Past and Present Opportunity in the Automotive Industry

Automotive Industry
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April 7, 2017, marks the 70th anniversary of American industrialist Henry Ford’s death. Every schoolchild learns that Ford revolutionized the auto industry by introducing the first mass-produced vehicles, rewarding workers with high wages and a five-day workweek, but few Americans today are aware that without his skillful navigation of the intellectual property laws of his time, none of these accomplishments would have been lasting. With this in mind, we will take a look at Ford’s legacy and the past, present, and future of automotive technology.

In 1879, a patent attorney named George Selden studied the Brayton-cycle engine, U.S. Patent Number 125,166, and decided to modify it to have a much better powerto- weight ratio. Selden posited the lower weight and higher power output would allow the engine to be used to create a new kind of horseless carriage, differing from the electric and steam-powered vehicles of the time. After some tinkering with the experimental engine he had created, Selden filed his application for a “Road Engine.”

At the time, the United States Patent and Trademark Office awarded each patent a term of 17 years from issuance, and Selden took full advantage of this rule by delaying each response to the office for the full two-year period allowed by the law. This filing strategy was common when an inventor wished to delay the start of the patent monopoly. In all, Selden ensured the patent remained pending at the office for 16.5 years, enough time for multiple American automotive companies to get started and ramp up production. Selden began receiving a royalty from nearly every automobile sold in the United States without himself selling a single vehicle.

Ford originally requested a license on the Selden patent for the royalty on each vehicle sold, but the organization controlling the patent licensing looked down on Ford and did not want him manufacturing vehicles. Ford viewed the patent as overly broad and likely unenforceable, and he began making his vehicles without paying for a license on Selden’s patent. Inevitably, Selden sued Ford for infringement of his patent.

In a devastating blow to Ford and his investors, the circuit court ruled in favor of Selden in 1909. Elec. Vehicle Co. v. C.A. Duerr & Co., 172 F. 923 (C.C.S.D.N.Y. 1909). The judge interpreted the claims of Selden’s patent broadly and considered Selden a pioneer in the automotive field. Ford had pressed hard that the claims were invalid, but relied upon highly technical arguments that were seemingly beyond the grasp of the judge. The judge’s limited understanding was made clear when he interrupted proceedings by stating, “Someone will have to explain to me what the liquid hydrocarbon gas engine is.” After the judgment was rendered, Ford promised to “fight to the finish,” and appealed the case.

Fortunately for Ford, the three judges of the Circuit Court of Appeals were comparatively well-versed in both patent law and the automotive industry. On appeal, Ford argued that Selden’s patent was too broad to cover all carriages that are self-propelled with a liquid hydrocarbon engine in view of previous disclosures and inventions.

Instead, Ford asserted, Selden’s patent only specifically described a Brayton-cycle engine. The court reasoned that this specific disclosure, in view of the preexisting broad concept of a self-propelled carriage, entitled Selden to coverage only for vehicles powered by a Brayton-cycle engine. Columbia Motor Car Co. v. C.A. Duerr & Co., 184 F. 893 (2d Cir. 1911). Ford, and almost all other vehicle manufacturers, utilized an Otto-cycle engine design, which is still the most popular spark-ignition engine design today. As such, the court maintained Selden’s patent as valid, but also found Ford and every other automotive manufacturer to be noninfringing.

The automotive industry continues to surge forward in patent filings, and for the first time in the company’s existence, Ford Motor Company just so happened to receive more granted U.S. patents in 2016 than any other automotive manufacturer. In 2015, the top 10 areas of automotive industry innovation according to the Intellectual Property Insurance Services Corporation were as follows: (1) advanced navigation systems, (2) remote control, (3) electronic stability systems, (4) automatic braking, (5) smart glass windshields, (6) advanced airbags, (7) adhesive connected frame and body panels, (8) advanced diesel engines, (9) improved electric motors, and (10) vehicle structure and safety.

As the auto industry looks to the future, autonomous vehicle technologies are beginning to take center stage. Companies like Apple and Google are entering the field of automotive technology for the first time. As these new players test their mettle, current automotive giants seek to defend their position of leadership. With a paradigmatic shift in the industry just around the corner, attorneys of many disciplines continue to play key roles with regard to intellectual property management, mergers and acquisitions, partnership contracts, and more. When the next Henry Ford is discovered, where will your firm be? Garrett Hausman

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