Nice Work If You Can Keep It

The new cartel made a mistake: It said Henry Ford couldn’t join because he didn’t know how to manufacture cars.

Alexander Winton and other manufacturers, who had originally seen the Selden patent as a mortal threat to their livelihoods, began to view it instead as a means of limiting competition in the automobile business, which at that time was ferocious, with dozens of companies coming into the business every year (and a more or less equal number leaving it, usually through bankruptcy). Soon some thirty companies formed the Association of Licensed Automobile Manufacturers (ALAM) and agreed to pay a royalty of 1.25 percent of the retail price of every car they sold. One-fifth of that money was to go to Selden, two-fifths to the Electric Vehicle Company, and two-fifths to the ALAM to finance infringement suits against nonmembers, who would have to apply for membership in the ALAM before being allowed to go into the car business. In other words, the ALAM was a cartel.

Almost immediately the brand-new cartel made a serious mistake. An automobile company, formed just that year, wanted to join. But the ALAM, which, like all cartels, was out to limit the number of members of the club, turned down the Ford Motor Company’s application, saying it had not demonstrated competence in the manufacture of automobiles. Henry Ford’s response, needless to say, was to go right on manufacturing them and, like the majority of American car companies, ignore the Selden patent.

When the ALAM threatened to put him out of business, Ford answered, “Let them try it!” The association sued a few weeks later, but not until May 28, 1909, seven months after the Model T had been introduced, did the suit finally go to trial.

Henry Ford was perfectly candid under cross-examination. “I invented nothing new,” he admitted. “I simply assembled into a car the discoveries of other men behind whom were centuries of work. … Had I worked fifty or ten or even five years before, I would have failed. So it is with every new thing. Progress happens when all the factors that make for it are ready, and then it is inevitable. To teach that a comparatively few men are responsible for the greatest forward steps of mankind is the worst sort of nonsense.”

By pure coincidence, an automobile race from New York to Seattle was getting under way right outside the courthouse in lower Manhattan as the trial was going on. Five cars were in the race, and two of them were Ford Model T’s. One of Ford’s lawyers, Frederic Coudert, watched the spectacle from the window while William Howard Taft, in Washington, pressed a golden telegraph key, the mayor of New York fired a starting pistol in response, and the racecars were off. Coudert then turned to the judge. “Your Honor,” he said, “there is something that puzzles me. I don’t see a Selden car. I see a Ford car, two Ford cars, but I see no Selden car!”

Ford was so confident of the outcome of the lawsuit that he left in the middle of it to go to Seattle to watch the finish of the race. To his delight the winner was one of the Ford cars. But while Ford found triumph in the race, he did not in the court, which ruled that any gasoline-powered car that was manufactured without a license from the ALAM infringed the Selden patent.

Ford was distraught by the verdict and even thought of selling out to William Durant, the founder of General Motors. The deal fell through when Durant couldn’t raise the cash he needed. Meanwhile, Ford was appealing the decision.

On January 11, 1911, the appellate court handed down its ruling: The Selden patent was valid only for cars using the Brayton two-cycle engine that Selden had spotted so long ago. The gas-powered automohile, it said, overall was a “social invention.”

The following night the Ford Motor Company held a raucous victory party. Ford attended, a broad grin on his face, but his mind was obviously somewhere else, thinking beyond the moment of triumph.

A friend sat down next to him and congratulated him on his victory, but Ford obviously did not hear a word of what he said, for he suddenly turned to him. “Nobody can stop me now,” Ford said. “From here on in the sky’s the limit.”

Ford was right, of course, and the world changed.