ECONOMY

AI Technologies as a Determinant of the Tech Control Game

Odaki Kazuhiko and Hishinuma Takeshi examine the challenge of information management to protect against technological outflows in the post lifetime employment era.

Inscrutable staff outside a self-checkout demonstration store at the Future Expo, Tokyo, October 23, 2019. JAPAN JOURNAL PHOTO

Japan’s technological advantage has been lost in many fields in the twenty-first century. For example, Japan placed thirteenth in the Global Innovation Index (GII, 2018), showing that it is not an Asian front-runner. Companies operating in neighboring Asian countries show a conspicuous presence in global markets for smartphones and high-tech home electric appliances, and Japanese companies have been eclipsed. Japan’s ebb is more serious than those of Western countries.

People point out many causes, but undoubtedly, technological standards improved in neighboring Asian countries. One of the factors in their technological improvement is technological transfer and outflow from Japan. Causes reported and analyzed are as follows: Japan generously and spontaneously transferred its technologies out of historical consideration for its Asian neighbors. Japan disclosed trade secrets because of Asian neighbors’ elaborate strategies and in response to strong requests. Japan neglected to go through procedures to obtain patents in Asian neighbors and gave them legal opportunities to imitate Japanese technologies. Conversely, Japan even applied for patents for trade secrets and ended up disclosing them to the whole world.

In addition, Japanese companies’ personnel policies of local employees recruited overseas were so much of an extension of domestic systems that precautions against employee turnover and leaks were lax and loose. Western countries that were not originally premised on lifetime employment had firmer and more substantial preparations for employee turnover and measures for leaks than Japan in terms of legal systems and corporate structures. Japanese companies put emphasis on their employees’ sense of unity and togetherness and were unfamiliar with methods based on the view that human nature is inherently evil.

Probably, it is possible to say that these are own goals the individual companies’ have scored on themselves. In response to this situation, in Japan, large companies in particular have begun to make efforts to strengthen their information management systems and make their personnel contracts more elaborate. But in cases in which technological outflow has occurred by the direct approach of current or former employees by foreign countries, quick remedies that individual companies can take are limited. Japanese companies’ lifetime employment systems and corporate pensions are weakening and cannot depend too much on measures premised on employees’ self-sacrifice and loyalty. Japanese companies have difficulty enriching and solidifying social services for funding reasons and the effects of those efforts are incomplete. In response to this situation, the Unfair Competition Prevention Act has often been revised in Japan, and sanctions against the leak of trade secrets were reinforced. In particular, severe punishments were put in place for leaks to foreign countries.

But are legal regulations enough? Essentially speaking, if engineers migrate to foreign countries or foreigners return to their home countries, even if you try to impose punishments on them for their acts after the fact, it is too late. In a situation in which foreign governments have interests conflicting with Japan’s, they are less likely to cooperate in investigations, and it is necessary to take notice of the fact that the international liquidity of human resources is not necessarily advantageous to companies. In addition, the technologies to manufacture important goods are an aggregation of advanced and diverse know-how and technical information that Japan has accumulated, inherited and developed for many years. Until now, it may have been difficult to imitate Japanese technologies so comprehensively as to easily continue them as businesses, if not imitate just part of them. But if big data based on the accumulation of information that can be obtained just fragmentarily from the relatively low-level work processes of unskilled workers and information released are analyzed by the eyes of artificial intelligence (AI), even if there are no intentional specific leaks, it may be possible to reproduce important technologies.

You do not need to be pessimistic. AI can bring opportunities as well as risks to the defense. The day will come soon when no motion or facial expression of people who plot to leak information can escape the eyes of AI. In addition, AI will never overlook signs of competitors using Japanese companies’ technologies, garnered from various developments, such as competitors’ procurement of materials and securing of human resources. Therefore, the superiority or inferiority of AI technologies can be a key factor that defines which side will win, the defense or the offense. Because AI’s precision of detection makes constant progress through deep learning, it will pay to recognize that once either side lags behind, it could be cornered into a position in which it is monitored one-sidedly and could have difficulty recovering from that position of inferiority.

ODAKI Kazuhiko is a professor at Nihon University and consulting fellow at the Research Institute for Economy, Trade and Industry (RIETI). HISHINUMA Takeshi is a professor at Nagoya Gakuin University (NGU grant awardee) and consulting fellow at RIETI and Institute of Intellectual Property (IIP).

This article first appeared in the September/October 2019 issue of the Japan Journal.

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