Technology Trade Wars


Opinion written for Canadian Community News by Mike Sterling

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The Problem:

Much is made of trade treaties and how they will affect Canada and the United States.  The populist argument goes something like this:

Work is sent to Mexico and the Far East.  They have low wages and no environmental control in their manufacturing.  Therefore, we lose and they gain.

There is certainly truth in the statement, but there is something deeper too.

Patents are ignored in the Far East.  Companies like Samsung regularly violate patents and simply copy the technology. This is done in the auto industry too. They have large staffs of lawyers who fight the rebound law suits initiated by North American Companies against their infringement.  Their governments either look the other way or tip the scales.

These off shore companies 'milk' other companies' patents and resist the law suits with an experienced staff of lawyers.  This process takes years to play out.  If the bad guys lose, they sometimes settle, but it is too late as the technology moves on inexorably.  The fine has been easily absorbed in the profits acquired by the violation.  It's simply chalked off as a part of the product development process. The costs are predicted and budgeted.

This is not limited to the Far East.  European companies do the same thing less obviously.  Look how they attack companies like Apple and Microsoft as monopolies in the European Union.

If you think the above is an exaggeration, you are mistaken.  I know it from first hand experience.  If you are an individual inventor, you stand little chance. 

Even behemoths like Caterpillar, John Deere, Apple, Microsoft, IBM, HP, General Electric, Boeing, General Motors and Ford suffer from this.   They have to maintain huge staffs of lawyers to try to fend off 'idea stealers'.  They usually fail.

The perpetrators play defense.  They can settle at any time and they do so based upon time and money.  They overwhelm even the big guys with patent stealing world wide.

How about the individual 'inventor'?  He/She can be safe in North American courts, but cannot defend an idea internationally.  A person can patent any decent idea themselves or pay perhaps $15,000 to a good patent law firm.  Defending a patent on the international level is not possible even for a wealthy person.  Way, way too expensive.

One strategy for the small guy is to obtain the patent and not try to exploit it.  Patent hunters will come along and, if your idea is good enough, they will buy it from you.  Not for a fortune, but for enough to make you go on with more ideas.  You see ... ideas are cheap. 

I know one company with many billions of dollars in gross sales, who does not have an R&D department.  What serves as their R&D arm is a cadre of skilled patent lawyers who buy patents and companies.  Their skill is used to find the companies/patents and exploit them.  They don't steal, they buy and exploit.

Another tactic of these multinational thieves is to take an idea that is not worthy of a North American patent and take out a phony patent in their own country, but then not exploit it.  Why?

If you try to export to them, they will confront you with their let's say Japanese patent and make you pay them for an idea you had that you considered not patentable.  I've been involved in just that situation.

You think I'm making this up?  Nope!  I've even been hired by law firms to be an 'expert' on such things.  One revolved around an idea that I worked on as the chief technical officer of a small high tech company.  The idea and product that resulted, in my opinion, was not and is not worthy of a patent.  The thieves did as they always do, they adopted the idea.  Ok, so what?

Well, they did not bother with the small guys, they sued IBM, Apple, Microsoft and others for patent infringement on an idea that was not theirs, but that they had pushed through a lax patent system. They had no intention of exploiting the idea, they just sued the big guys for an idea that was not unique at all.   It was not worthy of a patent -- ever.

The law firm defending the big guys came to me and paid me a consulting fee to tell them what I knew.  They would call me once a week, ask me some questions and call again a week later with new questions.  They won and the bad guys lost.  I was surprised, but it was done in US courts.

Why did they lose?  The patent was so frivolous that it could not stand up to even the sometimes myopic scrutiny of the courts.  The bad guys decided it would be too costly for them to fight the big guys in this case, but it was just one of many.

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Some Possible Solutions:

First, we must resign ourselves that the lawyers, accountants, courts and particularly the politicians know almost nothing about the research and development process for high technology manufacturing.

They look upon manufacturing as a Henry Ford assembly line.  They rarely go to the high technology small shops and R&D organizations for advice.

You hear the following all the time from the political side:

"We have the greatest work force in the world .... blah,  blah, blah."  That statement means nothing.

So here are some things to do:

1.  Get the politicians to understand that they don't know the process.  Direct them to experts.

2.  Clean up the North American patent process so frivolous patents are not awarded.  (hard to do)

3.  Make sure we all understand that the trade battle is lopsided.  It's the bad guy's government and their private companies vs. our inventors and companies.  The bad guys are putting their governments thumb on the scale.  We have to engage our governments.

4.  Set up a North American Board consisting of blue ribbon appointees who will review situations like the Samsung controversy.  They can recommend a pause on key imports to government officials of the US and Canada and the UK.  This is not a tariff.  It says, the import of this product (example a hand-held phone) will be suspended until the courts decide or the parties agree.

5.  Set up special courts in the US and Canada for the processing of these patent infringements and frivolous defensive and junk patents.  This is already being done by trade commissions, but the heads of these organizations should be elevated to top level, not just portfolios that cover much wider vistas.  The courts themselves should be specialized too with educated judges.


Of course we know that it's a bigger than just what I've described.  We have  problems with currency manipulation and product dumping below manufacturing costs to drive competition out of the business.

Our big companies have some guilt too.  They are also combative and not fair at times too.

Dumping is expertly done by Japan and China.  Take for example solar panels and memory chips.  Dumping drove companies out of business and cleared the field of competition.  Products were sold below manufacturing cost until the competition melted away.

So my proposal revolves around just a part of the problem.  It's one that involves nothing other than a pause.  It is not an outright fine or a final decision, but in the day of fast moving technology, it can be lethal to the bad guys.  You get the other side thinking about their roll-out costs and time scales.  Will a pause stop their larceny?

What would be their response?  Of course they would respond in kind.  But it would disrupt their strategy and they would soon come to consider us as being aware of the entire process. We are by their very actions of trying to take technology, superior in creativity at least in some areas.  I think it would surely help.

If nothing else, it would alert our government officials to the nature and depth of the game.  Get the problem up to Cabinet and Minister level and closely tie Canada and the US together at the strategy level.  Bring in the UK to help with Europe.  Right now our politicians are asleep.  They are not bad or ignorant.  They just don't know the depth of the problem.  Most are from a legal, business or accounting background.

Looking at Germany closely might help.  They do a better job especially on the dumping issue.

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Friday, March 25, 2016