanese patent system works if they wish to use it successfully. Americans, ever the champions of individual rights, are accustomed to a system expressly designed to protect the inventor: the U.S. system gives priority to the first-to-invent rather than the first-to file, patent examiners commonly allow broad claims, secrecy is maintained until the patent is granted, and the courts often resolve conflicts in the patentee's favor. None of these features is present in the Japanese patent system, which, reflecting its genesis in a group-oriented society, was originally designed to encourage overall industrial development even at the expense of individual inventors. One factor U.S. firms should take into account when filing in Japan is timing. Since examination is not automatic- as it in the U.S.- and pre-grant opposition is allowed, a filer can wait years for a patent. In the U.S., by contrast, patents are generally issued within two years of filing. More important, the public disclosure of all patent applications in Japan within 18 months of filing combines with the time delay to give competitors a tremendous advantage. "American companies," says patent lawyer Robert Cesari of the law firm Cesari and MCKenna, "especially those in rapidly developing fields, must think carefully about whether it is worth filing in Japan, and if so, the best time to do it." It is equally crucial to understand the predisposition of the Japanese Patent Office toward narrow claims and the tendency of examiners to interpret claims narrowly. Japanese firms often use this feature of the system to patent a series of small improvements upon a basic invention. U.S. firms call this a "picket fence" strategy because the patent becomes hemmed in, compelling the inventor to enter into cross-licensing agreements. "Picket fences were a thorn in our side," states Vice President of R&D at a Fortune 500 consumer products company, "so in the mid-80s, we changed our patenting strategy in Japan. We increased our number of filings dramatically, as well as the percentage of those we call 'aggressive'. . .and our situation has improved considerably since." The Japanese courts can not be relied upon to protect intellectual property in Japan. Prohibitively expensive and time consuming, lawsuits are rarely pursued. As a result, it is especially important to formulate an effective patenting strategy based on a thorough understanding of the system. A good strategy is the key to protecting your share of the critical Japanese market. Ivex International Ivex International: To achieve success in the Japanese market," says James McCormick, Executive Vice President of IVEX International, "a credible presence is no less important than a good product." With offices in the U.S. and Tokyo, IVEX helps American high-tech firms build that presence by offering the following services to small and medium-sized companies, as well as divisions of larger companies: * Assessing client's market potential in Japan and developing appropriate strategies to capitalize on this potential * Evaluating and recruiting appropriate distribution and reseller channel(s) * Operating as client's office in Japan (supervising, supporting, and overseeing sales network activities; forging direct relationships with key customers; and managing PR and advertising) * Developing key strategic alliances and effective OEM relationships * Managing the transition to a client subsidiary in Japan. For more information, call IVEX at 603-882-5460. SELLING HIGH-TECH IN JAPAN On May 11, Japanese Langiage Services and IVEX International will host a seminar in Boston titled "Selling High-Tech Products in Japan." Viewlogic Systems President and CEO Alain Hanover and Cognex President and CEO Dr. Robert Shillman are among the speakers. Call Carl Kay at 617-338-2211 for details. Setting Your Watch to Japanese Decision-Making Time The speed of decision-making represents a thorny issue for Japanese and Americans alike in joint business. In general, Americans find the Japanese unbearably slow, while the Japanese are annoyed by American impatience. Our long-time colleague Hiroki Kato, Vice President of asian Business Development at Iomega (Roy, Utah), past Vice President of the Chicago Mercantile Exchange, and former Professor at Northwestern University, explains one major source of this problem in Understanding and Working with the Japanese Business World (Prentice Hall, 1991), a book he co-authored with his wife, attorney Joan Kato. The following excerpt is adapted by permission of the publisher. The time period from project beginning to end is similar in the U.S. and Japan, yet what happens between those two points differs greatly. An American company typically makes a major decision at a very early stage, involving elatively high-ranking people. It may take considerable time to implement the decision, and generally resources are not mobilized until the decision is handed down. By contrast, an a Japanese company, relatively junior employees advance most ideas. As the ideas filter to the top, they spread throughout the operational sectors, giving employees time to consider the most effective implementation strategies. A final decision may take longer, but once made, the organization is poised to act quickly. Given these differences, if americans negotiate with the Japanese before an idea has traveled through the echelons of the Japanese organization, the japanese will naturally appear slow and indecisive. On the other hand, if the first meeting occurs after the Japanese company's upper management has reached a decision, the Japanese will be prepared to execute the decision more quickly than the typical American firm. An American organization that can adapt to the Japanese side's pace of decision-making has a greater chance of succeeding in joint business. When an American company absolutely requires a prompt response, it is important to explain why. An apology or other show of consideration, acknowledging that your request is counter to protocol, improves the likelihood of a positive reception. Past favors from your side also carry weight, for the Japanese keep an accurate mental account of the obligations incurred throughout a relationship. Following up with a thank-you fax shows respect for the Japanese way of doing business. OFFICES IN JAPAN New developments in Japan target foreign firms seeking convenient, modern facilities and flexibile leases. In the Kanto (Tokyo) area, fax Japan Business Center at 011-81-43-297=3134. Also, the city of YOkohama offers financial assistance to firms locating at Minato Mirai. Fax 011-81-45-664-7145 for details. In the Kansai (Osaka/Kyoto) region, Kyoto Research Park offers rentals and business identity programs for firms testing out a presence in Japan. Call their U.S. agent at 215-823-5000. Near Osaka, the hub of Japan's chemical and pharmaceutical industries, is Senri, which offers an internatonal school and American-style housing. Fax Inter Support at 011-81-6-313-2615. Entente rents offices and apartments on Kobe's Rokko Island, home of Proctor and Gamble's new Japan headquarters. For more information, fax 011-81-78-858-0669. GLOBAL ALLIANCES MAGAZINE The quarterly journal Venture Japan offers in-depth treatment of issues in U.S.-Japan strategic alliances in the semiconductor and biotech industries, venture capital, and other fields. Japan Insider readers can subscribe at $54 per year, 25 percent off the regular $72 price. Sample issues cost $15. Call 212-227-1200. JAPANESE CULTURE VIDEO How to Do Business in Japan without Losing Your Face by Lon Gibby Productions offers a basic introduction to Japanese culture in a 75-minute video. Place your order by telephone, 509-467-1113, or fax, 509-467-4763. Mention Japan Insider for a price of $169 ($30 off list). The Japanese Business Calender SPRING/HARU April 1st is a day of beginnings: it is the first day of the school year, the first day of the fiscal year, and the first day of work for new company recruits. Hanami, or cherry-blossom viewing, marks a unique event in the Japanese business calender. Usually in April, depending upon the year and the region, company departments or sections plan after=work hanami parties, replete with food and alcohol, at popular viewing sites. A new company recruit is customarily assigned to spend the day away from work to procure and save a good spot. It's no easy task, yet a noble effort demonstrates his loyalty to the company. Another April event is Shunto, or "the spring offensive." After wage scales are announced, industries with strong unions customarily threeaten to strike. Every year, millions of commuters enciously await word on whether a transportation strike will stop the trains from running. A lack of train service means even more intense traffic jams than usual, leading many people to stay in hotels or even to sleep at work. May is a quiet month in Japan. Most people take a vacation during the string of national holidays in the first week of the month called Golden Week. Kabunushi sokai, or annual stockholders meetings, generally take place at the end of June. These brief, ceremonial affairs are occasionally interrupted by sokaiya, gangsters who extort funds from companies by threatening to disrupt the meeting or by offering protection against other sokaiya. Giving brobes to the sokaiya is illegal, yet every year the press exposes a few companies that succombed to their pressures. Japanese business shuts down for a week of holidays called Golden Week. NATIONAL HOLIDAYS: April 29 Green Day May 3 Constitution Day May 4 People's Holiday May 5 Children's Day The Japanese business calender included many world class trade shows, and Japanese Language Services offers the following trade show services: * Producing literature, videos, and slide shows * arranging booth rental, staffing, and other logistics * collecting information at shows Contact Coleman Yeaw at 800-USA-JAPAN for more information. UPCOMING TRADE SHOWS: May 18-21 High-Tech Materials Exhibition May 19-22 Business Show Tokyo May 28-31 High-Technology Tokyo June 9-11 Telecom Japan June 16-18 WINDOWS World Tokyo _________________________________________________________________ JAPAN INSIDERCopyright 1993 Japanese Language Services, Inc. All rights reserved. PUBLISHER: Carl Kay EDITOR: Laura Silverman Japan Insider Japanese Language Services, Inc.186 Lincoln Street, Boston, MA 02111-2403Phone: 617-338-2211 Toll-free: 800-USA-JAPAN Fax: 617-338-4611 _________________________________________________________________ E-mail: insider@japanese.com World Wide Web: http://www.japanese.com _________________________________________________________________