Landmark patent case broke Selden's lock on auto industry
But Selden merely improved an engine that by the early 20th century was nearly obsolete. The only motor vehicles ever built to his patent's specifications were the two used as exhibits in his patent infringement suit against Ford Motor Co.
Selden was a patent attorney in Rochester, N.Y. His lawsuit, which was filed in 1903, brought him temporary fame. It was the patent suit - not Selden - that had a lasting impact on the auto industry.
The appellate ruling in Ford's favor in 1911 permitted the industry to race ahead, unfettered by monopoly. The case also led to technology sharing, standardized automotive parts and processes, and reforms in patent litigation.
Henry the hero
The legal battle turned Henry Ford into an American folk hero, championing free enterprise and the people's car. Ford dismissed the case as cheap advertising because it gave Ford Motor Co. renown for engineering affordable, dependable automobiles.
The most damaging aspects of the Selden patent case were the cost of litigation and royalties paid by licensees.
Selden applied for a patent in 1879, continually broadening the description of his invention to encompass all types of motor vehicles with gasoline-powered engines. The patent was issued in 1895 and expired in 1912.
"The object of my invention is the production of a safe, simple, and cheap road locomotive, light in weight, easy to control, and possessed of sufficient power to overcome any ordinary inclination," Selden wrote in his application.
Patent No. 549,160 remained in obscurity until 1899, when Electric Vehicle Co., a New York producer of electric taxis and streetcars, purchased rights to it for $10,000 plus royalties.
When the future dimmed for mass-produced electric vehicles, Electric Vehicle Co. tried instead to wring money out of the gasoline-vehicle market by threatening vehicle manufacturers with patent infringement suits. Those who capitulated paid licensing fees and joined the Association of Licensed Automobile Manufacturers. The royalties were split among the association, Electric Vehicle Co. and Selden.
One of the association's goals was to protect the automotive market from fly-by-night operators, but it excluded some promising manufacturers. Its members tended to be Eastern manufacturers who aimed at the luxury market, while the unlicensed manufacturers were Midwestern producers of moderately priced vehicles.
Henry Ford, whose aim was to mass-produce affordable cars, initially made several attempts to join the Association of Licensed Automobile Manufacturers even though he believed the Selden patent was worthless. After being rebuffed as a mere assembler of parts, Ford grew defiant and referred to the association as a "trust."
As Ford Motor Co. expanded, it became a threat to the association. On Oct. 22, 1903, Selden and Electric Vehicle Co. sued Ford for patent infringement.
"Selden can take his patent and go to hell with it!" cried James Couzens, one of Ford Motor's early investors and corporate officers.
The suit backfired as badly as the two vehicles built under the Selden patent's specifications.
Ford found it cheaper to fight the association than to pay royalties. As a Selden licensee, Ford Motor Co. would have paid an average $12.50 per car. Instead, Ford paid $6.80 per car to fight the Selden suit.
Media coverage of the suit popularized both Henry Ford and his affordable vehicles. The average price of vehicles produced by association members was $2,000, whereas most Ford vehicles retailed for less than $1,000.
Victory did not come as easily as Ford had hoped.
The battle raged until 1911, only a year before the Selden patent expired, which enabled the association to collect a total of
$5.8 million in royalties. Selden's estimated return was $200,000. The royalties dwarfed the estimated $1.5 million the association paid for legal and technical experts, patent searches and advertising.
Selden’s patent was simple.
The three judges of the U.S. Circuit Court of Appeals for the Second Circuit had more expertise in patent law and a greater understanding of the automobile business. Ford switched to a new patent attorney, who made a simple case that focused on Selden's sputtering vehicle exhibits and an automotive history book written by one of Selden's key expert witnesses. The book's findings contradicted the author's court testimony that Selden was a pioneer.
"From the point of view of public interest, it were even better that the patent had never been granted," wrote Judge Walter Noyes in the appellate court's decision.
The suit had unintended and beneficial consequences.
As an example of abusive patent litigation, it contributed to reforms. In 1912 the U.S. Supreme Court adopted rules designed to reduce delays and legal expenses in infringement suits.
Although the association was dissolved in 1912, its mechanical branch adopted standards for parts and processes, the precursor of modern industry standards.
The Selden suit also prompted manufacturers to share technology. The National Automobile Chamber of Commerce adopted a cross-licensing agreement in 1915 that permitted members to share technology without licensing fees.
Ford Motor Co. used patents only to protect invention - not to generate profits.
"No man has a right to profit by a patent only," said Henry Ford, reflecting on the case in 1925. "That produces parasites, men who are willing to lay back on their oars and do nothing. If any reward is due the man whose brain has produced something new and good, he should get enough profits from the manufacture and sale of that thing."
As for Selden, he remained a dreamer to the end. He died in 1922 clinging to the notion that he had fathered the gasoline-powered automobile. "Morally," he said, "the victory is mine."