Control of The Industry
By 1903, the organization had officially become the Association of Licensed Automobile Manufacturers, and had secured favorable rights from the Electric Vehicle Company. Only a few months after the formation of the organization, Winton became an ALAM member, and the suit against his company was dropped. The patent had gained legitimacy without ever having its validity determined.
The ALAM gained from the agreement, giving them control over the entire automobile industry for a relatively low cost. The group negotiated a 1.25% royalty on all cars produced, one half of one percent of which went directly into the ALAM legal and operations funds. Applications for ALAM membership and a Selden license were granted only by the unanimous decision of a 5-member executive board. This system left ALAM members with royalties considerably lower than the costs of trying the Selden patent in the courts, and gave existing members the ability to exclude and even litigate unlicensed competitors.
The ALAM's exclusionary policies were ultimately its undoing. The up-and-coming Ford Motor Company was capitalized in 1903, and Henry Ford immediately attempted to secure a Selden license. He was denied, officially due to his past business failures (the Detroit Automobile Company and the Henry Ford Company, specifically), and also due to the protectionist climate of the ALAM. Frederic Smith of Olds was the executive board member most outspoken against Ford’s admission to the ALAM, and also had the most to lose from such an admission, as he held most of the Detroit market for affordable automobiles.
On October 22, 1903, the ALAM filed suit with the Ford Motor Company, and what followed was a messy public relations battle. The ALAM launched a campaign threatening to sue those who purchased Ford automobiles. Ford responded in-kind, summing up their position as, "We believe that the art would have been just as far advanced to-day if Mr. Selden had never been born."
On September 15, 1909, presiding Judge Hough found legitimacy in the Selden patent. The court of appeals later overturned the ruling, finding in favor of Ford on January 9, 1911. The ALAM chose not to contest the ruling.
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