Читать книгу The Inventive Life of Charles Hill Morgan: The Power of Improvement In Industry, Education and Civic Life - Allison Chisolm - Страница 31

Competition in the bag business was inevitable, given multiple patent holders pursuing profits in key markets. While Morgan Brothers worked to consolidate their position in the early 1860s, Francis Wolle and his brother Augustus were looking to either sell or grow.

They decided to grow. The Wolles and partners officially incorporated the new Union Paper Bag Machine Company as a holding company in 1861, intending to create a monopoly in paper bag production by acquiring all bag-making machinery patent rights and profit from licensing others to make bags.

They threatened to sue Charles Morgan for infringement of their patents, but Morgan met with their representative, John Lewars, the same man Morgan and his partners had accused of infringing the Rice patent. As Morgan reported to Boutwell, the Wolles may not have had the capital to fund a lengthy patent battle. In his conversation with Lewars, Morgan learned that Augustus Wolle and his brother gave an exclusive and irrevocable Power of Attorney to Lewars “who was President of a company who used the Wolle machine, to sell rights under the Patent which embraces the folding rolls and blades.”

In addition, Morgan related, Lewars said “Wolle has treated him shadily and he means to use this Power of Attorney to bring him to terms.” He shared the intelligence that “Mr. Wolle has not met all his business paper promptly of late.” As Morgan continued to Boutwell, “if this is true, he may not commence a suit as promptly as he threatens. I enclose a letter from Patent Office giving an extension of time to take evidence.”

Morgan also discovered the Wolles initially sought to sell their patent rights, so he wrote directly to Augustus Wolle to verify this, saying, “I wish to know whether you would protect me from loss should I take stock in the Union Patent Paper Bag Co.”

He concluded in his letter to Boutwell, “I am fully decided not to compromise this matter till the question of interference is disproved and unless better terms are offered.”

Seeking those better terms, Morgan met with Augustus and Francis Wolle at a Boston hotel in early September 1861. He did not accept their offer, but made a counteroffer of his own:

I will sell my entire interest in Paper Bag Machines Patents for the sum of Five Thousand Dollars, one half cash, the balance in two notes, one owed two years with security, and revoking the right to use such patented machinery as I may choose in the manufacture of bags, by paying the company therefore a patent rent not exceeding 3 cents per thousand bags.

Perhaps due to the financial constraints Lewars hinted at, the Wolles did not take Morgan’s offer. They did back Armstrong’s patent case against Morgan, and continued to pursue other bag manufacturers through lawsuits or outright purchase. They also gained the rights to the other half of the Rice patent, originally held by Smith, then Whitney and Priest. Priest may even have become an employee of the Union Paper Bag Machine Company.

By December 1866, the market had two very similar versions of paper bag machines to choose from, the Rice and the Armstrong. This infuriated Charles Morgan, especially after winning the patent battle. As he explained to customers Chatfield & Wood, things would change by 1871:

The Armstrong Machine is an infringement on the Rice Machine & the Union Paper Bag Machine Co. own one half of the Rice Patent & therefore have the right under the Rice Patent to use the Armstrong. The Rice Patent expires in April 1871 when their ownership will expire, as I have secured the extension of the Rice Patent to myself exclusively. This I have accomplished during the past week.

When I say that the Union P.B.M. Co. have the right under the Rice Patent to use the Armstrong Machine as above I also say that they do grossly infringe on my patent.

He signed the letter, “Hoping to obtain justice for myself & for you, I am Truly Yours.”

The best defense is a good offense. Seeking to shut Nixon out of Philadelphia and the New York territory, the Wolle brothers filed suit against Martin Nixon in late October, 1867, claiming improper use of Morgan paper bag machines in Philadelphia. Wolle v. Nixon promised new legal expenses for the Morgans, who once again prepared for a patent battle.

On Henry’s advice, Charles asked his friend George Boutwell to secure representation in both Boston and Philadelphia, agreeing to Boutwell’s preference for attorney H. Waters and eager to lock in his services for their side. “Mr. Waters lives at No. 9 Chamber St. Boston,” Morgan reported to Boutwell. “I went to his house last evening and found he was at Chicago and was expected home today. Please say to my brother that I would like to have him see him as soon as he arrives in Boston & retain him if he is not retained by the opposite party.”

In Philadelphia, they hired patent attorney Jack Giles, one of only four listed in that year’s city directory. Charles sent Boutwell a check for $150 to retain Giles and offset initial expenses. They must have hired the right attorneys, as by January 1868, letters note that the parties were looking to settle without litigation.

As the Wolles’ enterprise continued to grow and Morgan became more consumed by work for Ichabod Washburn, he decided the time had come to cash in on his more than a decade of innovations and business dealings. He began to entertain offers for his rights to the Rice patent and his improvements, including carte envelope production.

In February and March, 1867, Morgan offered the patent rights for the carte envelope business for $800 cash to his friend Edward L. Wilson, who had sold him the original invention. Morgan had then refined the envelope production “with labor saving devices” for profitable manufacture. Wilson sought continued discounts instead. Morgan proposed the same sale terms to both Martin and William H. Nixon, but for $1,200 cash. They also declined the offer.

The Union Paper Bag Company approached Morgan in December 1867 with “a price to sell out my interest in Bag Machine Patents,” as he told Martin Nixon. Because the discussions were entwined with legal action against Nixon, they remained just discussions.

On New Year’s Day, 1868, Boutwell passed along an inquiry from “Mr. C. Smith” asking about the terms of sale for the patent rights. “In reply,” responded Morgan, “I would say that I will sell my entire interest in Paper Bag Machine Patent to pay thirty-five thousand dollars ($35,000.00) cash.”

By April, the price had come down to $15,000. Morgan wrote Benjamin S. Binney of Somerville, Massachusetts on April 16, 1868, offering to pay him $10,000, conditional upon the completion of an offer within 30 days to sell Binney his entire patent rights for $25,000. Binney had previously sued (unsuccessfully) Morgan’s colleague Whitney, who had teamed up with Ellis A. Hollingsworth to produce bags made on the original Rice machines. Morgan said of Binney at the time, “Mr. B. has talked very large for years and if he can get hold of other people’s money, will doubtless spend it for them.”

Morgan must have called Binney’s bluff, as the paper business carried on. Morgan offered a standard license to the Columbia Paper Bag Company of Springfield, Massachusetts on September 28, 1868, to use his improved paper bag making machines for a dollar, as long as they agreed to pay on a quarterly basis his license fee of 3 cents per thousand bags made. The license granted them manufacturing rights for the region within 75 miles of Springfield City Hall, but not in New York State.

The terms also stated they may not use any other paper bag machines, “excepting, however, any Paper Bag Machine adapted exclusively to the manufacture of Flour Bags with square bottoms, and capable of holding each not less than twenty five pounds of flour.” This was a market Morgan Brothers had not entered.

Charles’ focus on the license fee for bags made, not machines rented, and his granting a license for a smaller territory than previous agreements all suggest that the paper bag industry had matured by 1868, dominated by a few large players competing on price for products that the public perceived as comparable. Without the lawsuits, owning the Rice patent would have been a “cash cow” for Morgan and his brother, generating large cash flows at sustainably high price levels.

The most suitable offer came that November from Ellis A. Hollingsworth of the firm Hollingsworth & Whitney. Like Morgan, Hollingsworth had patented his own paper bag machine in 1865 and also had faced legal action, in his case with Wolle. Boutwell telegraphed Morgan at 5:10 p.m. on November 10, 1868 with the offer of $10,000 for his interest in the paper bag machine patents and the extension he had purchased in December 1866. Morgan responded immediately by return telegram, accepting the offer, but asking to retain the patent rent due him from his licensees back to October 1.

“I will come to Boston on the 12^th instant to complete the bargain,” he wrote Boutwell later that same day. The sale was unconditional, and Hollingsworth granted Morgan the back royalties due him.

Morgan felt the timing was right, considering the growing obstacles he faced to profitably expand the paper bag business. He wrote his longstanding colleagues and licensees, Messrs. Chatfield & Wood, that same month, noting:

you doubtless think hard of this, but gentleman I ask you to put yourself for a few moments in my place with 2 lawsuits look me in the face after having worked hard for 10 years to realize something from the Patents, and having failed to make a combination with you and others with capital to defend the Patents. When their alternatives were presented to sell out or fight I chose to sell out and think you would have done likewise.

Securing those final patent rent payments proved to be taxing. Almost two years later, Morgan wrote attorney George Harding that when Stokes of Philadelphia had come to Worcester on business on April 8, 1870, he had “caused him to be put under bonds to appear and defend a suit here for the account his firm owed.” The court date, however, would have to be the following winter.

The fighting in the paper bag business continued. In May 1870, Union Paper Bag Machine sued Chatfield & Wood of Cincinnati for infringement. In stark contrast to the financial and legal response to Wolle v. Nixon, Morgan distanced himself from the affair, writing after his former customers forwarded the legal notice to him,

as you already know ... some 16 months ago I sold my entire interest in Paper Bag Machine Patents & License under the same to E.A. Hollingsworth, a resident of Boston, Mass. The notice to Thurston Priest I return as I do not know where he resides.

The Wolle brothers continued to harass Morgan licensees with lawsuits and went on to consolidate their business, merging with multiple licensees and agents from across the country, including then-industry leader Wheeler, Fisher & Company of Chicago and six other licensees in 1874. Holding a near-monopoly position in the market, Union Bag & Paper Company, as it was known after the merger, flourished. By the end of the century, it manufactured 80 percent of all paper bags sold in the United States.

As one indication of the size of this expanding industry, an 1881 Supreme Court case cited the production of 93.5 million bags between 1871 and 1875 by just one company in Richmond, Indiana that had been using both Morgan and Rice machines. The case, not surprisingly, was Nixon v. Union Paper Bag Machine Company.

There were more innovations in paper bag machines after Morgan left the business. The bags made through the 1860s were more like envelopes, flat with a single flap to close the bottom. But on November 9, 1869, an employee of the Columbia Paper Bag Co., working on paper bag machines licensed from Charles Morgan, filed a patent for a machine to fold and paste flat-bottom bags. With her invention, Margaret E. Knight became one of the first women to hold a United States patent, which was granted, after her own infringement battle, on July 11, 1871.

A dozen years later, a Philadelphia inventor, Charles Stillwell patented a square bottom bag with pleated sides that could stand up straight on its own. Known as the Self-Opening Sack (S.O.S.), the model patented June 12, 1883 closely resembles the paper bags in use today. Improvements on the machine to manufacture this style bag were patented in 1890 by William Purvis, who later licensed his invention to the Union Bag & Paper Co.

Decades later, Union Bag & Paper merged with Camp Manufacturing Company to form Union Bag-Camp Paper Corporation in 1956. Renamed Union Camp Corporation in 1966, that company was in turn acquired by International Paper in 1999. Most of today’s flat-bottomed brown paper grocery bags are made by International Paper. Their patent portfolio includes the original machine design improved by Charles Hill Morgan.

Morgan’s commercial interests, however, had decidedly turned from paper to metals as he dedicated his time and creative energies to Washburn & Moen’s rolling mills for the next two decades. His brother, too, eventually made the shift to metals. By 1867, Henry had relocated to Boston, continued manufacturing paper bags for a time, and then helped establish the Morgan Spring Company with Charles in 1881. They worked together in that company until Henry’s death in 1899.

The Morgan brothers had profited from their role in the earliest days of the paper bag business. They capitalized upon a new market with their mechanical and business skills to such a degree that by the mid-1860s, Morgan paper bag machines could be found in most states east of the Mississippi. The lessons learned from that experience as entrepreneurs fueled the success they found in their next endeavors.