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The Power Of Patents
For two hundred years the United States patent system has defined what is an invention and protected, enriched, and befuddled inventors. As a tool of corporate growth in a global economy, it is now more important than ever.
September/October 1990 | Volume 41, Issue 6
Apologists for the independent innovators like to point out that established concerns tend to belittle radical thoughts—the kind that make history. The railroad baron Cornelius Vanderbilt dismissed George Westinghouse with his air brake, proclaiming that he had no time to waste on fools. General Electric and other companies rejected the idea of a machine to rinse and dry clothes; the novel machine was picked up by a company that had not been in the field at all, Bendix, which made a bundle on it. But perhaps the crowning put-down was voiced by the banker J. P. Morgan, speaking on behalf of the officials and engineers of Western Union: “Mr. Bell, after careful consideration of your invention, while it is a very interesting novelty, we have come to the conclusion that it has no commercial possibilities.”
Such critically important new inventing as does take place today outside the ranks of big industry is likely to occur in areas no one has thought to go before or no one thought was really practical, as with Land and his amazing instant camera—an idea that Eastman Kodak had at first belittled. Even so, the going can be extraordinarily difficult, and the stakes can get awfully high, as was demonstrated by the struggle of the then quite small Haloid (later Xerox) Corporation of Rochester, New York, to introduce a copying process based on the patent held by the inventor Chester Carlson.
An engineer and lawyer, Carlson had gotten the idea for a new copying process while working for a patent firm in New York in the 1930s. It differed from previous methods in that it was dry—no liquids were used. It involved charging a light-sensitive surface with static electricity, projecting an image (such as a printed page) onto that surface, applying a powdered ink (called a toner) that would stick to the dark parts of the image while leaving the rest blank, and finally transferring the resulting image to paper that had been momentarily given its own electrostatic charge. By 1937 Carlson had worked out the concept and received the first of his patents on it. Of course, no one was interested; one company, A. B. Dick, was sure mimeographing would never be supplanted. Years passed. In 1944 Carlson assigned the rights to his idea to a Columbus, Ohio, research concern called the Battelle Memorial Institute, which did some minor work on the idea but could not convince anyone of its value until the modest-size Haloid Company, which was looking for new products to augment its line of photographic papers, took an option on the process in 1949.
One would have thought the rest would be downhill all the way. Not so; it was uphill and exceedingly treacherous. The Carlson method, besides being still rudimentary, was no good without a machine that could use it, and this machine had to be like nothing else in the world. Haloid’s own engineers had to invent it—it was much too complex for one person—and this took the entire decade of the 1950s, while Haloid’s president, Joseph Wilson, and the firm’s legal counsel, Sol Linowitz, worked desperately to keep raising money to pay for development and to protect the priceless Carlson patents. (Linowitz is not a patent lawyer; but he is a canny and brilliant operator, and he was in charge of the legal tactics throughout.) Among Linowitz’s scary arrangements were those involving licensing certain aspects of the process to big-name firms like Bell & Howell, IBM, and Western Electric so as to generate much-needed funds for research as well as to gain the benefit of these firms’ allied technologies —but without giving away all the secrets of the Carlson method.
“Each of these relationships with a giant of American industry,” Linowitz later recalled, “was a two-edged sword. We always had to be alert to the danger that one of these much larger licensees would come up with a product that would wipe out our prospects- and to the more subtle danger that one of them might become sufficiently enamored of xerography to want to gobble up Haloid and its patents…A commanding position in Haloid stock could have been acquired without much strain by any of a number of the licensees.”
It was nip and tuck, and there were many times when all involved were profoundly discouraged. RCA’s announcement in 1953 of a brand-new and seemingly promising copying system called Electrofax dismayed the Haloid forces, but they resolved to keep going. Mean-ewhile, researchers were ironing out the kinks in Carlson’s process and introducing a large number of critical innovations—for example, the use of selenium, a common element, as a photoconductive insulator. These discoveries were themselves patented and thus extended the company’s protection beyond the expiration date of the Carlson patents in 1959-61. At long last, in the early 1960s, Haloid—renamed the Xerox Corporation—came out with the great Xerox 914 copier, which changed American business and suddenly convinced office workers everywhere that easy copying was absolutely essential. (“In later years,” says Linowitz, “I liked to say that this was a case where invention was the mother of necessity.”) Only then did the financial rewards begin rolling in, as, of course, they did most dramatically.