32 Pages Posted: 28 Jun 2016
Date Written: June 27, 2016
A current policy concern is that the alleged uncertainty over the enforceability of “overly-broad” patents of “dubious validity” may retard innovation. We take the Selden patent on the automobile as a classic of this type of patent. We review the evidence of commercial development during its term and show that there is no evidence that innovation was retarded. To better understand this result we follow Henry Ford’s investigation of the Selden patent’s scope during 1903, the year when the Ford Motor Co. was most vulnerable to “uncertainty” over the enforceability of the asserted broad construction of the Selden patent claims. We use new primary sources to show how Henry Ford and others engaged in what today is called “Freedom to Operate” patent analysis when it most mattered commercially. We show that Ford correctly anticipated that a future court adjudication of the Selden patent claims would not support the broad construction of those claims. Ford’s and the Ford Motor Co.’s confidence in their understanding was powerfully illustrated by their Company’s public offer to indemnify purchasers of Ford automobiles against the threatened suits for infringement under the Selden patent. This and other public actions effectively induced the Selden patent owners to bring suit against the Ford Motor Company. Finally, we show that the Ford Motor Company litigation costs in its first year of operation were trivial yet litigation brought valuable market publicity. We find that Henry Ford’s investigative actions provide an exemplary model for what innovators unremarkably do today when faced with “uncertainty” over the breadth or validity of patent claims.
Keywords: Overly-broad patent, dubious validity, bad patents, Freedom to Operate analysis, Selden, Ford, Ford Motor Co., automobile, ALAM, Brayton, gas-engine, Otto
JEL Classification: K11, L24, L62, N41, N61, N81, O31, O32, O33, O34
Suggested Citation: Suggested Citation
Howells, John and Katznelson, Ron D., The 'Overly-Broad' Selden Patent, Henry Ford and Development in the Early US Automobile Industry (June 27, 2016). Available at SSRN: https://ssrn.com/abstract=2801309 or http://dx.doi.org/10.2139/ssrn.2801309