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The Little Company That Could Sue, That Is


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THE LITTLE COMPANY THAT COULD--SUE, THAT IS

Is there a Japanese conspiracy to keep the U. S. from regaining a foothold in the $33 billion American consumer electronics industry? Tiny Go-Video Inc. in Scottsdale, Ariz., is on a crusade to prove there is. Now, after years of high-decibel publicity about a Japanese "cartel," Go-Video has to put its evidence where its mouth is. On Apr. 2, the company's antitrust case against Sony, Matsushita, and JVC is set to go to trial in U. S. District Court in Phoenix.

Ultimately, a Go-Video victory may spur the U. S. government to use American antitrust law against foreign cartels that obstruct U. S. exports. Thanks in part to U. S.-Japanese trade negotiations, the Justice Dept. recently stated its willingness to attack such foreign practices as bid-rigging and group boycotts of American companies. "Japan is way behind the U. S. and Europe" in attacking collusive practices, declares U. S. Deputy Trade Representative S. Linn Williams.

The trial, assuming it isn't stopped by a last-minute settlement by all three defendants, could also provide U. S. companies with a revealing glimpse into the carefully orchestrated ways of Japanese business. Go-Video hopes to put into evidence 45 videotaped depositions by Japanese executives. The executives themselves, alleges Go-Video, will reveal how Japanese electronics makers illegally conspired to keep an outsider from crashing the VCR party by preventing Go-Video from making and selling a dual-deck VCR that can copy tapes. The defendants strongly dispute the charges.

DUAL SUIT. Go-Video has traveled a bumpy road from the start. Co-founded in 1984 by R. Terren Dunlap, 46, a former trial lawyer, Go-Video's prime asset was a patent on dual-deck technology (table). Since no U. S. company was set up to make the product, Go-Video tried to line up a Japanese or Korean VCR maker to produce the machine under license or sell the essential parts. Unable to find either, it sued some 30 defendants, including 14 Japanese and three Korean electronics companies in June, 1987. The suit charged that the companies agreed among themselves to refuse to manufacture Go-Video's machine. The reason, the suit alleges: to prevent a U. S. company from competing in the VCR market. All but three defendants have settled the charges or been dropped from the case.

The remaining defendants may have something to worry about. Last July, Judge Robert C. Broomfield refused to dismiss the antitrust charges. In explaining his ruling, the judge laid out evidence suggesting a conspiracy among the defendants. He cited a series of "meetings and actions" in early 1985 among the Electronics Industries Association of Japan and other trade groups. On Feb. 28, 1985, the EIAJ sent members a letter urging Sharp Corp., which briefly made the decks, to stop. It did. The letter also asked other VCR makers not to produce the machine, "now or later."

Such actions, the judge noted, may have come in response to U. S. press reports that the Motion Picture Association of America opposed dual-deck VCRs, saying the machines invite tape pirating. The defendants testified that they feared sales of the dual-deck in the U. S. would cause problems in Japan-U. S. trade relations and possibly result in royalty legislation on all VCRs.

The suit is vital to Go-Video's future. In 1989, it dropped charges against Samsung Electronics Corp. after the Korean company agreed to make the dual-deck. Priced at up to $1,095, the well-reviewed VCR-2 has been on the market since July and is the only Go-Video product on retail shelves. But though the company actually has something to sell, its finances are deteriorating. In the latest six-month period, negative cash flow from operations worsened to $1.8 million from $1.2 million the year before. Its stock price is down from a high of just above 24 in mid-1988 to 3 3/8 on Mar. 27. Go-Video has survived mainly on stock offerings and lawsuit settlements. In the year ended July 31, 1989, it received $1.3 million and will share with its lawyers $3.5 million from recent settlements.

STAY TUNED. There may be more to divide soon. A Matsushita Electric Industrial Co. official says the company hopes to settle if "Go-Video will agree to a reasonable figure." He adds: "This is not to say we in any way admit to Go-Video's accusations, which are completely wrong." Matsushita and JVC told the judge that Go-Video never approached them about a dual-deck and that they never seriously considered the idea. Sony said it had rejected making a dual-deck in late 1983 or early 1984 and declined to deal with Go-Video for "commercial reasons."

Whatever the outcome, Go-Video will remain focused on Japan. The company has filed two more suits against Japanese conglomerates. Meanwhile, at the Las Vegas consumer electronics show in January, Go-Video showed prototypes for a second product: a device for sending video signals from a VCR to a television without wires. The company doesn't yet make the system. Rather, it holds the patent rights and is trying to license them to manufacturers. Given Go-Video's history, companies that get together and refuse may be in for a lawsuit.

GO-VIDEO'S COURTROOM ODYSSEY

MAY TO SEPTEMBER, 1984 Go-Video is incorporated. Its main asset: A patent on the technology for a dual-deck VCR that can duplicate tapes. Go-Video begins search for a Japanese or Korean company to manufacture the machine

FEBRUARY TO MARCH, 1985 The Motion Picture Association of America, fearful of tape pirating, opposes the dual-deck machine. So does a trade group of Japanese VCR makers, which asks its members not to produce a dual-deck

JUNE, 1987 Go sues some 30 defendants, including 14 Japanese and 3 Korean electronics makers, alleging an illegal conspiracy to keep the dual-deck off the U.S. market. Most defendants settle or get dropped from the suit

MARCH, 1989 Samsung agrees to make the dual-deck. In return, Go drops its claims against the Korean company

MARCH TO APRIL, 1991 Sanyo and NEC settle for $3.5 million, leaving Sony, Matsushita, and JVC to go to trial on Apr. 2

DATA: COURT FILINGS

LAUREL DAUNIS/BWMichele Galen in New York, with Neil Gross in Toyko and Kathleen Kerwin in Los Angeles


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