More on Henry Ford, the Selden Patent, the ALAM, and What Followed:
Patents are important historical materials, but interpreting them is fraught with difficulties. As one observer has asserted, “in a particular industry the place of patents is seldom what it seems and the effects of patents are often similar to the famous ‘riddle wrapped in mystery inside an enigma.’”[i]The significant role of patent attorney George B. Selden in the early history of the automobile in America can hardly be overestimated.
In 1879 Selden applied for a patent on a motor vehicle employing an hydrocarbon-fueled internal combustion engine. His patent turned out to be one of the most famous in American history. It has been claimed that Selden “kidnapped an infant art and held it in bondage to maturity.”[ii]Selden did what was legal under the 1861 patent law, and before it was actually granted, cleverly applied, withdrew, and modified the patent application between 1879 and 1895. Patent 549,160 (November 5, 1895) purportedly covered every gasoline-fueled internal combustion engine equipped vehicle. In 1899 the patent was exclusively assigned to the Electric Vehicle Company and its first test in court was in a suit against the Winton Motor Carriage Company in 1900.
Three years of legal wrangling followed before Winton acknowledged Selden’s claim and acquired a license to manufacture automobiles. In that same year, 1903, the Electric Vehicle Company and 18 other manufacturers formed the Association of Licensed Automobile Manufacturers (ALAM) with the express purpose of enforcing the Selden patent against non-members, dealers and customers of non-member cars. To agree to a license meant paying the Association a royalty of 1.5% of the catalog or retail price of each vehicle sold.
Independents formed their own trade association, the American Motor Car Manufacturers Association, and what followed was continuous litigation until 1909, when in a sweeping decision, the Selden patent was upheld. Only Henry Ford and Thomas B. Jeffery held out. And well they did, for on January 9, 1911, the Circuit Court of Appeals reversed the 1909 decision, maintaining that while the Selden patent was valid, it was restricted to a particular kind of engine. In sum, Ford had not infringed on the patent. Thus, Selden’s patent did not blanket the automobile industry. Judge Noyes concluded “The public gained absolutely nothing from his [Selden’s] invention, whatever it was.”[iii]
Over the course of the Selden patents sway somewhere between $5,800,000 and $10,000,000 in license fees were collected. Between 1910 and 1911 all manufacturers with the exception of Ford paid royalties to The ALAM. Had the patent remained in force, one wonders about the historical trajectory of the American automobile industry. Perhaps it would have remained focused on luxury vehicles instead of inexpensive utilitarian vehicles. How would have suppliers and the glass, rubber, steel and petroleum industries matured?
The ALAM stranglehold was smashed, but patent pooling would remain characteristic of the future industry, just through a different trade organization – the Automobile Manufacturers Association (precursor organizations were the Automobile Board of Trade and the Automobile Chamber of Commerce). In essence, this organization was a patent cartel, and by 1939 with the exception of Ford and Lincoln and The Bantam Car company belonged to the AMA. Patent litigation in the automobile industry thus was minimized, the pooling of patents was the general rule, and patent law was nearly completely abrogated. Patent protection was not afforded to suppliers; however, and perhaps this explains to a degree the technological stagnation that subsequently characterized the industry by the 1930s.
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