Ford Pays Off

"It'll be a grand fight," predicted Irish Inventor Harry Ferguson four years ago, when he slapped a $251 million antitrust and patent infringement suit against Ford Motor Co., its subsidiary, Dearborn Motors Corp., Henry Ford II and other Ford officials. Ferguson was right; his suit turned out to be the biggest legal battle in the auto industry since 1911, when old Henry Ford himself successfully broke the famed Selden patent.*

End of a Partnership. The fight started when Henry Ford II canceled an oral agreement which his grandfather had made in 1939 to manufacture a tractor for Ferguson according to Ferguson's specifications. Old Henry had been intrigued by the tractor's ingenious hydraulic lift and new method of linking other farm implements to it. Young Henry was appalled at the manufacturing costs. During the seven years of the agreement, the Ford company made 303,501 tractors which Ferguson sold along with farm implements made by others for $313 million, netting Ferguson $4.3 million in 1946 alone. But the Ford company itself, said young Henry, had lost $25 million on the deal. He decided to set up his own company, Dearborn Motors Corp., to market his own tractors. Ferguson's aides took one look at the new Ford tractor with its hydraulic lift, and filed suit.

Ferguson's immediate problem was to stay in business. He had no plant, but he hastily built one near Detroit, and for the first time began producing his own machines in the U.S. He ran the works, by remote control, from his enormous English stone mansion near Stow on the Wold, Gloucester. In 1949, young Henry called on him to try to settle their differences. Ferguson set such stiff terms that Ford gave up. Finally, in Manhattan's federal court last year, the trial began.

Legal Labyrinth. In the year since then, 10,000 pages of testimony were taken, and the defense had not yet had its turn to be heard. Ford had already spent more than $3,000,000 in trial expenses: Ferguson Inc. had spent as much, and it looked as if the expensive legal fight would go on for years.

But Ferguson, who had based part of his case on the charge that Ford was monopolizing the tractor business, could not prove it. His own sales in 1951 reached $64.5 million (v. their $79.4 million peak while Ford was making the tractor), and his company netted $406,956. The antitrust part of the suit was dismissed by the court.

Last week Ford and Ferguson made a deal and settled the case out of court. The cost to Ford: $9,250,000, the biggest patent settlement ever paid in a U.S. suit. In the settlement, Ford conceded that it had infringed Ferguson's patents by copying the hydraulic valve, coupling system, and the power-take-off setup, agreed to make restitution to Ferguson on the basis of about $21 for each of the 441,000 tractors Dearborn Motors has made since mid-1947 (Ferguson had asked $100). Ford also agreed to alter the designs of its own tractors enough to remove any further infringement. In England, Harry Ferguson estimated that his company will be able to keep $5.6 million of the payment after taxes.

*Issued in 1895 to George B. Selden, a lawyer and inventor, the patent was so broad it apparently covered every gasoline-driven car, even though Selden himself never built one. Virtually every U.S. automaker paid 1 1/2% of his sales in royalties to the owner, until Ford, in 1908, sent word: "Selden can take his patent and go to hell." After eight years of court fights, Ford proved the patents invalid.

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