Silicon Steppe

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The prevailing winds of technological change may blow from West to East, but a growing number of U.S. companies are riding the countercurrents, turning communist technologies into capitalist profits.

Consider Multi-Arc Vacuum Systems Inc., of St. Paul, Minn., which markets a Soviet-developed process for coating metals. The process was "discovered" in the late 1970s when Joseph Filner -- president of Noblemet International (now Newmet Corp.) of New York City -- stumbled across it during a business trip to the Soviet Union. There he learned about a Russian auto plant that had had difficulties getting new machine tools when it needed them. Searching for ways to alleviate the problem, workers had found that a thin film of titanium nitride enabled them to work their old tools longer, harder, and faster.

Filner visited the plant and, in December 1979, negotiated a U.S. license for the technology. On the strength of that license, Noblemet and other investors launched Multi-Arc as a joint venture to sell the coating machines and related services. In just over two years, the company's annual revenues grew from zero to $5 million. Multi-Arc now has 80 employees, recently set up a british subsidiary, and is about to begin licensing a service operation. Ironically, the process -- invented in a Russian auto factory -- has proven most popular among tool makers supplying the U.S. auto industry. "It's an impressive, rapidly growing, successful business," says Jack Heule, president of Minneapolis-based Control Data Worldtech Inc., a division of Control Data Corp that does research and consulting on, and brokering of, technology transfers. Worldtech is now a worldwide marketing reprrsentative for Multi-Arc.

United States Surgical Corp. of Norwalk, Conn., is another company predicated on a Soviet technology license. In the 1960s, president Leon C. Hirsch first saw a surgical stapler -- a device that uses stainless steel staples in place of standard sutures -- while visiting a patent broker. The stapler had been designed by a Hungarian more than 50 years before, and then refined by the Russians, but it was not widely used in the Soviet Union. United States Surgical obtained the rights through Licensintorg, the Soviet foreign trade organization for technological exchange. Although other licensed manufacturers have since introduced their own surgical staplers, United States Surgical continues to do well with its model and has diversified into patientcare products. The company currently has sales of $146 million per year.

To be sure, neither start-up was simple: Negotiations with the Russians were long, involved, and complicated by distance, language, and culture. In both cases, products had to be modified significantly in order to meet the needs of the American market. "Soviet technology, particularly in the heavy industries, is very good. . . There's a lot of technology worth having over there," observes Curtis Fritze, vice-president of Worldtech. "But the Russians don't have the basic know-how to transform it into products."

Multi-Arc and United States Surgical were happy to provide that expertise. United States Surgical, for example, incorporated a cartridge-loading mechanism into its stapler. In the original model, staples had to be loaded individually with tweezers.

These are not isolated instances, moreover. Other companies have recognized the commercial opportunities in adapting Eastern technologies to meet Western needs. "We sell more technology than we buy," says Vladimir Kramerov of Soviet-owned Amtorg Trading Corp. According to Kramerov, Russia holds fewer than 30 U.S. licenses but has granted more than 50 to U.S. companies.

"The Soviets have a lot of technology -- in metals, electroplating, heavy equipment, and medicine," concedes Val Zabijaka, regional economist with the Soviet desk at the U.S. Department of Commerce.

Among the other beneficiaries of that technology:

* Rexnord Inc., a Milwaukee-based manufacturer of industrial components and machinery, which discovered a Soviet ore crusher through a search of Worldtech's computerized files of technologies around the world.

* McDermott Inc., a marine construction company, which obtained the license on a Soviet welding technique that was used to build the Trans-Siberian pipeline. McDermott will use it to build marine pipelines.

* Maxwell Laboratories Inc. of San Diego, whose chairman, Alan Kolb, found out about an electromagnetic metal-shaping process while attending a convention in the USSR. Olin Brass, of East Alton, Ill., is developing the technique to cast copper alloys.

* Texas Utilities Co., of Dallas, Tex, which plans to use a Soviet process for in situ gasification of coal -- that is, for generating electricity by burning coal that is still in the ground.

* Dr. Robert J. Morrison, a Pennsylvania optometrist who acquired the license for a soft contact lens developed at the Institute of Macromolecular Chemistry in Prague. The rights were eventually sold to the optical manufacturer Bausch & Lomb Inc., of Rochester, N.Y.

In addition, various companies have been doing a brisk business as matchmakers -- keeping an eye out for promising Communist-bloc technologies and helping to arrange the deals. The matchmakers include Welt International and Kiser Research Inc., both of Washington, D.C., as well as Worldtech.

None of this means that the Russian steppes have suddenly been transformed into hotbeds of technological innovation. But it does suggest that the Communists may have something to offer the captains of capitalism, namely, new products "American businessmen may find the exercise -- getting the Bear to begin moving -- a bit awkward at first," says Heule, "but it can pay off."

Last updated: Jan 1, 1984




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