THE ROLE OF PATENTS IN THE DEVELOPMENT OF. AMERICAN AIRCRAFT, 1917-1997
On 12 November 1975, ten lawyers from nine different law firms appeared in U. S. District Court, Southern District of New York. They represented twenty clients – nineteen of the largest aerospace firms in the United States and a curious legal and business entity known as the Manufacturers Aircraft Association, Inc. (MAA). All the aerospace firms were members of the MAA; some had been members since the MAA was founded in 1917. All ten lawyers agreed with the court’s finding that the MAA violated Section One of the Sherman Anti-Trust Act of 1890. The MAA was, in short, “a contract, combination… or conspiracy in restraint of trade or commerce.”1 On behalf of their clients, the assembled lawyers agreed to “wind up the affairs and terminate the existence” of the MAA.2 They further agreed to “terminate and cancel the Amended Cross License Agreement,” the legal instrument defining the purpose and operation of the MAA.3
The consent decree captures none of the historical irony hanging over this decision. The federal government had directed aircraft manufacturers in 1917 to enter into a cross-licensing agreement and to form the MAA to administer the agreement. In spite of protests at the time and repeated challenges in the 1920s and 1930s, the Justice Department consistently found that the cross-licensing agreement did not violate the Sherman Anti-Trust Act. In 1972, however, that same Justice Department brought suit in District Court, arguing, in effect, that it had been mistaken for 55 years. During that time, the United States aircraft manufacturing industry had been arguably the most successful in the world, dominating a market in which other nations, beyond the reach of the MAA, were free to compete. Half the companies represented in District Court had joined the MAA since its founding, a membership pattern suggesting openness and inclusivity, not combination and conspiracy. The MAA had been good for its members and good for America.4
Still more ironically, termination of the cross-licensing agreement had no discernible impact on American aircraft development. The MAA went out of business in 1975. All the patents licensed by the MAA and controlled by its members were made available to any applicant. The Court arranged to adjudicate disputed royalties arising from the new dispensation. Yet American aircraft manufacturers went right on dominating the free world market for this product, just as they had done under the protection of the cross-licensing agreement. In fact, the termination of the MAA coincided with the introduction of the European Airbus,
P Galison and A. Roland (eds.), Atmospheric Flight in the Twentieth Century, 323-345 © 2000 Kluwer Academic Publishers.
which, in the words of author John Newhouse, appeared at first “to be an even more dismal failure than most of Europe’s other jet transports had been.”5 The Airbus went on to be more competitive, but the United States still dominates the world market for commercial airliners more than twenty years after the dissolution of the MAA.
The many ironies of this case have attracted scholars of patent law, economists, and even sociologists.6 They have not, however, stimulated much study by historians of technology, not even historians of aviation. In most histories of American aviation, patents are noted by their absence.7 Even in my own study of the National Advisory Committee for Aeronautics (NACA), patents find little place after the cross-licensing agreement of 1917, which the NACA brokered.8 The NACA formed a patents committee in 1917, but discharged it with thanks when the cross-licensing agreement was signed. The Air Commerce Act of 1926 directed the NACA to form a patents committee, but the following year the NACA converted it to a committee on “Aeronautical Inventions and Design.” Congress may have thought of aviation development in terms of patents, but the NACA did not. Even in the 1930s, when the NACA found itself under congressional pressure to be of greater service to industry, it was proprietary information, not patents, that proved the sticking point.
The importance of aircraft patents to economists and legal scholars and their apparent irrelevance to aviation historians raises several nagging questions. Have historians simply overlooked the importance of patents in aviation history? If, as historians seem to believe, patents were not important, why was there a patent pool? And why did the Justice Department believe that the patent pool restrained trade? Finally, if patents do not shape an innovative industry, such as aircraft manufacture, what do they achieve? And what, then, does drive innovation in aircraft manufacture?
This paper will attempt to answer those questions. It will first summarize the history of aircraft patents in the United States. Then it will explore the theory of patents and the application of that theory to this particular case. Next it will seek the reasons for the success of the American aircraft industry, looking especially for ways in which patents might have played a role. In conclusion, it will attempt to explain the invisibility of patents in previous accounts.