Henry Ford Made Billions Fighting Patents

There was a point in the development of the automobile industry that looked like the computer industry circa 1982:  hundreds of small companies competing to be number one.  For the auto industry, that year was 1903.  Enter the wicked patent attorney:

The lawsuit began in October 1903, when George B. Shelden and his licensee, the Electric Vehicle Co. filed suit against the Ford Motor Co. for infringement of Selden's patent, and it wasn't finally decided until Jan. 9, 1911. It has been estimated that costs of the battle passed the $1-million mark.

(prox $24 million today).  A patent attorney gamed the system to create an income stream for himself and "investors."  The asset was the patent.  (Sound familiar?) In essence, while having nothing to do with automobiles or the industry, the patent holders were able to abuse the system to lay a private tax on the automobile industry while obliging taxpayers to fork over the money to enforce the monopoly that made their private tax possible.  Bear in mind the Constitutional basis for the patent is (read what an afterthought this clause was)

"To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."

So as you can read, the point is progress (for everyone), specifically limited to what will promote that, no where mentioning untold wealth by private taxation.  Now of the hundreds of companies making cars in 1903, one said "no."

When Ford Motor Co. was sued for infringement on Oct. 22, 1903, it was a small struggling company. Its first sale had been made on July 15, when the company bank balance was down to $223.00. The syndicate, of course, represented a multi-million-dollar combine. Ford retained Ralzemond A. Parker, an eminent Detroit patent attorney, to defend the company. Like Ford, Parker was convinced the patent was unenforceable and should, and could, be defeated.

The fight went on for eight years.  On one hand were "investors" who desired to game the system with a private tax enforced by public moneys vs an inventor and marketer who truly and naturally wanted to promote the progress of science and useful arts.

For the next 8 years, the country was treated to the spectacle of an intense trade war between Ford Motor Co. And the Selden interests. The Selden group harassed unlicensed automobile makers and their customers with suits and threats of suits.

Note what was happening, Ford was distinguishing his company from the others.  He probably had no idea this was a good idea when he started, especially when he had to future on the line to fight the wicked patent attorneys and "investors."

Ford advertised that he would indemnify his customers against suite by the Selden syndicate and later posted the entire assets of the company as a bond. The advertising war was carried on almost daily in the newspapers throughout the entire country.

Recall when the music industry in the '90s was suing twelve year old girls?  All this is nothing new (although it was new then.)  Ford was up against people who had money pouring in.

But, Ford soon stood alone, however, as other auto dealers yielded to the Selden demands. On Nov. 22, 1910, attorneys for the litigants began presenting their arguments to a three-judge appeals court. The hearings were brief and covered much of the same territory covered in the lower court. On Jan. 9, 1911, Judge Walter C. Noyes reversed the lower court. Ford had won!

You need passion (to suffer) to start a business, and it is the joy of overcoming the problems that allows the little guy to beat the big guy.  Seldon and his thuggish clique just wanted money money money.  Ford wanted to provide a value in the marketplace.

So the whole industry was funding the effort by Seldon to destroy Ford, and when Ford won, the whole industry was freed from the private tax backed by government violence.

It has been estimated that royalties paid before the patent was held invalid amounted to about $5,800,000.00.

No wonder Ford became bitter in his later years, being a free man among welfare queens.

The whole industry was freed from the necessity to pay royalties on automobiles, and a serious threat to its development was removed. 

The irony is, today Ford is part of a patent poll that makes it almost impossible to start up a car company in USA.  When taxpayer recently bailed out Ford and the others, those patents should have been open sourced.  We missed an opportunity.

Of this amount, Selden is believed to have received only about $200,000.00. Even so, it was a bountiful harvest for the holder of a patent finally adjudged worthless.

Yes, and where occasionally courts would follow the law, we see so little of that now.  While we are assured patents are to  "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries."  in fact we see time and again, they are nothing but a hindrance to the same.



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