Do Patents Alleged to be “Overly-broad” and of “Dubious Validity” Retard Innovation?

Abstract

A current refrain in patent policy discourse is that “overly-broad” patents of “dubious validity” retard innovation. We briefly review expressions of the thesis to show that they reduce to the allegation that disagreements over enforceable patent scope and/or validity harm innovation. The Selden automobile patent is alleged to have been such a patent. We review the evidence of commercial development during the Selden patent term and show that although there was disagreement as to the scope and validity of Selden’s patent claims, there is no evidence that innovation was retarded. We show that Henry Ford and others relied on “freedom to operate” analyses of the Selden patent claims that unambiguously demonstrated their narrow scope. We reexamine archival evidence and cite new primary sources, in particular the legal Opinion given to Ford on the Selden patent to provide a more accurate account than hitherto published of how Ford made his analysis. It was this analysis embodied in the legal Opinion that gave the Ford Motor Company the confidence to publicly indemnify all its customers from infringement liability. Suit for infringement of the Selden patent was brought against the Company, and Ford ultimately prevailed. The Selden patent was licensed, not to create a patent pool, cross-licensing agreement or cartel, but a “patent enforcement collective”; the Selden case should be known as the exemplary instance of how freedom-to-operate analysis can provide the confidence to invest and develop business.