State of Innovation

Patents and Innovation Economics

Another Anti-Patent Myth Debunked: The Selden Automobile Patent

There is a myth by the anti-patent crowd that “overly broad” patents inhibit the development of new technologies.  One of the classic examples they like to cite is the Selden Patent (US Pat. No. 549,160), which supposedly inhibited the development of the automobile around the turn of the century.  A new paper ‘The “Overly-broad” Selden patent, Henry Ford and Development in the Early US Automobile Industry’ By John Howells and Ron D. Katznelson, shows that in fact the automotive industry prospered and inventiveness accelerated despite the Selden patent.

According to the paper:

First, neither the ALAM-adopted restrictive licensing policy based on the Selden patent, nor the public liability threats to purchasers of unlicensed vehicles (see sections 2.2.3-2.2.4) restricted entry into the automobile industry as shown by Figure 1.

Second, measures of automobile development show it to have been most rapid during the Selden patent term; Raff and Trajtenberg’s analysis of real, quality adjusted prices for the American Automobile Industry show that the fastest rate of price decline for a given automobile quality occurred between 1906 and 1911, within the term of the Selden patent prior to its 1911 adjudication: the rate of quality improvement was greatest in the 1906 – 1911 period and more than half of the quality gain for a given price observed to have occurred by 1980, had been attained in the period 1906 – 1911 (Raff and Trajtenberg 1996, p85, 91).

Third, rather than Ford being slowed down through patent litigation with the ALAM, from the foundation of the Ford Motor Company in 1903, Ford grew sales at an exponential rate faster than that of the total industry during the period of litigation. A serial developer of five major automobile models, which gained tenfold increase in sales every four years, can hardly be considered to have been “stifled.” The Ford Motor Company became the leading manufacturer of automobiles produced in 1906, a position the company retained until 1927; see Figure 2.

econgrowth.smallThe paper provides overwhelming evidence that the Selden patent did not inhibit the automotive industry or the development of new technologies in the automotive industry.  This should have been apparent to anyone familiar with the history of the automotive industry.  The United States led the world in developing and manufacturing automobiles at the turn of the century and beyond.  Selden had a U.S. patent and it was enforced in the U.S., so the facts do not square with the anti-patent narrative.

Another interesting part of the paper is that Ford knew that they would prevail in a lawsuit over the Selden patent.  This is the value of well-defined laws and courts who stick to the law.

Selden’s patent was issued by the US Patent Office in 1895 and eventually was assigned to the Association of Licensed Automobile Manufacturers (ALAM) in early 1903. The ALAM publicly asserted that the Selden patent claims should be broadly construed, meaning that the entire automobile industry was within their scope. In October 1903 suit was brought against the Ford Motor Company under the Selden patent and when finally adjudicated on appeal in 1911 the Ford Motor Company was found not to infringe because although the patent was held valid, it was construed narrowly to cover an improvement to the obsolete Brayton engine. This was the embodiment with which Selden had experimented prior to 1879, the year he applied for a patent. Columbia Motor Co. v. CA Duerr and Co. 184 F. 893, 896 (2nd Cir. 1911). The narrow Brayton-based construction saved Selden’s claims, but they were not infringed since all gasoline engines in commercial use were Otto engines by 1911, rendering the patent economically worthless

Another anti-patent lie bites the dust.  When a group or a movement consistently lies and promotes lies to support their position over and over again, as the anti-patent crowd has done, they should not be taken seriously by rational people.

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July 11, 2016 - Posted by | -Economics, -Law, Innovation, Patents | , , , ,

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