Feb. 12 in Patent History…

Excerpt from Art Cashin comments: http://financialservicesinc.ubs.com/staticfiles/faw/adobe/all/cashin_comments.pdf

On this day (+2) in 1876, one of America’s most celebrated inventors was to learn the promise and punishment of punctuality. His name was Elisha Gray and he had already moved interactive communications light years ahead. He had invented an automatic relay for the telegraph which sped up communications by half. He then invented a trans-printer which read Morse code and printed the words in typeface. Partially inspired by the ease and speed provided by Gray’s inventions, the telegraph business took off.

That led to capacity constraints and demands for a telegraphic super highway. Since there was no fiber optics at the time, they needed something new. Gray decided to try sending simultaneous multiple messages by using a different musical tone for each message. It was ingenious….but still had a few bugs. And, while Gray worked on them, word spread that his new system had a special quality…..it could transmit the human voice. But Gray thought the ability to send eight telegraphic messages over the same wire simultaneously was more important.

While he plugged away at that, his partners warned that others (including Edison) were said to be working on voice transmission. So just to tie up loose ends, Gray dropped by the patent office to drop off his letter of intent on the telephone. Unfortunately, a guy named Alexander Graham Bell had dropped by just two hours earlier. That coincidence of time would result in patent lawsuits over the next three decades. In an odd twist, the lawsuits became so expensive that Bell and his father-in-law offered Western Union the rights to the telephone for just $100,000. In a decision studied in today’s business schools, Western Union replied…..We’re in the telegraph business not the phone business….and that’s where they stayed….If they had only realized they were in the communications business!!!! They might have ruled the world.


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