Thursday, January 01, 2015

Henry Ford as "patent troll" victim

From within Patent trolls take their toll in Crains Detroit, which invokes Henry Ford as an early troll victim,

So patent trolls march on, even harming investments. Over the past five years, U.S. venture capital investment would have been nearly $22 billion more without patent troll litigation, according to a May study by researchers at the Massachusetts Institute of Technology. For context, venture capital invested roughly $131 billion over the same time period.

Bessen and Meurer, from Boston University, had noted

In the past, “non-practicing entities” (NPEs), popularly known as “patent trolls,” have helped small inventors profit from their inventions. Is this true today or, given the unprecedented levels of NPE litigation, do NPEs reduce innovation incentives? Using a survey of defendants and a database of litigation, this paper estimates the direct costs to defendants arising from NPE patent assertions. We estimate that firms accrued $29 billion of direct costs in 2011. Moreover, although large firms accrued over half of direct costs, most of the defendants were small or medium-sized firms, indicating that NPEs are not just a problem for large firms.


In June 2014, there was a study The Effect of Patent Litigation and Patent Assertion Entities on
Entrepreneurial Activity
from an MIT professor which cited

Bessen, J. and E. Maskin (2009). Sequential innovation, patents, and imitation.
RAND Journal of
Economics 40
(4), 611{635.
Bessen, J. E. and M. J. Meurer (2006). Patent litigation with endogenous disputes.
Economic Review 96
(2), 77{81.
Bessen, J. E. and M. J. Meurer (2008). The Private Costs of Patent Litigation.
Mimeo, Boston
Bessen, J. E. and M. J. Meurer (2014). The direct costs from NPE disputes.
Cornell Law Review 99
Bessen, J. E., M. J. Meurer, and J. L. Ford (2012). The Private and Social Costs of Patent Trolls.
(4), 26.

and which contained the text

We use our estimates from Table 6 to provide some rough estimates of the e ect of di erent types
of patent litigation on VC investment. (...)

Since our analysis suggests a negative and linear relation between the proportion of patent cases
involving frequent litigators and VC investment, our estimates from Column (2) of Table 6 suggest
that VC investment would have likely been $21.772 billion higher over the course of five years but-
for litigation brought by frequent litigators. This is relative to the baseline of $130.979 billion that
was invested in start-ups and innovation over the course of these five years. Since our estimates
represent a reasonably large proportion of the baseline, we also followed a bootstrap procedure to
try to estimate the 95% con dence interval for this estimate, which was between $8.1 billion and
$41.8 billion.

The MIT report also alluded to patent citation analysis, a fairly discredited methodology:

Pioneering studies by Jaffe et al. (1993); Audretsch and
Feldman (1996); Ahuja (2000) used the granting and citation patterns of patents as a way of
measuring the di usion and spread of knowledge and innovation.

The Crains article also noted

One of the first known victims of patent trolling was right here in Detroit, when in 1903 Henry Ford was sued over his first production of the Model A.

Ford Motor Co. was sued by a New York attorney named George Selden, who filed a patent for a horseless, engine-powered carriage in 1879, according to a recent Forbes article. Selden was never able to make a working engine, which only existed in a drawing.

Of the first Ford designated "Model A", 1,750 cars were made from 1903 through 1904. The initial lawsuit was filed October 22, 1903, and a decision was made September 15, 1909, with an appeal finding non-infringement on January 9, 1911, at a time when Ford had been producing the Model T ( production from October 1, 1908, to May 27, 1927 ) . Over the course of the trial, two "Selden vehicles" were produced. Selden's US patent actually issued in 1895 and expired in 1912.

[There were actually three lawsuits involving Ford, which were later consolidated. The final 1911 decision [ 184 F. 893 (CA 2 1911) ] is captioned Columbia v. Duerr, with Duerr having been Ford's dealer in New York.] One lawsuit named a Ford buyer as defendant.

The identity of the plaintiffs was interesting. Columbia was a company formed from Electric Vehicle and Pope's earlier Columbia Company (which made primarily electric vehicles), so one had an electric vehicle company suing Ford. However, ALAM, which comprised companies making gasoline cars, was also involved. ALAM comprised Olds, who was a competitor of Ford.

Of the first Model A, see also

Of Ford himself, note that the "Ford" company that built the first Model A was Ford's third car company and that Ford had worked for Edison:

In the summer of 1898, Ford was awarded his first patent, in the name of his investor and Detroit's mayor, William C. Maybury, for a carburetor he built the previous year.

Maybury's support, combined with Ford's bold ideas and charisma, helped assemble a group of investors who contributed some $150,000 to establish the Detroit Automobile Company in early August 1899. Ten days later, Ford left Edison, where he had worked for the previous eight years. He turned down a considerable salary offer of $1,900 per year and the title of general superintendent to become mechanical superintendent of the new auto company, with a salary of $150 per month.

The company began to collapse in the middle of its second year of operation and ceased doing business in November 1900. Maybury and others retained their faith in Ford, however, and in late 1901 they backed him as chief engineer of the Henry Ford Company. This effort failed as well, and Ford put all of his hopes into a make-or-break third effort. The Ford Motor Company, founded in mid-June 1903, rolled out its first car--a Model A--that July and continued to grow steadily over the next several years.


Thus, from the first Model A in July 1903 to the first law suit in October 1903, one had only about three months.


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