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After its establishment in 1960, SONAM worked hard to blend into the business culture of the US. Morita remembered those years as a time when his patience was pushed to the limit on numerous occasions. The perplexities of the US legal system often left him scratching his head. Yet he persevered and soon developed a sufficient understanding. He once remarked that,  If you don't know your way around the law, it is impossible to do business in the United States.
The most important factor in Sony's success was commitment from the top as displayed in the leadership Sony showed during the campaign to have the unitary tax abolished.
Morita was personally interested in legal issues and was instrumental in assembling a legal team at the Sony head office in Tokyo. With the help of lawyers such as Edward Rosiny, he was able to train Tamotsu Iba, Kenichiro Yonezawa, Teruo Masaki, Teruhisa Tokunaka and other Sony managers in the intricacies of doing business in the United States.
Whenever a legal problem arose, Morita and Rosiny would direct the legal team as to the appropriate action to take. Sony concluded a large number of contracts with US companies in the 1960s and 1970s, including contracts with Super Scope Inc., joint venture agreements with TI and Tektronix, and technology transfer agreements with IBM and other companies.
Sony eventually became embroiled in two major antitrust lawsuits. The first, brought by US TV manufacturers National Union Electric Corp. and Zenith Radio Corp. against a group of Japanese TV makers, became a landmark case in the 1970s. Then in 1987, Go-Video Inc., a consumer electronics manufacturer, brought a lawsuit against Japanese and South Korean VCR makers and US motion picture companies, alleging breach of antitrust laws. In both instances, the plaintiffs claimed enormous damages.
The Sony legal team honed its skills amid an environment of contracts and lawsuits. The first time they were truly tested was on the Betamax case beginning in September 1976. Sony received proposals from its US advertising agency for a new Betamax advertising campaign. The ads referred to Columbo and Kojak, two of the most popular programs on television at that time, and mentioned that viewers no longer had to choose between the two. The ad promised that with Sony's new Betamax system, viewers could watch one of the programs now and one at a later time. These advertisements led to a complaint from Universal Pictures Inc. and its parent company, MCA Inc. Both Columbo and Kojak were distributed by Universal Pictures. The release of the advertisements eventually resulted in an eight-year lawsuit before the Los Angeles District Court. It was the first time that Sony faced allegations of copyright infringement.
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Betamax introduced the concept of Time-Shift. |
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The plaintiffs in the suit, Walt Disney Productions and Universal Studios, made a four-part claim against Sony. First, programs made by the respective plaintiffs were the property of the said plaintiffs. Second, the rights attached to this property included the rights to any reproductions of the original programs. Third, it was inevitable that VCRs would be used by consumers to reproduce programs without the permission of the plaintiffs, thereby indirectly infringing on the property rights attached to the original program. Fourth, Sony was contributing to the infringement of copyrights through the activities of manufacturing and selling VCRs. In addition to Sony, advertising agencies, retailers and all those who had made copies of the programs were included in this litigation.
If the plaintiffs' contentions were upheld, Sony would have to stop selling VCRs in the United States. Unless the law was revised, the future of the VCR would be in doubt. There was also the question of damages.
Led by Morita, Sony was ready to sacrifice the time to defend its position. Sony's future and the future of a vital part of the world electronics industry were at stake. Time-shift, a phrase Morita had coined to describe the concept behind the home-use VCR, was to become the central theme of Sony's defense, which was based on two arguments. First, the basic concept behind the home-use VCR is to free the public from the constraints of television scheduling, in other words, to allow people to watch programs at their own convenience. Second, the huge volume of information transmitted over the airwaves by television stations is in the public domain. The VCR is merely a device that extends the function of the television -- that is, it enhances people's ability to watch information which is publicly broadcast. The only difference is that the VCR enables people to do so when it suits them.
Sony won the first round of litigation when the L.A. District Court accepted Sony's arguments and handed down its decision in October 1979. However, Universal Studios appealed this decision to the US Court of Appeals in 1981, and the original decision was overturned. Sony was naturally dissatisfied with this decision and in turn appealed to the Supreme Court in Washington the following year.
Until the original decision was overturned by the Appellate Court in 1981, the media and general public had not shown a great deal of interest in the case. Neither had Sony employees, with the obvious exception of the people in Sony's legal team. But the decision by the Appellate Court quickly changed this state of affairs. Newspapers throughout the US became absorbed in the case. There was almost unanimous agreement in the press that the decision against Sony was wrong, even unpardonable. The reactions went as far as the popular Mickey Mouse comic strip, which depicted Mickey Mouse putting handcuffs on a consumer trying to use a VCR at home. By then, however, the Sony battle had spread to include other VCR manufacturers as well.
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