Ford vs. Selden: The First Patent Licensing Authority
Although patent licensing authorities, or similar patent enforcement entities, are well known in the modern patent landscape, the practice has interesting historical roots. In 1895, the U.S. Patent Office issued George Selden, a young patent lawyer and inventor from New York, a patent (No. 549,160, the "'160 patent") covering a road vehicle powered by a modified Brayton-type gasoline engine, a patent that would not expire until 1912. Selden had filed his original application back in 1879, but continuously amended his patent until it covered all gasoline-powered engines.
In 1903, the Electric Vehicle Company, which enforced Selden’s patent, formed the association of licensed automobile manufacturers. (or ALAM for short) Once the ALAM was formed, they took a stance that reinforced Selden’s patent and its claims to virtually own the entire U.S automobile industry, and that any of those who did not abide by its wishes were threatened with infringement suits. Henry Ford attempted to join the somewhat exclusive club and filed for membership to operate and sell his affordable automobiles. Ford was denied, not once, but twice, officially based on his prior business failings. After his second denial, Ford decided to sell his cars anyway. The ALAM responded with a smear ad campaign that tried to convince prospective buyers to decide against Ford. In response, Ford launched a counter-ad-campaign, with slogans such as: "When you buy a Ford Motor car from John Wanamaker, you are guaranteed against any trouble with the trust."
Selden’s patent utilized a Brayton-type engine, which, at the point of conflict, had been stripped of any obvious verbiage designating it as such. By 1903, the automotive industry had adopted a four-stroke Otto-cycle engine, which utilized compression inside the respective cylinders, instead of the Brayton-type engine's external compression. Despite such differences, Selden’s patent had claims of broad enough scope such that ALAM continued to enforce it against Otto-cycle engines. But, even after Selden’s original patent amendments, characteristics of the Brayton-type engine remained, like the clutch’s position in order not to need to re-ignite a pilot flame.
To counter ALAM’s license demands, targets of the ALAM commissioned a freedom-to-operate (or FTO) analysis and began producing opinions on whether outsiders and their products would infringe on Selden’s patents. Patent attorneys such as Ralzemond A. Parker produced non-infringement opinions that Ford would eventually leverage in order to rebuke claims presented by ALAM on the basis that Selden’s engines were not Otto-cycle engines and therefore did not apply to his cars. Henry Ford’s Model T, utilizing the Otto-cycle engine, went on to become the highest-selling automobile until the Volkswagen Beetle in 1972.
So, while ALAM may have been one of the earliest patent licensing and enforcement entities, and is now just a historical footnote, the approach taken by ALAM, of course, has continued to this day, as do the conflicting viewpoints on its costs or benefits to society . . . .
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