Countries battle over technology Some fear U.S. losing high-stakes contest

April 26, 1992|By Ronald E. Yates | Ronald E. Yates,Chicago Tribune

Ask Richard Elkus Jr. about technology transfer and you are immediately transported back to 1960, the year an American company called Ampex let Sony Corp. and other Japanese manufacturers walk away with a device it had just developed called the videocassette recorder.

"It was a disaster for Ampex; it was a disaster for the nation," recalled Mr. Elkus, the man in charge of developing the VCR for Ampex. "But we did it to ourselves. . . . You can't blame the `` Japanese."

Indeed, it was Ampex that initiated the contact with Sony, Mr. Elkus said. Eager to move from vacuum tubes to transistors, a U.S. technology that Sony was already using to make smaller and better radios, Mr. Elkus and other Ampex executives suggested a technological marriage between themselves and Sony.

That marriage, he recalled, was to have resulted in smaller, less expensive VCRs that could be sold to consumers. But before Ampex and Sony could get to the altar, Ampex management, worried about cash flow and capital outlays, and unable to see the potential of home video-recording equipment, got cold feet and unilaterally broke off the relationship. A jilted Sony sued and wound up with a fully paid license to use Ampex technology to make VCRs.

The rest, as they say, is history.

Japanese electronics companies such as Sony, Matsushita, Sanyo and Sharp now hold licenses and patents on just about every videocassette recorder and peripheral made anywhere on the planet -- a market estimated to be worth about $100 billion annually.

What bothers Mr. Elkus, now president of Prometrix, a Silicon Valley company that makes semiconductor testing equipment, is history's disturbing tendency to repeat itself.

He argues that the United States is losing the international contest over technology transfer, the high-stakes movement of basic research and innovation -- new products and new processes -- between nations.

L His concerns are supported by an array of facts and figures:

* In 1990, U.S. companies sold about $2.5 billion in technology to Japanese companies via licensing and patent agreements, while the Japanese sold less than $500 million in technology licenses and patents to U.S. companies. The U.S. Council on Competitiveness, an organization of executives from business, academia and labor, says that means the United States is, in effect, running a technology-transfer deficit with Japan of $2 billion a year.

* The International Trade Commission estimates that U.S. companies lose $40 billion to $50 billion each year because of technology misappropriated by foreign companies.

* Beginning in 1989, the number of U.S. patents awarded to Japanese companies has exceeded the number granted to U.S. companies. In 1990, for the first time, the top four recipients of U.S. patents were Japanese companies. Hitachi Ltd. led with 908 patents, followed by Toshiba Corp., with 891; Cannon K.K., 868; and Mitsubishi Denki K.K., 862.

The only U.S. companies to make the top 10 were General Electric (fifth, 785 patents), Eastman Kodak (seventh, 720) and International Business Machines (ninth, 608). * Japan sent almost 9,000 senior researchers to the United States in 1990 to conduct basic research at U.S. universities and research laboratories, while about 1,400 U.S. researchers went to Japan. At the same time, 30,000 Japanese undergraduate and graduate students arrived in the United States to continue their studies, while fewer than 1,200 U.S. students went to Japan.

* Though they seem to be falling behind, U.S. executives are aware it is an important race. According to a recent survey of the U.S. electronics industry by Ernst & Young, almost 60 percent of 550 chief executives said technology innovation was the single most critical factor in their companies. Fifty percent said they had technology licensing agreements with other companies, up from 30 percent in 1990.

Such statistics are raising eyebrows at corporations throughout the United States, but not many Americans understand their significance, said Mr. Elkus and others such as Erich Bloch, a fellow at the Council on Competitiveness and the former director of the National Science Foundation.

They argue that although the trade of goods and services dictated much of the commercial relationship between Japan and the United States in the 1980s, technology will swing the balance of trade in the 1990s. The winners will be those nations that can develop, protect and transfer technology, they say.

Treating innovation as a cheap, renewable commodity is a recipe for disaster in an increasingly competitive and intertwined global economy, Mr. Bloch said.

"In the 1950s, '60s and '70s we gave too much away by selling technology and licensing things for peanuts," Mr. Bloch said. "We didn't know the value of knowledge. I hope we know it rTC better today . . . but I am not sure we really do. We need to drive harder bargains for our technology and get a quid pro quo. "

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