Kenneth Lustig of Intellectual Ventures recently penned a fantastic essay about the American patent system and its unique place in history. (See No, The Patent System Is Not Broken). Today, American-style patent systems are commonplace in the industrialized world, but, explains Lustig “in 1790, [the US] was unique in the world for containing ‘an explicit provision for the sale of patent rights.'” Making patents freely alienable, for the first time, meant truly treating them as property. Under the American system, inventors could focus on creating new property (inventions). As I’ve discussed previously, a viable secondary market gives technology makers an opportunity to liquidate their patent assets quickly, allowing them to finance further discoveries. While buyers that consistently make the right purchases are rewarded, so too are inventors who consistently create valuable new inventions.
The anti-patent crowd disregards this as mere myth, but the reality is that it happens all the time. Occasionally, it not only dramatically improves the fate of the inventor, but the rest of us as well. Inventor Walter Hunt is but one example. Hunt was a prolific inventor whose mind gave birth to many new discoveries, embodied in patents that he sold to investors. Although he died more than 100 years before I many of us were born, his actions suggest that his passion was for invention, not innovation. Among Hunt’s many inventions, the safety-pin might be the most famous, reportedly being sold to WR Grace & Company for $400. While this may seem paltry (about $11,000 in today’s dollars), consider the standard of living at the time. In the 1850’s, a working man in New England (where Hunt lived) would earn about $300 in an entire year. But one of Hunt’s inventions, sold to various manufacturing interests, turned out to change the fate of all of our lives in a way that few probably realize.
In 1849, Walter Hunt was awarded US Patent No. 6663 for a “COMBINED PISTON BREECH AND FIRING COCK REPEATING GUN.” In other words, Hunt had invented a gun that could fire multiple rounds without needing to be reloaded–a significant achievement at the time. Hunt sold the invention to George Arrowsmith, a promoter who attracted the interest of an investor. The investment enabled others, including Horace Smith and Daniel Wesson, to improve on Hunt’s original design resulting in the formation of the Volcanic Repeating Arms Company in 1855. Smith and Wesson acquired Hunt’s patent, along with one covering their own improvements (See US Patent 10,535) and began manufacturing a repeating pistol.
Unfortunately for the partners, the gun (and their company) was a complete flop. Fortunately for the rest of us, another investor had vision to see past the failed product, recognizing value in the invention rights owned by Volcanic. The investor paid $40,000 (about $1 M in today’s dollars) for the companies assets, which, owing to the market failure of their products, consisted primarily of the patents. The sale freed Smith and Wesson of the company’s debts, allowing them to continue their pursuit of the firearms business, eventually finding success selling revolvers. The partners’ new company would eventually become the largest manufacturer of handguns in the United States.
Meanwhile, the patent investment not only paid off in spades for the investor, but literally changed the face of America. Armed with patents on repeating firearms, the investor, one Oliver Winchester, used the repeating cartridge technology to construct rifles, rather than pistols manufactured by the now defunct Volcanic Arms. Winchester would eventually create the famous model 1873, today known as The Gun That Won The West. The Winchester 1873’s popularity and efficiency can scarcely be doubted, as the ability to fire fifteen rounds from a .44-40* cartridge gave American frontiersman and lawmakers control over unsettled terrain. Considering the state of US territory in the latter half of the 1800’s (between westward expansion driven by the tail end of the industrial revolution and relations with Southern states after the Civil War), history undoubtedly would have unfolded quite differently without Winchester’s lever-action repeating rifles.
But for the ability to purchase foundational patent rights leading to the creation of the Winchester repeating rifles, Oliver Winchester might never have created in a firearms business so similar to one that had already failed. What’s more, without the incentive of the patent system, not only securing for Hunt the exclusive right to his invention, but more importantly enabling him tosell his property once created, the world may not have known this, or many other inventions. After all, Hunt had already failed to patent an invention proving critical to modern sewing machines,delaying dissemination of this technology for years. The world had to wait for someone else, without the benefit of Hunt’s genius, to make the same discovery, before sewing machines became practical pieces of equipment.
Can we say for certain that Hunt would not have invented but for the patent system? Well, judge for yourself after hearing the tale of Hunt’s invention of the safety pin according to this story from Wired:
So, when Hunt owed a friend $15 (about $355 in today’s money) one day in 1849, he decided to just invent something.
Without the vision of several investors along the way, including Oliver Winchester, and without the inventive mind of Walter Hunt, American progress and expansion may very well have been delayed by decades.* That’s a .44 caliber round with 40 grains of black powder. In case you’re wondering, that’s a lot.
- No, the Patent System Is Not Broken (forbes.com)