{"id":2064,"date":"2015-08-14T08:38:57","date_gmt":"2015-08-14T12:38:57","guid":{"rendered":"http:\/\/cpip.gmu.edu\/?p=2064"},"modified":"2026-04-09T19:10:04","modified_gmt":"2026-04-09T19:10:04","slug":"patent-licensing-and-secondary-markets-in-the-nineteenth-century","status":"publish","type":"post","link":"https:\/\/blogs.uakron.edu\/ualawip\/2015\/08\/14\/patent-licensing-and-secondary-markets-in-the-nineteenth-century\/","title":{"rendered":"[Archived Post] Patent Licensing and Secondary Markets in the Nineteenth Century"},"content":{"rendered":"

The following post comes from CPIP Programs and Research Associate Terrica Carrington, a rising 3L at George Mason University School of Law, and Devlin Hartline, Assistant Director at CPIP. They review a paper from CPIP\u2019s 2014 Fall Conference, Common Ground: How Intellectual Property Unites Creators and Innovators<\/a>, that was recently published in the George Mason Law Review.<\/p>\n

By Terrica Carrington & Devlin Hartline<\/em><\/p>\n

In his paper, Patent Licensing and Secondary Markets in the Nineteenth Century<\/em><\/a>, CPIP Senior Scholar Adam Mossoff gives important historical context to the ongoing debate over patent licensing firms. He explains that some of the biggest misconceptions about such firms are that the patent licensing business model and the secondary market for patents are relatively new phenomena. On the contrary, Mossoff shows that \u201cfamous nineteenth-century American inventors,\u201d such as Charles Goodyear, Elias Howe, and Thomas Edison, \u201cwholeheartedly embraced patent licensing to commercialize their inventions.\u201d Moreover, he demonstrates that there was \u201ca vibrant secondary market\u201d where patents were bought and sold with regularity.<\/p>\n

Like many inventors, Mossoff explains, it was curiosity\u2014rather than market success\u2014that drove Charles Goodyear to create. Despite having invented the process for vulcanized rubber, Goodyear \u201cnever manufactured or sold rubber products.\u201d While he enjoyed finding new uses for the material, commercialization was not his niche. Instead, Goodyear \u201ctransferred his rights in his patented innovation to other individuals and firms\u201d so that they could capitalize on his inventions. \u201cAs the archetypal obsessive inventor,\u201d notes Mossoff, \u201cGoodyear was not interested in manufacturing or selling his patented innovations.\u201d In fact, his assignees and licensees \u201cfiled hundreds of lawsuits in the nineteenth century,\u201d demonstrating that \u201cpatent licensing companies are nothing new in America\u2019s innovation economy.\u201d<\/p>\n

Mossoff next looks at Elias Howe, best known for his invention of the sewing machine lockstitch in 1843, who \u201clicensed his patented innovation for most of his life.\u201d Howe was also famous for \u201csuing commercial firms and individuals for patent infringement\u201d and then entering into royalty agreements with them. It was Howe\u2019s troubles with \u201cnoncompliant infringers\u201d that \u201cprecipitated the first \u2018patent war\u2019 in the American patent system\u2014called, at the time, the Sewing Machine War.\u201d Howe engaged in \u201cpractices that are alleged to be relatively novel today,\u201d such as \u201cthird-party litigation financing,\u201d and he even joined \u201cthe first patent pool formed in American history,\u201d known as \u201cthe Sewing Machine Combination of 1856.\u201d<\/p>\n

Finally, Mossoff discusses Thomas Edison, whom many consider to be \u201can early exemplar of the patent licensing business model.\u201d Edison sold and licensed his patents, especially early on, so that he could fund his research and development. However, Edison is a \u201cmixed historical example\u201d since \u201che manufactured and sold some of his patented innovation to consumers, such as the electric light bulb and the phonograph.\u201d Moreover, despite his \u201cpath-breaking inventions,\u201d the marketplace was often dominated by his competitors. Mossoff notes that Edison was a better inventor than businessman: \u201cAt the end of the day, Edison should have stuck to the patent licensing business model that brought him his justly earned fame as a young innovator at Menlo Park.\u201d<\/p>\n

While some might call these inventors anomalies, Mossoff reveals that they were in good company with others who utilized the patent licensing business model to serve \u201cone of the key policy functions of the patent system by commercializing patented innovation in the United States.\u201d These include \u201cWilliam Woodworth (planing machine), Thomas Blanchard (lathe), and Obed Hussey and Cyrus McCormick (mechanical reaper)\u201d and many others who \u201csold or licensed their patent rights in addition to engaging in manufacturing and other commercial activities.\u201d This licensing business model continues to be used today by innovative firms such as Bell Labs, IBM, Apple, and Nokia.<\/p>\n

Mossoff next rebuts the \u201coft-repeated claim\u201d made by many law professors that \u201clarge-scale selling and licensing of patents in a secondary market is a recent phenomenon.\u201d This claim is as \u201cprofoundly mistaken as the related assertion that the patent licensing business model is novel.\u201d Mossoff notes that during the Sewing Machine War of the Antebellum Era, \u201cthe various patents obtained by different inventors on different components of the sewing machine were purchased or exchanged between a variety of individuals and firms.\u201d As early as the 1840s, individuals acquired patents in the secondary market and used them to sue infringers.<\/p>\n

In fact, Mossoff points out that it was not uncommon to see newspaper ads offering patents for sale in the nineteenth century:<\/p>\n

The classified ads in Scientific American<\/em> provide a window into this vibrant and widespread secondary market. In an 1869 issue of Scientific American<\/em>, among ads touting the value to purchasers of \u201cWoodbury\u2019s Patent Planing and Matching and Moulding Machines\u201d and ads declaring \u201cAGENTS WANTED\u2014To sell H.V. Van Etten\u2019s Patent Device for Catching and Holding Domestic Animals,\u201d one finds ads offering patents and rights in patents for sale:<\/p>\n

\"Replication
1. “A PATENT ON A FARM GATE TO SELL or Exchange for a No. 1 3-horse power Portable Steam Engine. Address C. H. EMBREE, West Dresden, Yates Co., N.Y.” \u2013\u2013 2. “BENT, GOODNOW & CO., Boston, Mass., Agents for the sale of Patents. FOR SALE\u2013A variety of very valuable “Rights.” Send stamp for THE PATENT STAR, Containing description of each.” \u2013\u2013 3. “PATENT RIGHTS SOLD ON COMMISSION, and Valuable Inventions introduced by the most experienced Patent Salesmen in the Union. Can refer to over one hundred inventors for whom we have acted. E. E. ROBERT & CO., Consulting Engineers, 15 Wall st. New York.”<\/figcaption><\/figure><\/blockquote>\n

Such ads were ubiquitous in the nineteenth century, says Mossoff, and they \u201cbelie any assertions about the absence of such historical secondary markets by commentators today.\u201d Similarly, Mossoff points to research showing the \u201cfundamental and significant role\u201d performed by intermediaries known as \u201cpatent agents,\u201d the \u201cpredecessors of today\u2019s patent aggregators.\u201d These patent agents invested in a wide range of products and industries\u2014a remarkable feat given the \u201cconstraints of primitive, nineteenth-century corporate law and the limited financial capabilities of market actors at that time.\u201d<\/p>\n

In his brief yet insightful account of the history of patent licensing firms, Mossoff refutes the modern misconception that \u201cthe patent licensing business model and secondary markets in patents are novel practices today.\u201d It\u2019s important to set the record straight, especially as many in modern patent policy debates rely on erroneous historical accounts to make negative inferences. The evidence from the nineteenth century isn\u2019t that surprising since it reflects \u201cthe basic economic principle of the division of labor that Adam Smith famously recognized as essential to a successful free market and flourishing economy.\u201d Casting \u201caspersions on this basic economic principle,\u201d Mossoff concludes, \u201cstrikes at the very core of what it means to secure property rights in innovation through the patent system.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"

The following post comes from CPIP Programs and Research Associate Terrica Carrington, a rising 3L at George Mason University School of Law, and Devlin Hartline, Assistant Director at CPIP. They review a paper from CPIP\u2019s 2014 Fall Conference, Common Ground: How Intellectual Property Unites Creators and Innovators, that was recently published in the George Mason […]<\/p>\n","protected":false},"author":3627,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[1],"tags":[57,83,270,495,702,1017,1023,1065,1067,1069,1080,1081,1347,1458],"class_list":["post-2064","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-patent-trolls","tag-adam-mossoff","tag-charles-goodyear","tag-elias-howe","tag-innovation","tag-nineteenth-century","tag-non-practicing-entity","tag-patent","tag-patent-aggregator","tag-patent-assertion-entity","tag-patent-licensing-2","tag-patent-licensing-firm","tag-sewing-machine-war","tag-thomas-edison"],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts\/2064","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/users\/3627"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/comments?post=2064"}],"version-history":[{"count":5,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts\/2064\/revisions"}],"predecessor-version":[{"id":16927,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/posts\/2064\/revisions\/16927"}],"wp:attachment":[{"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/media?parent=2064"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/categories?post=2064"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.uakron.edu\/ualawip\/wp-json\/wp\/v2\/tags?post=2064"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}