Friday, January 8, 2016

Then Along Came the Ballpoint

Note:  for the last few days, I've been documenting the history of Eberhard Faber.  That story begins at http://leadheadpencils.blogspot.com/2016/01/so-many-fabers.html.

This adventure started with a few E.Faber repeating pencils, nearly identical to Eversharp Skylines on the inside, from Monday’s article (http://leadheadpencils.blogspot.com/2016/01/maybe-even-closer-than-we-think.html):


When these might have been made intrigued me, because I knew of only one whopper of a connection between Eberhard Faber and Eversharp before I found these: the ballpoint pen.  As I was poking around, all the sources I was finding appeared to plagiarize one another with exactly the same story – usually in the same words.  Eversharp “teamed up with” Eberhard Faber in 1945 to acquire the rights to manufacture Biro’s new ballpoint pens in the United States.

I put “teamed up with” in quotes because that’s the phrase most sources plagiarize from each other . . . and, putting my lawyer’s hat on, there’s no such thing as “teaming up.”  After I've researched this a bit, I’ve got a better understanding of what actually happened, some of which doesn’t square with what all these sources are saying.

And I’ve turned up more questions than answers.

The truth came out, as it so often does, in Court.  When Eversharp and Faber started paying license fees to Eterpen, both companies withheld Federal income taxes on the payments, and when Eterpen wanted the withheld money back, Uncle Sam wasn’t as accommodating as Eterpen would have liked.  The resulting tax case, Eterpen Financiera Sociedad v. United States (1952), 108 F.Supp. 100, explains in detail what the deal was between these companies.

The Court noted that Eversharp and Eberhard Faber entered into an agreement with each other first, on May 5, 1945.  That agreement provided that if the two companies succeeded in negotiating a license deal with Eterpen, Eversharp would produce all of the pens and ink and Faber would be entitled to purchase up to 25 percent of that production for sale by Faber.

Question one answered: Faber did not make those early ballpoints that look so much like Eversharp Fifth Avenue ballpoints: they were made by Eversharp for Faber.

The second agreement – or agreements – were entered into between Eterpen, Eversharp and Eberhard Faber on May 18, 1945.  Part one of this was an exclusive license agreement for Eversharp and Eberhard Faber to “make, use and vend” pens under the Biro patents in the United States, Hawaii and Alaska.  Part two was an option agreement, allowing Eversharp and Eberhard Faber to purchase the Biro patents for $1,500,000.00 on or before March 1, 1946.  By a later amendment, the parties extended the option period until December 1, 1946.

As the December deadline approached, Eberhard Faber did not want to participate in exercising the option, so Eversharp did so on its own, negotiating the price down to $1,100,000.00 – with Faber continuing its license rights under the May 5 agreement.

Correction for the record: unless someone has a source to contradict this court decision – and I’m not counting pen history sites -- Eberhard Faber did not buy the license rights from Biro  for $500,000.00 and Eversharp did not pay Eberhard Faber $1,000,000.00 for those rights.

The court case also tells us, by working the math backwards, roughly what Eversharp and Eberhard Faber’s sales figures were in 1946.   According to the case, both companies withheld 30 percent of the gross payments made in 1946 under the agreement, amounting to $121,038.02 withheld by Eversharp and $25,298.90 by Faber.  That means total royalties payable in 1946 were $487,789.73, which represents under the agreement 5.25 percent of their combined net sales (deducting some unspecified expenses).  That means . . . drumroll . . . net sales of $9,291,233.02 in 1946; in rough numbers (because we don’t know what “net” means or what expenses were deducted).  Even if we divide that by the initial gross sales price of $15.00 per pen, that’s more than 619,000 pens.  And that’s a conservative estimate.

In 1946 alone.  The Court notes production did not begin until 1946.  While it’s possible that just meant royalties weren’t payable until 1946, I’d now like to see primary evidence that Eversharp and Eberhard Faber introduced their ballpoints in 1945.  I don't believe they did.

Enter Milton Reynolds who, unable to acquire his own rights to market the ballpoint, reverse engineered the Biro design in four months and had his new ballpoint on the market in October, 1945.  Our collector’s lore says that Eversharp never saw Reynolds coming and therefore rushed their ballpoint to market and sued Reynolds for patent infringement.

It simply didn’t happen that way.

According to Wikipedia, Milton Reynolds did not discover the Biro ballpoint pen while in Argentina.   The University of Washington has an archive of some 38 boxes of Milton Reynolds documents and papers, and in 1971, Robert Leonard Rosenberg wrote his PhD thesis on the subject, titled The Ventures and Adventures of an Errant Entrepreneur: Milton (Ball-Point) Reynolds (1892–1976).  Given a choice between any other source and the guy who wrote his thesis using the original documents, you know who I believe.

According to Rosenberg, one of the few Biro ballpoints to make it into the U.S. found its way to Goldblatt’s department store in Chicago, where Milton Reynolds saw it – and then he went to Argentina to find the Biros and attempt to secure the rights.  This must have been some time after May of 1945, because when Reynolds arrived, he learned that the deal had already been struck with Eversharp and Eberhard Faber.

At this point I’ll add a chapter to this story which you won’t find anywhere else.  A couple years ago I purchased the remaining assets of the Panda Pencil Company – that’s a whole other story for another time, but the detail I wanted to add here involves a story told by the president of Panda, who was more than 80 years old at the time.  Since Panda supplied lead to Eberhard Faber, he knew several members of the Faber family personally.

According to Panda's former president, when Reynolds returned to the U.S., he went to New York to attempt to purchase or sublicense rights from Eberhard Faber.  We know from the history of Faber that at the time, Lothar had just died, Eberhard was in his eighties, and in August, Lothar’s son died in a drowning accident.  So, Reynolds sought out “Mrs. Faber” (he didn’t say which one) in a New York hospital, where she was recuperating from one of the first double mastectomy procedures in the United States.  He says that when another member of the Faber family discovered Reynolds in Mrs. Faber’s hospital room, trying to get her to sign documents while she was still under heavy sedation and painkillers, he dragged Milton out into the hallway and beat the tar out of him before having security escorted the battered Mr. Reynolds from the hospital.

Is that true?  Who knows - but it does fit perfectly in this story!

Milton Reynolds, unable to secure his own version of the ballpoint, developed his own version of the ballpoint in a remarkably short period of time, and introduced his new pen at Gimbel’s on October 29, 1945.  Many sources report today that Reynolds simply reverse-engineered the Biro, patents be damned, just to make a quick buck.  However, according to the Rosenberg thesis, Reynolds came up with his own design with engineers William Huernergardt and Titus Haffa which did not rely on the patented capillary action, but rather used gravity alone and a thinner, less viscous ink.

Take note: Reynolds didn’t simply copy the Biro design.  He and his engineering team redesigned it to work by gravity alone, in order to avoid a patent dispute.

And here’s a side note from the Rosenberg thesis: he says the ball bearings that formed the points were “repurposed from the metal beads used in war-surplus bomb sights.”  Who made bomb sights during World War II?  The W.A. Sheaffer Pen Company.

Talk amongst yourselves on that one.  I don’t have anything more on whether Sheaffer was involved in Milton Reynolds' adventures as a supplier . . . yet.

Any site reporting that the introduction of the Reynolds Ballpoint in October, 1945 was a surprise to Eversharp and Faber is wrong.  Wrong, wrong, wrong.

There’s a reason why the Reynolds was introduced only at Gimbel’s Department Store: Eversharp had contacted other department stores, including Sears, and threatened that if they carried the Reynolds ballpoint, they would refuse to supply them with any Eversharp products and they would sue them for patent infringement.  On October 6, 1945, the United Press picked up the story that Reynolds had filed suit against Eversharp and Faber, alleging unfair competition and seeking an injunction.  Eversharp and Faber responded with a counterclaim for patent infringement.


Take note:  Reynolds sued Eversharp and Faber first.  Before his pen was introduced.

The case landed on District Judge Leahy’s desk on a motion for an injunction - an order issued by the Court prohibiting Eversharp and Faber from doing things until the case could ultimately be decided.  Judge Leahy’s decision was published on November 17, 1945 (Reynolds International Pen Co. v. Eversharp, Inc., 63 F.Supp. 423 - available online at https://casetext.com/case/reynolds-international-pen-co-v-eversharp).   Reynolds and Eversharp each filed affidavits in support of their cases, and Judge Leahy didn’t believe either of them.  “The only source of what has occurred is to be found in the affidavits,” Leahy said, “and the affidavits contain hearsay and hearsay on hearsay. Every substantial allegation of the complaint is denied by the answers. There is a sharp conflict on every question of fact. These conflicts cannot be resolved by reading hearsay affidavits.”

And then Leahy made a few threats of his own:

“Until this lawsuit is decided defendants — regardless of whether they have or have not done so in the past — should not threaten the trade on account of the Reynolds pen and plaintiff, in turn, should restrict its remarks, as to defendants' violation of law, to the courtroom. The parties are in court and their disagreements should be settled there. If either party becomes careless, until after the trial of the cause is had, about the admonitions just written, an application for an injunction pendente lite will receive quick consideration.”

In short: whoever screws up first loses.

Those affidavits, while they didn’t help either side in court, are valuable for us today in assessing the situation leading up to the Christmas shopping season in 1945.  Reynolds was in Court before the introduction of his pen, claiming that Loud’s expired 1888 patent for the ballpoint meant that Eversharp and Faber could not claim that their Biro rights covered all ballpointed writing instruments – just the ones that were covered by the Biro patents.

As for Eversharp, any illusion that they were in a rush to put their ballpoint on the market is pure poppycock.  Said Judge Leahy:

“Defendants' affidavits recite that their engineers have engaged in intensive laboratory and technical research for the past year in developing the ball-pointed pen covered by the two Biro patents. When they offer their pen to the American public it is their wish that such a pen will not only be efficient but a credit to the names of the two defendants who will sponsor it.”

In fact, it appears that Eversharp’s CA was not available until mid-1946; here’s an article from the June 3, 1946 Harrisburg Telegraph, in which an Eversharp was giving a sneak preview of the pen, on the day it was released:


“The patent rights for the new pen were acquired in the Argentine nearly a year ago, but the product was kept off the market, according to [Eversharp sales representative Bart J.] McClosky, until it was perfected.”

The first advertisement I could find for the Eberhard Faber counterpart was this one, from September, 1946:


Eversharp and Faber didn’t rush the ballpoint pen to market.  They started working on it nearly a year before they started kicking up dust with Milton Reynolds, and after the initially spectacular debut of the Reynolds in October, 1945, it was another six months or so before they launched their version.

Maybe after the fact, as massive numbers of the product were being returned and none of them actually worked, Eversharp and Faber blamed Reynolds for having to hustle to market . . . but it wasn’t true.  The sad fact is that all of Eversharp’s horsemen and all Eversharp’s men couldn’t make the damned thing work.

Clearly, there’s a lot more research to be done on the subject.  I was coming into the story researching things from the Eberhard Faber angle, trying to learn how and why Eberhard Faber got mixed up in the ballpoint fiasco.  Now that I know exactly how the deal with Eterpen developed, I’m at a loss: why was Faber ever interested in the ballpoint concept in the first place, since their existing production of fountain pens were mostly ho-hum, lower quality pens like this one:


Maybe Lothar Faber’s death in 1943 had something to do with it: maybe his son Eberhard started pursuing the idea and had a deal all but worked out, but needed a company like Eversharp to do the production.  Maybe the Biros, who fled Germany for Argentina during the War, felt enough of a connection with the German heritage of the E.Faber firm to insist that any American deal include them?

Maybe.  I’d like to learn more about this.

3 comments:

Jon Messer said...

Great research, work & insight Jon. In terms of learning more, that makes at least two of us {hah}. Keep up the excavation and revelations!

Cheers, Jon

qvxb said...

Jon,

In your post you wrote ".. which did not rely on the patented capillary action, but rather used gravity alone and a thinner, more viscous ink." Did you mean less viscous ink?

Jon Veley said...

You are correct on the viscosity issue . . . thinner is less viscous, not more. Correction made with my thanks.