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How the Telephone Conquered the World. Episode Four: David the Start-up Versus the Corporate Goliath

How the small Bell Telephone Company battled both patent trolls and the giant Western Union corporation over patent priority

The history of the invention of telephony reads like a captivating detective novel, but even more intriguing are the events that contributed to the worldwide adoption of this technology. In this series of columns on IQ.HSE, Anton Basov, HSE Faculty of Computer Science editor, discusses how telephones have become an integral part of our everyday life. The fourth episode of the series recounts the story of the fledgling start-up's confrontation with hordes of patent trolls and its subsequent victory in a full-blown corporate war against the largest telecommunications company of the late 19th century.

Upon his return to the USA from his European tour, Alexander Graham Bell faced a serious challenge. For a year and a half leading up to that moment, no one had disputed the primacy of his invention. Behind him was a successful telephone demonstration at the Centennial International Exhibition, along with dozens of lectures and hundreds of published papers. Bell had introduced the telephone to both America and Europe and had even presented it to Queen Victoria. With telephone exchanges proliferating across the USA and the text of Bell's patent being widely accessible, claims began to surface from those who asserted they had invented the telephone prior to Bell.

Over the following 11 years, US courts deliberated on six hundred lawsuits contesting Bell's priority. Five of these lawsuits reached the Supreme Court. The fledgling Bell Telephone Company had to urgently establish a legal department under the leadership of attorney Thomas D. Lockwood. 

Alongside him, two other exceptional attorneys defended Bell's rights. The imposing Chauncey Smith was highly experienced in courtroom oration (indeed, he passed away while delivering an impassioned address during a court session), while the more reticent James J. Storrow possessed an extraordinary memory. Upon assuming the role of Bell's attorney, Storrow dedicated an entire summer to studying physics and electrical engineering to gain a thorough understanding of the unfamiliar field.

This trio successfully safeguarded Bell's rights in confrontations with fifty opposing attorneys and, except for two minor lawsuits, emerged victorious in every case.

Bell had numerous competitors, but his primary rival was Elisha Gray, a talented engineer and inventor. Born in 1835, Gray attended Oberlin College, and in 1869, he established an electrical engineering company that supplied telegraph equipment to Western Union. Like Bell, Gray was endeavouring to develop a harmonic telegraph capable of transmitting multiple telegrams simultaneously over a single wire. On February 14, 1876, Bell handed in a patent application describing his 'talking telegraph' to the Patent Office. It is often said that on the very same day, merely two hours later, Gray also filed a patent application.

But the devil is in the details. While it is true that Bell applied for a patent, Gray, on the other hand, submitted a caveat, a preliminary application for an invention without a detailed description or drawings. A caveat allowed inventors to 'claim' an idea and secure priority should another inventor seek to patent the same concept. Gray's caveat outlined the idea of employing electricity to transmit sound. However, this proved insufficient—Bell's patent application did not only precede Gray's submission but also carried greater legal weight.

The Most Unfortunate Contender in the Telephone Race

In 1884, Daniel Drawbaugh claimed to have devised both the telephone and the telephone switchboard prior to 1876, but that he had been too poor to afford the patent fee. A similar argument would be used by another 'inventor' of the telephone, Antonio Meucci. It took nearly four years and the testimonies of five hundred witnesses to expose the falsehood of Drawbaugh’s claim.

A skilled craftsman and a subscriber to Scientific American , Drawbaugh replicated numerous inventions featured in the magazine and presented them as his own, a relatively easy task in his secluded Pennsylvania village. He lost the case, but this did not deter him from making another attempt in 1903, asserting that he had invented the radio before Marconi.

Gray was not too upset at first. On March 5, 1877, he wrote to Bell, stating, 'I do not claim even the credit of inventing [the telephone]'. But over the course of the year, his perspective on the matter shifted.

As covered previously, in 1877, Bell's business partner and father-in-law Gardiner Hubbard offered Western Union's president, William Orton, all the rights to the telephone for as little as $100,000. Orton rejected the offer. 

The telegraph was the primary application of electricity at the time. Electric motors and generators were still imperfect, and the electric current derived from batteries was costly and only suitable for small-scale devices like bells, alarms, and electric clocks. The incandescent lamp had yet to be invented, and arc lighting had only recently started gaining popularity.

Western Union was the world's largest telegraph and, consequently, electrical company. It operated a network of 400,000 kilometres of telegraph wires across the United States. The company also catered to private customers by offering printing and index telegraphs capable of transmitting up to 60 words per minute. According to Orton and other Western Union executives, a rudimentary telephone was incapable of replacing these advanced devices.

Their certainty wavered when one of their subsidiaries, the Gold and Stock Telegraph Company, responsible for transmitting stock exchange quotes to brokers' offices, reported that a few customers had forsaken the telegraph in favour of the telephone. 

Orton assigned the investigation of the matter to Frank L. Pope, the chief electrical engineer at Western Union. Pope devoted the following six months to immersing himself in the intricacies of telephony. He purchased every relevant book available in the USA and Europe, enlisted a polyglot fluent in eight languages as a translator, engaged in discussions with experts, and persistently approached the patent office. The conclusions reflected in his report proved disheartening: Bell's patents had been acquired legitimately, and circumventing them or constructing a telephone by alternative methods was unfeasible. Pope recommended to the leadership of Western Union that they might consider acquiring Bell's patents.

Orton refused to follow the expert's advice. On December 6, 1877, Western Union founded the American Speaking Telephone Company (ASTC), with George Walker as president and Orton as director. They employed designs created by several inventors, including their supplier Gray, Amos Dolbear, and George Phelps, as a means to work around Bell's patent. Additionally, they played a trump card by acquiring Thomas Edison's patent for a carbon telephone, now known as a carbon microphone.

Carbon Microphones and Their Inventors

Bell's telephone had one significant drawback: it used the same device for both transmitting and receiving sound. As a transmitting device, Bell's telephone was rather mediocre.

Several inventors endeavoured to devise a transmitter grounded in an alternative physical principle, such as electrostatic transmission. The most successful type was the charcoal transmitter. The greater the pressure applied to the charcoal, the better it conducted the current.

Three individuals laid claim to the invention of the carbon microphone: Emile Berliner, who would later invent the gramophone, David Hughes, the renowned electrical engineer and inventor of the letter-printing telegraph, and the legendary Thomas Edison. It appears that each of them independently invented the carbon microphone. However, it was Edison who successfully introduced it into widespread use. The carbon microphone remained in use in telephones until the end of the 20th century.

After testing telephones on its own telegraph lines connecting New York, Washington, and Philadelphia, ASTC inaugurated its first telephone exchange at the Western Union office in New York on August 1, 1878. Now, Bell's company was in for a challenging period. Western Union had at its disposal an extensive network of communication wires connecting cities, the Edison microphone for enhanced sound transmission, a robust force of agents poised to market its equipment, and a customer base eager to make purchases. Bell had nothing other than his patents, leaving him with no choice but to rely on them.

On September 12, 1878, the National Bell Telephone Company (NBTC) filed a lawsuit against ASTC for patent infringement. The legal proceedings continued for over a year, until finally, Western Union's chief attorney George Gifford became convinced that prolonging the litigation was tantamount to squandering both time and money. Furthermore, the company had come to realise that due to technical constraints, telephones did not perform as effectively on telegraph lines as they had hoped. The parties began negotiating a settlement.

A committee consisting of six people (three from each side) deliberated over the settlement terms for several months. The dispute was finally settled on December 10, 1879. Western Union sold its telephone networks, which encompassed 56 thousand subscribers across 55 US cities, to Bell's company. In addition, they officially acknowledged Bell as the inventor of the telephone and declined to endorse Gray's claims.

Ironically, Gray's electrical engineering business was ultimately acquired by none other than Bell in 1881. Named Western Electric, it served as the primary supplier of telephone equipment in the USA until the end of the 20th century. Gray himself continued his inventive pursuits and in 1887 developed the telautograph—a device for transmitting handwritten text over long distances.

In exchange, NBTC agreed to pay 20% of the revenue generated from the acquired Western Union customers for 17 years and to abstain from installing telegraph lines in the United States. Western Union further transferred all of its patents for telephone equipment to NBTC and granted permission for the installation of telephone wires alongside its telegraph lines (while retaining the right to use the telephone within the company).

The out-of-court settlement brought the litigation to a close. This was how David, that is, Bell's young and modestly resourced company, triumphed over the corporate Goliath of Western Union.

There would still be numerous litigations, disputes, and misunderstandings in the future. However, none of these could undermine Bell's standing as the inventor of the telephone. The Patent Office itself, in 1884, conducted an eighteen-month investigation of all telephone patents and reported: 'It is to Bell that the world owes the possession of the speaking telephone'.

Author: Anton Basov, October 16, 2023