It’s hard for us to understand today how big a deal the Association of Licensed Automobile Manufacturers (ALAM) was when the automobile industry started, but it was huge. What was the ALAM, how did it get started and why was it such a big deal? Glad you asked.
Patents
During the early industrial revolution patents were of critical importance because it hamstrung competitors. The heroes of the age, like Thomas Edison, built their fortunes with the profit protection patents provided. Billy Durant built his cart business on the patent he acquired from the Coldwater Carriage Company.
Patent law, as it was seen by the courts of the day, had a doctrine called a “pioneer patent.” If you were the first person to invent, say, photographic film, everyone knows it will probably be crude and many will try to get around the patent by simply improving the product. To head that off, the courts took the view that whoever pioneered a brand new product deserved stronger protection.
The Selden Patent
Being George Selden was a mixed blessing. On one hand he was the son of one of the country’s most famous figures, with all the doors that opened. Judge Henry Selden was a leading political figure (he declined an invitation to run as Vice-President) and the one who defended Susan B. Anthony. On the other hand, that famous politician was a domineering father, who had no respect for George’s desire to embrace the new technology of the day: automobiles.
To make a long and painful story short, the young George retreated into the only avenue he knew to merge a love for automobiles with his father’s wish to stay in the family patent law practice: he figured he would patent the automobile. Unlike the inventors and tinkerers like Ford, Olds, Maxwell and the Lelands, Selden didn’t actually make anything. He simply drew it on paper and filed a patent.
Then, putting his knowledge of patent law to use, he kept filing amendments every tear. Patents in America last for 17 years. So what Selden’s amendments did was move the start date of the patent, and therefore its duration. He started in 1879 and eventually moved the official date of the patent to 1895.
The 1895 patent date would last till 1912, covering the heyday of automotive inventions. It promised to make Selden a fortune.
In theory.
Problem was his father obstructed him at every turn. When he asked Henry Lomb, the money man behind Bausch & Lomb, the judge intervened.
Enter Whitney
William Collins Whitney was a colorful figure. Personal friends with J. P. Morgan, he fused his knowledge of municipal politics with money savvy (code for greed). City monopolies for transit and utilities were fertile ground for connected entrepreneurs and Whitney excelled.
The scheme that brought him into our picture was electric cabs. In a harbinger of our green strategies of a century later, he set out to obtain a monopoly for battery-powered cabs. Telling investors he planned that for every major city he raised millions. Not only did he fail to obtain all the monopolies he claimed, but technology caught him out: batteries were troublesome and gasoline powered automobiles became popular.
The scheme exploded, the stock tanked and Whitney was on the ropes. In desperation, he reached out to Albert Augustus Pope, king of the bicycle craze. Pope’s main strategy was accumulating patents and demanding a royalty from every bicycle manufacturer. They sent Herman Cuntz off to track down useful patents and he stumbled upon the Selden patent. He quickly acquired it for Whitney.
Whitney’s initial idea was to sue the smallest and weakest automobile maker, one who didn’t have the money and legal resources to fight. Then, once he won that case, he would use the precedent to go after larger players. However, when his electric cab business imploded and angry investors threatened to sue him, he was forced to change tack. So he went after the only automaker of import at the time, Alexander Winton. Whitney was a politician and knew not all courts were the same. He picked a court which accorded the Selden patent pioneer status. Still, the facts were tenuous, and when Winton pushed back, Whitney changed tack.
Look, he said, why fight? Why don’t you agree to pay a royalty? Why would I do that? Because if you agree, we can go after each and every other automaker and make them pay the same royalty. Then you are at no disadvantage. In fact, because you’re one of the first, you’ll get two benefits: a share of the royalties, and you get to pick who gets allowed to make automobiles and who not.
The ALAM
Made sense, so Winton signed up, and the Association of Licensed Automobile Manufacturers (ALAM) was born. The Olds Motor Works (at that time without Mr. Olds) signed up and their Fred Smith became a leading light in the ALAM. Most manufacturers joined.
There is an interesting piece of personal interest. When Henry Ford started, he persuaded the Dodge Brothers to drop Fred Smith’s Olds and make engines for Ford. Smith was miffed and made sure Ford was refused an ALAM license. That should put Ford out of business, just like it did ABC Hardy. Smith didn’t reckon with Henry Ford, who fought back… all the way to the Supreme Court. In 1911 they ruled in Ford’s favor. The Selden patent was ruled to not cover the automobiles made, so Ford did not have to pay back royalties.
And thus ended an era few people know about today. One upshot from the ALAM: most patents are shared freely among automakers today. That’s why you’ll never see any make advertise any unique invention or device. Learned something new again, didn’t you? 🙂