CHAPTER 24
In the wake of Judge Hough’s ruling, nonlicensed manufacturers fell over like so many dominoes. Within weeks, more than thirty of the independents had been accepted into the ALAM ranks as paying members. Billy Durant, whose General Motors had been refusing to pay licensing fees, settled with the organization and paid $1 million, although some portion of this would come back to him as fees for the carmakers in his group—including Buick—that had held ALAM licenses.
Not surprisingly, ALAM members were exultant, filling the newspapers and trade magazines with a series of pronouncements praising justice and the American legal system. The most ironic of these came from Alexander Winton, who had more or less set events in motion when, after the most vitriolic denunciations of his current allies, he had accepted $40,000 to switch sides almost a decade before. “Every automobile manufacturer was warned years ago not to infringe on the Selden patent,” Winton exclaimed. “The patent has withstood the assault of the ablest legal talent on this continent; it emerges from the court triumphant, and nothing now remains but to exact from the trespassers a share of that income which they have enjoyed for years without legal right and in utter defiance of the American law which rewards inventive genius with letters patent.”1 For Winton, this was the first time in many tries that he ended a contest ahead of Henry Ford.
Although Winton’s remarks in particular must have infuriated him, Ford remained stolid, at least in public, categorizing the defeat as only a temporary setback. A boxed insert in Motor Way magazine, on the same page where Hough’s decision was explained, read, “Selden suit decision has no effect on Ford policy. We will fight to a finish. Henry Ford.” He sent the same terse vow to newspapers and the other trades.
“I simply knew we were right,” Ford wrote later in My Life and Work, and portrayed his determination to see the matter through to the Supreme Court if necessary as always having been set in stone. He did admit that he had been apprehensive that “many buyers would be frightened away from buying because of the threats of court action against individual owners.”2 ALAM had previously sued a number of car buyers, albeit with mixed results, and some members of the association stated publicly that they would do so again. But ultimately, Ford insisted, such tactics would be moot. He told anyone who would listen that Hough’s decision was “neither final nor conclusive” and that he would both “continue to produce motor cars to the limit of his capacity, [and] resist all overtures and threats from the Selden camp.”3
Privately, however, Ford was apparently a good deal less confident. Horace Rackham, hardly a detractor, noted that Ford was gloomy, “in a very serious frame of mind.”4 Even with the Model T now an established success—he had sold seventeen thousand cars in 1909 and would double that figure in 1910—he seemed ready to get out. According to Couzens, “he constantly talked about retiring and becoming a farmer”—a telling comment given how much Ford hated farming.5
In the months before the case was decided, Couzens had approached Billy Durant on Ford’s behalf and told him, “Mr. Ford is very much concerned about the Selden patent suit and its outcome. The prospects of winning or losing the case are equal. To lose means payment of a very large sum of money. He is not a member of the license agreement and, on general principles, has opposed the right of any man to control this patent situation. General Motors, with its several companies holding licenses, would probably be able to make a very satisfactory adjustment with Selden if it owned the Ford Company.”6 Durant was unwilling to make a commitment to Ford until after the ruling, but just weeks after Hough’s decision came down, he met with Couzens in a New York hotel to discuss the sale. Ford, who was staying at the same hotel, did not attend because, as Couzens put it, he was “sick in body and mind” and had entrusted Couzens with the negotiations.7
Hough’s ruling notwithstanding, both sides knew it would cost Durant a good deal more to acquire Ford Motor than the figure agreed on the previous year. Couzens wanted to remain involved, but Ford intended to cash out. The number Durant and Couzens came to was $8 million, of which $2 million would go to Couzens in stock. Ford would receive $2 million at the time of sale and the remaining $4 million, with interest at 5 percent, within three years.*1 Ford would continue to draw a prorated share of the profits until he was paid in full. The remaining Ford shareholders would, like Couzens, receive stock. When Couzens went to Ford’s room to recount the terms, he reported that Ford called out from the bathroom, “Tell him he can have it, if it’s all cash. And I’ll throw in my lumbago.”8 Ford was so anxious to sell, however, that he eventually agreed to the initial arrangement of cash and notes.
The deal progressed far enough for Durant to receive a written option, for which he paid $75,000, and to visit the Ford plant in secret to check inventory. On October 26, the board of General Motors ratified the agreement. Durant, his local lines of credit having no further leeway, was off to New York to secure financing.
His first stop was 23 Wall Street for a meeting at J. P. Morgan and Company. Durant later recalled the meeting. “Loan me $8,000,000 legal tender,” he proposed to a group of assembled partners and investors, “and for security I’ll assign to you until repaid the whole of General Motors, and the Ford Motor Company, and will give my personal note.” Durant said that George Perkins, the Morgan partner who had been most disappointed at the collapse of the previous scheme, gave him an hour to present his case.
I explained to the Morgan partners that the age of the horse and buggy was over. That a new era in transportation, communication, and rapid travel between cities was coming. We explained the necessity for steel companies to enlarge their plants to be able to take care of the orders that would flood their present capacities; that the cotton growers in the south would have to double and treble their crops to supply the demand for textile material for automobiles; that good roads someday would cross the nation from ocean to ocean and from Michigan to Florida. I was then backing a young man in Michigan, who we called “Good Roads” Earle. The first good road we personally paid for. It was called the Buick Road, and was a gravel constructed route that went through Grand Blanc, to Atlas, and Clarkston, on to Detroit. That was the beginning of the Michigan Highway Department. We pointed out that a new prosperity would follow in America that would affect the entire continent, with the certain success of the motor industry. At that time we had our eyes on such men as Charles Kettering, Alfred Sloan, Walter Marr, Albert Champion, Charles S. Mott, A. B. C. Hardy, William Little, Robert Burman, and the Chevrolet Brothers, among others…men of vision whose soundness of judgment and mechanical engineering genius would assure the eventual success of the new automotive industry.9
Durant claimed that the financiers listened for two hours, but other than Diamond Match Company president Edward Stettinius and Morgan himself, no one at the table felt that Durant was anything more than a salesman. (That refusal would ultimately cost the Morgan partners billions of dollars. Stettinius, unbeknownst to his skeptical colleagues, eventually bought a large block of General Motors stock on his own and made a small fortune.)
He next tried National City Bank, this time to attempt to secure a $2 million loan to cover the first payment to Ford. Frank Vanderlip, the bank’s president, was enthusiastic about the deal, so approval seemed a formality. It wasn’t. The bank’s credit committee turned Durant and Vanderlip down on the grounds that Durant had placed far too high a value on Ford Motor Company. With that, Billy Durant lost his last chance to buy Ford’s company.*2
And so, against both his will and his better judgment, Henry Ford was back in the car business.
In this instance as well, most biographers have insisted that Ford, with Model T sales promising to soar, could not have been serious about selling his company. But Henry Ford was not a man to frivolously solicit an offer from a competitor. Ford was not a man to do anything frivolously. The option Durant obtained was real and, once more, there are too many disparate sources to conclude anything but that Ford was all too willing to be bought out.
And in some ways, Ford’s exit would have made sense. For someone who was instrumental in ushering in modernity, Ford’s essence remained in the world he was rendering obsolete. He was a man of great sentiment and craved an innocent, almost frontier life, where recreation consisted of such simple pursuits as fishing and folk dancing, mostly jigs and polkas. And, of course, there were his beloved birds. After he’d made his fortune, he initiated annual camping trips with his closest friends, Thomas Edison, John Burroughs, and Harvey Firestone—they called themselves the vagabonds—although the quartet came to be accompanied by cooks, servants, photographers, and often other celebrated Americans, including a president or two. Yet for all of this, Ford had just spent the better part of a decade focused obsessively on work, most days seeing nothing but the inside of a factory or workshop. Under these circumstances, it is not difficult to imagine him grateful for the chance to leave that brutish existence—and as a rich man to boot.
In any event, after the deal with Durant fell through, Ford’s spine stiffened. At this point, he had little to lose. The bulk of his indemnity was for cars already sold. It was true that future sales until the Selden patent expired three years hence promised to be robust, but pursuing the case on appeal would not cost him one additional cent in licensing fees. Had he accepted the judgment, he would have had to pay those anyway. His only risk was in legal fees, which, exorbitant as they may have been, would be only a small percentage of the reward he stood to gain if he won.
Ford supplemented his legal team with top patent lawyers from both New York and Chicago, as Ralzemond Parker gradually removed himself from the case. Ford always claimed he had affection for Parker, but Parker was old and tired, he had lost a case that everyone Ford spoke with—including Parker himself—had thought eminently winnable, and Ford had not demonstrated any tolerance for failure. The new legal team, with holdover W. Benton Crisp, was comprised exclusively of men with buttoned-up polish, which seemed appropriate for the appellate phase of the case.
If Ford had any doubts that he would fight on alone, they were dispelled early in 1910. In February, the American Motor Car Manufacturers Association, the trade organization that Couzens had put together to face off against ALAM, was dissolved. Officially, the reason was that the group’s five-year charter had expired, but the real reason was that all but thirteen of its forty-three members had already signed on with ALAM, and of those remaining, a majority wanted to jump ship as well. By the end of March, ALAM boasted more than eighty members, each of which advertised under the banner of the Selden organization.
On April 2, Thomas Jeffery died of a heart attack while on vacation with his wife in Pompeii, Italy. Automobile Topics wrote, “Mr. Jeffery’s death removes a man who has been one of the great manufacturers in the automobile field, and few men in the business were wider known in this country or abroad. He was the second man in the United States to take up the manufacture of automobiles, and he was among the first to see the great possibilities of the automobile as a commercial product.”10 Indeed, with the passing of the brilliant and idiosyncratic Jeffery, the one man with sufficient gravitas in the industry to join Ford as an effective ally in his appeal—assuming Jeffery would ever have joined with anyone—was gone.
Ford was hailed as a hero in his hometown—“Ford, the Fighter,” the Detroit Free Press dubbed him in an editorial—but in the industry at large, many shied away. To them, at least for the time being, he was only “Ford the loser.” ALAM pressed its advantage by returning to the same sort of threatening publicity campaign it had launched when the suit was first joined.
As he had in 1903, Ford offered to post a bond to protect his customers—and this time he had the money. ALAM responded with ads warning anyone thinking of purchasing an unlicensed automobile of legal liability. (Although at that point, with the case yet to be appealed, there was none.) ALAM also targeted “individuals listed as prospective customers” and sent them an “explanatory booklet, bearing on its cover the title, ‘What is the Selden Patent on Gasolene Automobiles?’ ” On the cover, in a display box, and as a chapter heading on the last page of the booklet in capital letters was the statement, “No bond is required when you buy a car licensed under Selden patent.” The text also asserted that “licensed dealers decline to take unlicensed cars in trade,” and that “it should be borne in mind that such a bond does not permit the owner of a car to use his machine if an injunction is issued and that an unlicensed car may be difficult to dispose of.”11
Eventually Ford responded by taking out full-page ads in the trade magazines and newspapers under the heading “This Advertisement is Published for the Protection of the Automobile Public.” In it, Ford laid out his guarantee:
If there are any prospective automobile buyers who are at all intimidated by the claims made by our adversaries, we will give them, in addition to the protection of the Ford Motor Company with its some $6,000,000.00 of assets, an individual bond backed by a Company of more than $6,000,000.00 more of assets, so that each and every individual owner of a Ford car will be protected until at least $12,000,000.00 of assets have been wiped out by those who desire to control and monopolize this wonderful industry. The bond is yours for the asking, so do not allow yourself to be sold inferior cars at extravagant prices because of any statement made by this “Divine” body.12
During this give-and-take, in addition to selling automobiles and preparing a complex legal appeal, Ford Motor was engaged in gradually shifting the company’s operations to the Highland Park plant, which had opened at the beginning of 1910. Manufacturing was moved first, operation by operation, but the plant was also to serve as a proving ground for many of the techniques that would eventually result in the Ford assembly line. With Flanders gone, most of the work was done by Wills and Sorenson, but always in accordance with the principles in which Flanders had schooled them. Sorenson wrote later, “The entire plant had to be functioning before the Ford mass production and assembly system could be completely worked out into one great synchronized operation from one end of the place to the other….We set up lay-out boards on which we worked out the production lines and placement of machines to scale. Numbered brass plates were attached to all machines in the Piquette plant with corresponding tags on the layout boards so that every machine would be set up in its assigned place when the move to Highland Park was made.”13
When the mock-up seemed finalized, the construction manager drew up detailed floor layouts, which were then given to Albert Kahn, the architect, to be rendered into building plans. The process was exacting and laborious, requiring constant revision, and then, as operations moved from Piquette Avenue to Highland Park, testing and retesting without impeding the flow of production of Model Ts for which orders had already been accepted.
Ford himself had little input in the process. “Henry Ford had no ideas on mass production. He wanted to build a lot of autos. He was determined but, like everyone else at that time, he didn’t know how. In later years he was glorified as the originator of the mass production idea. Far from it; he just grew into it, like the rest of us.” Referring to the conveyer system that was later installed to move parts from one station to another, Sorenson added, “Years later, in My Life and Work, a book which was written for him, Mr. Ford said that the conveyer-assembly idea occurred to him after watching the reverse process in packing houses, where hogs and steers were triced up by hind legs on an overhead conveyer and disassembled. This is a rationalization long after the event. Mr. Ford had nothing to do with originating, planning, and carrying out the assembly line. He encouraged the work, his vision to try unorthodox methods was an example to us; and in that there is glory enough for all.”14 The fiction persists, however. On the website of the Henry Ford Museum, under “Did You Know?” is the entry, “The idea for using a moving assembly line for car production came from the meat-packing industry.”
It is testament to the Ford team’s ability and commitment, and to the quality of their product, that in a year of utter turmoil, they continued to sell cars, and a lot of them—more than thirty-two thousand. Billy Durant’s Buick kept pace, with sales of more than thirty thousand cars, most of them Model 10s, but this was to be Durant’s last year as Ford’s chief competitor.*3
At that point, of course, every one of those thirty-two thousand cars increased Ford’s indebtedness to his adversaries. Ford therefore, for clarity if nothing else, wanted his appeal heard as soon as possible. Because of a series of procedural delays, however, it could not be scheduled until November 1910. ALAM had expanded the range of lawsuits to include almost every remaining serious independent as well as a number of prestigious foreign firms, such as Mercedes, and importers of foreign automobiles, such as Fiat. But each of these new actions would depend on the ruling of the appellate court in the Ford and Panhard suits.
The case would be heard by a three-judge panel of the Second Circuit Court of Appeals. Appellate cases are, in theory, not retrials but instead restricted to questions of procedure or judicial error in the original action. In this case, however, because of the nature of the ruling, the court, in the process of evaluating Judge Hough’s decision, would also be passing on the merits of the Selden patent.
The judges’ backgrounds would not have been a source of optimism for Ford’s lawyers. The senior member, Emile H. Lacombe, had been a protégé of William Whitney when Whitney served as New York’s corporation counsel, and he had helped in dismantling Boss Tweed’s political machine. Another of the three, Henry G. Ward, had been a law firm associate of Judge Hough, and, like Hough, had specialized in admiralty law. Only the youngest and most recently appointed member of the court, Walter C. Noyes, was of independent background, and although he was the best-versed in patent law, he had only been on the federal bench for three years.
The hearing was on the court’s calendar for only three days, a restriction that worked, perhaps unwittingly, to Ford’s advantage. Crisp and his associates filed a more pointed, succinct, and comprehensible brief than had Parker in the original trial. Ford’s lawyers focused on Selden’s sixteen-year delay in receiving his patent, not debating whether the process was allowed under the law—it was—but rather emphasizing it as proof that Selden himself had been aware that he would be unable to construct a working machine from his specifications. But it was Frederic Coudert, the lawyer for Panhard, “who made the most effective appearance for the defense,” whose “oral argument, reinforced by a superb brief, challenged the basic assumption of the trial court that the Selden patent, as viewed against the state of the art in 1879, marked the borderline between success and failure.”15
In his most devastating attack, Coudert showed the court that the newest edition of the definitive work on gasoline engines—written by the plaintiff’s key expert witness, an English engineer named Dugald Clerk, whom the ALAM lawyers had billed as the world’s foremost authority on the technology—had mentioned Selden not at all and that, further, Clerk had written that no one had developed the Brayton motor to any greater degree than had the inventor. This was a direct refutation of Clerk’s own testimony at the trial, when he had credited Selden with successfully adapting the Brayton motor for use in a road carriage. “Will this Court prefer the theories of Clerk, the retained witness, to those of Clerk, the disinterested scientist, composing the ‘classic’ on gas engines?” Coudert asked the judges.16
The appellate judges, unlike Hough, asked pointed and informed questions throughout the hearing, and after listening to closing arguments, including another bravura performance by Frederick Fish, they retired to consider the evidence. Given the mass of exhibits, a decision was not expected until spring. Instead, it was rendered in less than six weeks.
With this a case of great import, likely to go to the Supreme Court, it was significant that the two senior members of the tribunal deferred to Judge Noyes, the most expert in patent law, to write the opinion. Their confidence in him seemed not misplaced. The opinion Noyes wrote was praised as being “deft in its reasoning…[demonstrating] an understanding of automotive history, and a firm grasp of technical considerations, such as Hough had lacked.”17 It was also a complete reversal of Hough’s decision, leaving no room for ALAM lawyers to find subjective language on which to take the case further. Nor did Noyes’s opinion—tight, comprehensive, and meticulously thorough—seem to create any potential opening to claim judicial error.
After an exhaustive review of both the history of hydrocarbon engines and the technical specifications of the various types, in the most salient paragraph of the opinion Noyes wrote:
It is our opinion…that in [Selden’s] road locomotive combination embracing as its engine element an engine of the constant pressure type, the substitution in place of such engine of an engine of the constant volume type destroys the unity of the combination, because the two engines do not perform the same functions in substantially the same way. Granting the patent as broad a range of equivalents as its interpretation will permit, and giving due consideration to the degree of invention involved, still we are not able to hold that the Otto improved engine is the equivalent of the Selden engine or that the defendants infringe by employing it as an element of their motor vehicle combination.18
Noyes concluded with a statement directed at the more than ample royalties Selden had already received, although money was not likely to mitigate the sting to the old man’s pride:
While the conclusion of non-infringement which we have reached leaves the patentee empty handed…it cannot be regarded as depriving him through any technicality of the just reward for his labors. He undoubtedly appreciated the possibilities of the motor vehicle at a time when his ideas were regarded as chimerical. Had he been able to see far enough he might have taken out a patent as far reaching as [Judge Hough] held this one was. But like many another inventor, while he had a conception of the object to be accomplished, he went in the wrong direction. The Brayton engine was the leading engine at the time and his attention was naturally drawn to its supposed advantages. He chose that type. In the light of events, we can see that had he appreciated the superiority of the Otto engine and adapted that type for his combination, his patent would cover the modern automobile. He did not do so. He made the wrong choice and we cannot, by placing any forced construction upon the patent or by straining the doctrine of equivalents, make another choice for him at the expense of these defendants who neither legally nor morally owe him anything.
Significantly, the court did not question the practicality of Selden’s machine or whether it would have qualified for pioneer status had anyone chosen to build Brayton powered automobiles, nor did the judges address his delays in the patent process. If the Selden 1877 Buggy had been powered by an Otto, therefore, his patent might have been upheld. On this narrow basis only, Hough’s decree was reversed, with court costs accruing to the original plaintiffs.
The appellate court’s ruling has been almost universally extolled by historians and Ford biographers as a redress of a perversion of justice. Judge Hough has been dismissed as a man hopelessly befuddled by the intricacies of both the technology and the law, while Judge Noyes and his colleagues have been praised for sage and sound legal judgment.
The only problem with this interpretation is that Judge Hough’s ruling, not the appellate decision, conformed to the law then on the books. Ford should have lost.
The essence of the pioneer concept was that a patent holder advanced a technology in such a fashion as to create an entirely new perspective and set of potential applications; to, in effect, forge a new trail into a previously impenetrable forest. Selden had done that by applying an internal combustion engine of the “liquid hydrocarbon compression type” to road locomotion. It was a great breakthrough and no American had previously thought to do it. Whether the engine that powered such a conveyance was an Otto or a Brayton was surely secondary.
This is not to say that Selden “deserved” such a broad patent, or that except during the roughly fifteen-year period that the pioneer concept was accepted jurisprudence, one would have been granted.*4 But Judge Hough was correct in his view that as the law was then interpreted, the model on which the engine was based was incidental to Selden’s construct.
After the judgment was rendered, ALAM released a statement that said, “As the courts have disagreed on the merits of the Selden patent on gasoline automobiles, it was announced yesterday that the Columbia Motor Car Company and George B. Selden are arranging to apply for a writ of certiorari, with a view of having the case go to the United States Supreme Court for final decision.”*5 Within days, however, they reconsidered and announced that no further appeals would be undertaken.
Benton Crisp also issued a statement:
There is one thing about the decision…that is certain: The Ford Motor Company has never infringed the Selden patent. That fact is plain. It is also interesting to note that the court finds that Mr. Ford is one of the pioneer manufacturers of automobiles in this country; that he gained nothing from the Selden patent when it actually came out of the Patent Office, and that he owes nothing to the patent or to Mr. Selden either legally or morally.
After years of tiptoeing uncomfortably along the fence, the trade magazines now hailed the decision as if it had been handed down by Solomon. Motor World, for example, proclaimed, “Selden Routed,” and praised the “learned judges” for deciding that “while the patent did not lack invention or utility, it was not such as to entitle Selden to rank as an inventor.” Ford was equally acclaimed for “at no time showing symptoms of wavering” despite “the formidable interest arrayed against him.”19
Once again, however, the most entertaining reaction was from the editors of Horseless Age, who, under the banner headline “Selden Decision Reversed by Court of Appeals,” demonstrated that they could reverse course every bit as well. After commending ALAM for its “wise” decision not to pursue the matter to the Supreme Court, the editors wrote:
The outcome of the litigation will certainly prove to the advantage of the industry as a whole, and Henry Ford and the Ford Motor Company, who carried the burden of the defense, deserve the unqualified commendation of the industry for having had the courage of their convictions and for keeping on fighting dauntlessly against great odds. The abandonment of the patent will save the industry considerable sums, but above all it will remove barriers in the trade which have been most obnoxious, to say the least.20
The best characterization of the Ford-Selden battle, however, came from Charles Sorenson. “The Ford fight against the Selden patent is a milestone in the history of the automobile industry. I believe it is one of the greatest things Mr. Ford did not only for Ford Motor Company, but for everybody in the automaking business. All of us around him took only minor parts in this long-drawn-out case. He carried full responsibility for success or failure on his own shoulders with little or no encouragement from members of his board. He rarely had a pleasant moment inside or outside his organization as long as this uncertainty lasted. Yet the affair did as much to inspire him as anything that had occurred up to that time. He knew that he could battle with the best there was in the country and not be stopped.”21
So, as a result of his principles, his self-confidence, or simply his stubbornness—and with a healthy dollop of good luck thrown in—Henry Ford, who was by this time selling tens of thousands of Model Ts each year, with revenues in the millions and millions of dollars, could keep every penny.