Charles Goodyear invented the process to make vulcanized rubber in 1839 and received a patent for it in 1844, but he never manufactured or sold rubber products. Instead, Goodyear licensed his patented innovation to other individuals and firms to commercialize it. As reported by his biographers, Goodyear was basically crazy about rubber and about inventing and finding new uses for it. He even wrote a two-volume treatise on the history, invention, and uses of vulcanized rubber, called Gum Elastic and Its Varieties. As the archetype of the obsessive inventor, Goodyear was not interested at all in manufacturing or selling his patented innovation. By licensing it, he left the efficient commercial exploitation of his patented innovation to the new capitalists in the early 19th century.
Of course, by selling his patent rights to others, including even to businesspeople who themselves embraced the patent licensing business model, Goodyear would be attacked today as a “patent troll,” just as inventors today have been attacked for this same commercial activity. In fact, one of Goodyear’s own licensees engaged in a massive litigation campaign against hundreds of dentists, suing them for royalties on unauthorized uses of rubber dental implants. Similar to the farmers in the late 1880s, this was a patent infringement campaign brought by a patent licensing company against unsophisticated end-users of a new technology. Not only did this occur more than 150 years before today’s complaints about similar litigation practices, it also means that Goodyear would be hit with another pejorative label if he were alive today and engaging in these same licensing practices: “patent privateering” (the practice of selling patents or patent rights to “patent trolls” for the purpose of their bringing lawsuits).
Many people don’t know any of this because they mistakenly think that Goodyear founded the Goodyear Tire & Rubber Co. In reality, the company was formed almost four decades after Goodyear’s death and was only named after the famous inventor.
Elias Howe Jr.
In the 1840s, Elias Howe Jr. invented and patented the lockstitch mechanism used in sewing machines. Like Goodyear, Howe also licensed his patented innovation for most of his life. Similar to many patent licensing companies today, Howe often entered into royalty agreements only after suing commercial firms that were infringing his patent rights. One historian referred to Howe “suing the infringers of his patent for royalties” as his “main occupation” for “several years.” Howe’s assertion of his patents against noncompliant infringers who refused his licensing offers precipitated the very first “patent war” in the American patent system—similar to the “smartphone war” today, it was even called the “sewing machine war.”
Howe’s lawsuit tactics were both innovative and the source of much controversy. Since he was destitute when he began filing his mass lawsuits, he found investors to provide third-party financing for his litigation campaign. He also joined the Sewing Machine Combination of 1856, the very first patent pool formed in American history, which successfully ended the sewing machine war. (A “patent pool” is a special corporate entity in which numerous owners of patents that cover a single product license one another so that the product can efficiently be brought to market, such as a sewing machine, a DVD, MPEG video, and thousands of other products brought to market.) Howe’s licensing and litigation practices were criticized in his day; an article in an 1867 issue of the Galaxy magazine stated that “the secret of Mr. Howe’s success” was that “he litigated himself into fortune and fame” (quoted here).
Other famous 19th-century inventors also extensively licensed their rights in their patented innovations, in addition to engaging in manufacturing and other commercial activities. The list includes, among many others, Samuel Morse (telegraph), William Woodworth (planing machine), Thomas Blanchard (lathe), and Obed Hussey and Cyrus McCormick (mechanical reaper). The specialists who assisted these 19th-century inventors in selling or licensing their patented innovations were known as “patent agents.” Newspapers and magazines were littered with advertisements for their services; here are just two illustrative ads taken from an 1869 issue of Scientific American:
Of course, today’s innovation economy is vastly different from the 19th-century one. But the myriad business models for bringing patented innovations to the marketplace have not fundamentally changed, including the sale and purchase of patents in secondary markets and the licensing of patented innovations. Such commercial practices continued into the 20th century and continue to this day in such innovative companies as Bell Labs, IBM, Apple, and Nokia, among many others.
In fact, the long history of the patent licensing business model and of the secondary markets that made this business model possible is unsurprising. These commercial activities reflect the basic economic principle of the division of labor that Adam Smith famously recognized as essential to a successful free market and flourishing economy—in this context, it is the division of labor between inventors and businesspeople. As award-winning economic historian Zorina Khan has explained, this has been essential to how the patent system has been a driver of America’s innovation economy for more than two centuries. It is concerning that if the rhetoric of today’s patent policy debates were applied consistently, it would require us to condemn great American innovators like Edison, Goodyear, Howe, and many others as “patent trolls.”