Ford Vs. Selden:
Kayo Gave Car-Makers Jump On Future
Ouster Would-be Dictator in Court Fight Turning Point
A HALF-CENTURY AGO, one of the longest and costliest, and bitterest lawsuits ever tried in this country’s courts came to a close with a decision that changed the social and economic face of America.
The ostensible task before the courts was ro determine the validity of a patent consisting of two drawings and three and a half printed pages. But the real take in the battle was control of the automobile industry.
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.
The story of the Selden patent battle is the subject of a new book, Monopoly on Wheels, written by William Greenleaf, a New Hampshire University professor. It is a richly detailed narrative of this major turning point in the development of the automobile and in the career of Henry Ford.
The Selden patent purported to grant to Selden rights to all road vehicles powered by compression type internal combustion engines. Consequently, Selden claimed that any manufacturer or user of the "horseless carriage" was an infringer unless licensed by the patent holder.
The Selden patent was the brainchild of a man who was far more the clever patent attorney than the inventor. Although, he did considerable tinkering with engines, Selden, himself, never built a working automobile. Though Selden filed his patent application in the spring of 1879, his transactions with the Patent Office were shrouded in secrecy for more than 16 years.
Since an invention dates from the time of patent application, and amendments may be entered before the patent is granted, Selden was in a unique position .He was able to adjust his claims and then have the patent issued when the automobile was commercially feasible. The patent was issued on Nov. 5, 1895, and at that point had 17 years to run. Selden had delayed his patent long enough so that it could be used as a sword over the head of any manufacturer proposing to develop an automobile.
In 1899 Selden licensed a group of Eastern financiers who were forming the Electric Vehicle Co. to be the sole administrators of the patent. For this license he received $10,000.00 and a percentage of whatever royalties could be collected. So, in 1900, the Selden patent syndicate set out to compel royalty payments on every gasoline car made, sold, or used in the United States. Most small companies could not afford the expense of defending such a suit brought by a syndicate with overwhelming financial resources.
Shortly before the Ford Motor Co. was incorporated in 1903, Henry Ford discussed with the Electric Vehicle Co. the possibility of being licensed under the Selden patent. Upon being refused, Ford was outraged and vowed to fight the patent holders to the finish.
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.
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.
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.
But since, the Selden patent case was a routine suit in equity, newspapers carried very little of the courtroom action. Testimony was mountainous, and the case dragged on month after dreary month. By 1907, both sides had developed their principal exhibits. Selden had a car built incorporating the features of his patent, and Ford had a car built using features patented by French inventor Etienne Lenoir. The Lenior invention had preceded the Selden patent by several years.
When the two vehicles were taken on test runs, the Selden car failed miserably, while the Ford model based on the Lenoir patent performed beautifully. Ford’s purpose was to show that Selden had not patented a workable car, and that even if he has, it was not the first workable automobile patented .
However, 0n Sept. 15 ,1909 , Judge Charles M. Hough of the U.S. Circuit Court for the Southern District of New York ruled in favor of the Selden syndicate. But, Ford was not in a yielding mood. He wired his dealers that the “ Selden suit decision has no effect on Ford policy. We will fight to the finish!”
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!
The whole industry was freed from the necessity to pay royalties on automobiles, and a serious threat to its development was removed. It has been estimated that royalties paid before the patent was held invalid amounted to about $5,800,000.00.
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.
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