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Epson and its many patents
by Nozomu Kawamoto

For several years, Epson has been one of Japan's top five companies in the number of registered patents and has also consistently ranked among the top 20 recipients of US patents. For a company that has grown into a world-class manufacturer on the strength of technologies developed in-house, Epson's emphasis on new inventions may be a matter of course.

But intellectual property rights cannot easily be linked to corporate growth without a meticulous, persistent, and systematic effort. Spearheading such an effort today is Managing Executive Officer Masataka Kamiyanagi of the Intellectual Property Division.

Mutually Beneficial Tieups
"Protecting intellectual property rights is very important for our business performance," says Kamiyanagi, who is himself a certified patent attorney. "Only then can we go ahead with research and development with the reassurance that our inventions are safe. It can also enable us to negotiate with other companies from a position of strength."

This does not mean, though, that Epson only seeks to make money by licensing its patents. Rather, the goal of the company's IP strategy is to work with the R&D and operations divisions so that they can more effectively create products that customers are happy to own and thereby keep business profitable.

"There is no denying that we need to prevent infringements to our patents," Kamiyanagi notes. "Those who try to get a free ride by selling infringing products must be shown that illegal activities don't pay off. But that's not the only dimension of our IP activities. We're living in a world where no one company can monopolize all the technologies in a given sector. So a second priority is to work with other competitive companies under cross-licensing agreements or by forming alliances. This can dramatically expand our business horizons into new areas."

Dolphin Program
One initiative, launched in 2002, to boost Epson's IP capability is the Dolphin Program, which seeks to increase the number of high-quality, "leading" patents.

"The goal of the program is to reinforce our patent portfolio, and this is done by having our IP team become directly involved in R&D activities. In the past, the IP division simply filed the applications for inventions that the R&D team had come up with. We're now taking this a step further, using our resources to ensure that R&D activities transition smoothly into profitable hit products. We also explore development themes to determine whether our research focus and direction are really correct and analyze the patent filing trends at other companies to identify areas of opportunity that have not yet been tapped. In these ways, we can provide the data to help research engineers make sound judgments."

The result has been not only higher patent filings but also enhanced awareness of the role of IP and a smooth shift to commercialization, with products firmly protected by patents when they're ready for shipment.

Living with Litigation
A key concern of the IP division, needless to say, is the prevention of counterfeit products and patent infringements.

"We're involved in about twenty lawsuits around the world right now. One important recent ruling was the decision by the International Trade Commission, which will ban imports of any patent-infringing products into the United States.

"We're also quite active in China, which is a major base of compatible-ink production. We're working with law enforcement officials to prohibit the sale of counterfeit products and with customs officials to stop their export. We're hosting seminars in conjunction with leading universities for opinion leaders to get across the point that it is in China's best long-term interest to develop its own unique technologies, which will require respecting the intellectual properties of others."

While patent filings have thus far focused on Japan, the United States, and Europe, Kamiyanagi feels that additional efforts are needed to address the situation in the BRIC countries, as well as in South America, Eastern Europe, and the Middle East.

Offering Incentives
One approach to ensuring the continued stream of innovative products has been a unique and generous incentive system that gives engineers a choice in how they benefit from their inventions.

"Most companies have only one system. This was also true of Epson in the past. Engineers receive relatively small lot payments when patent applications are filed for their inventions, when they are registered, and when the companies actually use them. Even if patents are never actually used, engineers stand to receive some money."

"But in response to a request for a high-risk, high-return option, we now allow inventors to choose to receive a certain percentage of the royalties we obtain from their patents. In the light of the market scale of some of our hit products, this could mean reaping hundreds of millions of yen for a single invention in the future. They must forfeit the smaller payments, though."

Employees can change course once every two years, or when they move to a different workplace. "Our strategy calls for each operations division to become the number one IP company in their respective sectors. We need all-around strength, because even if we're strong in one area, other companies will attack our weakest point. I'd say we're in a pretty good position, but there are some areas where we're still not strong enough.

"Our efforts are now devoted to shoring up those areas and to linking our IP strategy effectively with a strategy for robust business growth."

Epson Australia
www.epson.com.au