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Japan, US to Clarify Patent Rules

US companies are winning suits against Japanese firms for infringement of patent rights - spurring efforts on both sides to harmonize patent procedures

AS many an American inventor has found out the hard way, build a better mousetrap and companies in Japan will beat a path to their own patent office to claim some variation on the idea as their own.

What's more, a well-made, inexpensive, made-in-Japan version of that mousetrap might then emerge later and win market share in the United States.

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But the days may be numbered when a Japanese firm can easily imitate (some foreign firms say "steal") a foreign discovery with only minor mutation. The US and Japan appear to be moving toward an agreement on how to "harmonize" their very different ways of granting patents.

"We're moving quickly from friction over patents to harmonization," says Shoji Tada, an official at the Japan Patent Office, which is under the Ministry of International Trade and Industry.

A compromise may not come too soon for some Japanese firms. Many of them are being forced to pay high penalties to American firms and inventors who have gone to US courts in recent years to claim infringement on their patents.

Last spring, in the most recent notable case, Minolta camera company was forced to pay $127.5 million after Honeywell filed a lawsuit claiming that it had invented the autofocus idea now used in almost every Japanese camera. Other Japanese firms face similar claims by Honeywell.

Such well-publicized disputes over high-tech patents, as well as over drug designs and computer software, have encouraged many US firms to defend their patents in court. And often, the Japanese firms are easy targets in what has become known in Japan as "patent wars." The Nikkei business newspaper estimates Japanese firms face about 1,000 patent disputes. "There's still a big gap in concept between the US and Japan on what is infringement of a patent," says Yoshikazu Takaishi, general counsel for IBM Jap an.

In a 1990 Japanese Machinery Exporters Association survey, 173 Japanese firms reported that they were involved in 207 patent-infringement suits filed by foreign firms, mainly from the US.

"US industry has been slowing down and companies are going to court to protect their patents and make more money," says Akira Okawa, a private patent attorney and former chief examiner in the Japan Patent Office. Most of the US victories rely on judgments by American juries. "We don't have much experience with a jury system," says Mr. Okawa. "And US juries are politically biased against Japanese companies."

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THE exporters association also found that in 248 cases the Japanese firms settled out of court. Most settlements were cash payments, but some resulted in cross-licensing agreements and payment with special technology. "These lawsuits are added pressure on us to harmonize the Japanese patent system with the US system," Mr. Okawa said. They also have spurred Japanese companies to beef up their patent offices and learn more about US patent law.

More than just a moneymaker for US firms, however, the lawsuits are a highly visible example of a decade-long push by the US government and industry to fight back against Japan's economic challenge and to improve American competitiveness by better protecting US intellectual property rights, which includes patents, copyrights, and trademarks.

In various political arenas, US officials have tried to pressure Japan to alter its patent system. First, in the mid-1980s, they went to the World Intellectual Property Organization in Geneva. Frustrated there, the US then linked patent reform with other issues at the Uruguay Round of multilateral talks aimed at expanding the present world trading system.

But as the Uruguay Round has stalled, the US has put direct pressure on Tokyo in bilateral talks known as the Structural Impediments Initiative. One result was a promise by Japan in 1989 to reduce approval time for patents to two years by 1995, down from five to six years.

The shorter approval time, if achieved, might reduce a more basic irritant for the US: Japan requires that applications be opened for all to see 18 months after filing. Any competitor of a patent filer can thus have access to a discovery for several years before it is protected. In contrast, the US keeps patent applications secret until approved, with the process taking about 18 months.

Exposing an inventor's work has helped Japanese companies "avoid the waste of time in coming up with the same ideas," says Mr. Tada, admitting that this increases the chances of "imitating" inventions. "The logic is that we give an inventor the right to the technology and in return he must make it available for society," he says. In contrast, the US protects the individual's right to invention, not society's claim on it, in hopes of spurring creativity.

"Philosophical differences between the US and Japan patent systems will remain for a long time," says Okawa, adding that "we already have enough [creativity] incentives within Japanese industries. In Japan, we have a balance between the rights of patent holders and society. In the US, they don't care about society."

TO speed up its approval process, the Japanese patent office has added computers, raised filing fees, told companies not to file numerous "minor" patents, and added more examiners. But says Mr. Takaishi, reducing the examining time to two years "will be very difficult."

The number of patents filed each year in Japan has more than doubled in the past 15 years, reaching 370,000 last year. The patent office has fewer than half the examiners as the US office, having raised the number to 1,015 from 853 since 1988.

An even more difficult issue for Japan is whether to follow a US request for it to broaden its interpretation of what is patentable beyond just the physical differences between inventions. The US judges an application on whether it has "substantial similarity" with other discoveries.

"Almost all patent applications in Japan were on very narrow claims, which gives limited value to each patent," says Takaishi.

Before it bows to every US demand, Japan wants the US to adopt some changes, especially by moving to a first-to-file system, which the rest of the world follows, rather than stick with its first-to-invent rule.

This change was proposed by a US Commerce Department panel this summer, along with 15 other items, such as disclosing an application two years after filing.

The acting chief of the US Patent Office, Michael Kirk, told the Nikkei newspaper last week that he endorses the panel's ideas and hoped to submit them to Congress to achieve a patent harmonization treaty perhaps by 1994, but only if "Japan carries out systematic reforms."

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