Thomas Edison, Intellectual Property and the Recording Industry

Thomas Edison, Intellectual Property
and the Recording Industry

By George Ziemann

Chapter 2 -- Music, Movies and Monopoly

Before we plunge ahead, let's pause for a minute and bring up another story about Edison. His first significant invention (there was an electric vote machine that didn't work out) was the stock ticker, which was actually a high-speed telegraph. He was 22 (1869) when he figured this one out and took it to New York. The financial community loved the ticker and decided to buy Edison's patents, probably to keep it confined to a tight circle of investors.

According to a story I read and simply cannot relocate, they asked Edison how much he wanted for his patent. Edison, who had reportedly been thinking of a figure in the $3,000 neighborhood, decided at the last minute that he might be better off to have the brokers make an offer. They gave him $40,000. Edison took the check to the bank and walked out with $40,000 in cash, which he crammed into his pockets. He went back to where he was staying and spent at least one sleepless night worried that someone would do him in for his cash.

Then he figured out that he could leave the money in the bank and take it out when he needed some.

By 1887, Edison had already moved into his new lab in West Orange, New Jersey. He had 60 employees, which he attempted to manage himself with a loosely organized structure. In fact, he kept it as unstructured as possible, on purpose. He is reported to have told one new employee, who inquired about rules, "There ain't no rules around here. We're trying to accomplish something."

As we ended our first installment in this story, it was 1888. The North American Phonograph Company, (NAPC) had combined the inventions of Thomas Edison and Alexander Graham Bell, combining their patents and creating a limited-time monopoly on the art and science of recorded music. Shortly thereafter, the NAPC began selling recordings.

Between 1887 and 1891, Edison and his company took out more than 80 patents on improvements to the phonograph, which had been Edison's pet project. In 1889, he came up with the first experimental motion picture, at least in the U.S. In April, 1894, the first "peephole" Kinetoscope parlor opened at 1155 Broadway in New York.

By August of 1894, NAPC was in financial trouble, A Mr. Walcutt and Mr. Miller held the company for a few months from 1894-95 and renamed it the Walcutt & Miller.& Co. The name was changed again in 1896 to The National Phonograph Company, which was (and still is) known as Edison Records.

Thomas Edison did something very significant in 1896, which we must speak of before going further. While experimenting with Roentgen's x-ray machine, Edison discovered the fluoroscope. While this was an important discovery in and of itself, the true significant act was that Edison, who had been patenting things at an amazing rate of frequency, chose to leave the fluoroscope in the public domain for the benefit of medicine.

It was important to note the selfless act of contributing the fluoroscope to medical science because Edison had a much more personal connection to the phonograph. He paid more attention to the phonograph than he did to his son, Thomas Jr. He was equally obsessed with the motion picture, the natural result of his kinetoscope. He may have already been planning to combine the two mediums, but first, he wanted complete control over the filmmaking process.

From The Edison Movie Monopoly by J.A. Aberdeen:

In December 1908, the motion picture inventors and industry leaders organized the first great film trust called the Motion Picture Patents Company, designed to bring stability to the chaotic early film years characterized by patent wars and litigation. The Edison Film Manufacturing Company, the Biograph company, and the other Motion Picture Patents members ended their competitive feuding in favor of a cooperative system that provided industry domination. By pooling their interests, the member companies legally monopolized the business, and demanded licensing fees from all film producers, distributors, and exhibitors.

Eastman Kodak agreed to sell filmstock only to authorised producers. The MPPC took over all but one of America's film distributors. The courts upheld Edison's claims that most of the film cameras in use infringed his patents. Then Edison got too pushy. The MPPC had detectives and strong-arm men who would go out hunting for infringing activity. Pretty soon, there was a constant battle going on, both in and outside of the court system.

Does this sound familiar? It ought to. Here it is, 95 years later, and Edison's recording industry, which he created even before the movie business, is poised on the verge of falling victim to the exact same consequences of the exact same actions that brought an end to the MPPC.

More from J.A. Aberdeen:

A January 1909 deadline was set for all companies to comply with the license. By February, unlicensed outlaws, who referred to themselves as independents protested the trust and carried on business without submitting to the Edison monopoly. In the summer of 1909 the independent movement was in full-swing, with producers and theater owners using illegal equipment and imported film stock to create their own underground market.

With the country experiencing a tremendous expansion in the number of nickelodeons, the Patents Company reacted to the independent movement by forming a strong-arm subsidiary known as the General Film Company to block the entry of non-licensed independents. With coercive tactics that have become legendary, General Film confiscated unlicensed equipment, discontinued product supply to theaters which showed unlicensed films, and effectively monopolized distribution with the acquisition of all U.S. film exchanges, except for the one owned by the independent William Fox who defied the Trust even after his license was revoked.

Many of the early independents were resilient film exhibitors who ventured into production when they found their supply of film threatened. Carl Laemmle (Independent Motion Picture Company or IMP), Harry E. Aitken (Majestic Films), and Adolph Zukor (Famous Players) were among the pioneering independents who protested the Trust, and then laid the foundation for the Hollywood studios. Having entered the business through exhibition, they determined that they liked production better, and got out of the theater business as the nickelodeon boom ended around 1911.

Fortunately for Edison, he had begun working on a recording disc in 1910, because his movie business was about to fall apart. By the time the U.S. government brought anti-trust charges against the MPPC in 1912, it was already too late anyway. The independents had begun to reform and redefine the industry themselves. By the time the courts found that the MPPC had acted as a monopoly by restraining trade, the independents had already broken the monopoly anyway.

Even though Edison had invented the process, defined it, set the standards and had every legal right to control his monopoly, he went over the line by preventing others from making his inventions better, stopping variations on the theme and systematically eliminating the competition by taking away their supply.

So just for good measure, the courts ordered the MPPC to be "disintegrated." As Aberdeen phrases it, "The Edison monopoly had taken a retrogressive stance to the innovative industry reforms introduced by the outlaws."

This is by no means the end of the story. But it is a good stopping point for this chapter.

But a personal opinion first -- This is exactly what has happened in the recording industry in the past 3 years -- a retrogressive stance to innovative industry reforms introduced by anyone except the RIAA members. Just like Edison's patents, the RIAA has pooled their copyrights in restraint of trade.

And just like Edison's Movie Monopoly, the court is going to disintegrate it sooner or later, but not until the independents have already broken the monopoly. We like production, too. The recording industry better invent something new real fast, because anyone can do what they're trying to charge consumers for now. In our garage. In our living room. In our underwear.

Chapter 3 -- The Industry Evolves