The Inventive Life of Charles Hill Morgan: The Power of Improvement In Industry, Education and Civic Life. Allison Chisolm
arrangements gave L. Whitney Jr. & Co. the opportunity to develop the market for this new product, while avoiding significant capital outlay, since they had space in their Watertown paper facility and gave Smith & Morgan access to a production facility at no cost. The paper producers could thus control their costs by agreeing to purchase only what they could sell, so the patent holders took the risk of balancing production and sales—a relatively manageable risk, given how fast they could ramp up production. Granting exclusive distribution rights for New England to L. Whitney Jr. & Co. in 1859 protected the paper mill from competition, allowing them a stable price and thus predictable profits on the sale of paper bags.
The January 7, 1858 agreements spelled out that Smith & Morgan “agree to make all the paper bags that L. Whitney Jr. & Co. may want made for them for the term of five years from date... all sizes of bags from one lb. to five pound to ten pound bags.” They further agreed to “furnish two bag machines and run them at our own expense and make all repairs upon them at our own expense,” plus gears, shafting, and steam pipe fittings. Bags would be delivered tied up with twine.
In turn, L. Whitney Jr. & Co. “agree to furnish Smith & Morgan with wrapping paper for the term of five years from date for five and a half cents per lb. also manilla [sic] paper for eight cents per lb. for the term of five years from date. The paper is to be made in rolls the width ordered.”
Their agreement included providing room to operate the bag machines “when our steam is up and our Mill is running,” and to pay Smith & Morgan “for making what bags we may sell as fast as we sell them,” at the rate of two cents per hundred bags that would hold one to five pounds, three cents per hundred of the five to ten pound bags, and four cents per hundred of the 10 to 20 pound bags.
By October 1858, Whitney must have received a third machine in Watertown, as Morgan used all three as collateral for a $300 loan from local shoe manufacturer, John B. Plympton. He never took ownership of the machines, however, as Morgan paid him in full the following January, discharging what had been recorded with the town clerk as a “Mortgage of Personal Property.”
Bag sales proved as fast as the machines. Morgan reported to a customer, Nixon & Chatfield in Cincinnati, Ohio, that Whitney’s three machines had produced on average 70,000 bags per day during June 1859. As agreed, they tied them up in 500-bag bundles.
Bags were initially sized by the amount of weight they could hold, as boxes had been, with sizes ranging from one to 20 pounds. Later, they followed a number system which indicated the weight the bag could hold, from #½ up to #25. But it all depended on what the bags were needed for. As Morgan explained to a prospective customer, “The sizes vary in different localities, Boston, Cincinnati, New York, Philadelphia and Springfield having sizes peculiar to their respective trades.”
In assisting Rice with his initial design, Morgan ensured Rice’s patent was commercially viable. In a very practical sense, the machine could make enough paper bags to clear a profit for the machine’s owner or licensee, especially one with access to paper supplies at cost and limited competition. While payments for the machine got the business on a solid footing, licensing became the real revenue-generator for Smith & Morgan’s business. They quickly sold licenses for the right to manufacture paper bags in specific territories. New England was snapped up by L. Whitney Jr. & Co. and New York soon followed, with Charles’ brother Henry and longtime friend V. De Mont Upham controlling the territory within 100 miles of New York City, which included Philadelphia, 93 miles south.
On March 31, 1858, Smith & Morgan conveyed to Upham and Henry Morgan the exclusive right to manufacture bags on their machines “together with all the improvements which maybe hereafter made.” They agreed to pay Charles $300 per year for each machine they used, to be paid quarterly. The contract was executed in the presence of Leonard Whitney, Jr.
The new partners first set up shop in Chatham, New Jersey and then in downtown Philadelphia. In February 1859, they required financing to build two machines for a paper mill customer, and Charles Morgan, together with several of Clinton’s leading citizens, Parker’s business partner, Gilman M. Palmer, architect Joshua Thissell Jr. and Parker’s foreman (and eventual business partner) Archelaus C. Dakin, signed a note for the funds at the Clinton Savings Bank, secured by the machines.
Eighteen months after the initial license agreement, on Oct. 4, 1859, Charles Morgan bought back from Upham and Morgan for $2,000 that manufacturing license, together with two bag machines, and the next day conveyed one half to his brother Henry by verbal agreement. Henry continued the business in Philadelphia and Charles began his preparations to move there with his family.
Smith sold his half of his patent rights to Thurston Priest and Leonard Whitney on January 1, 1859, but retained the right to manufacture bags. This prompted a new agreement between Morgan and the two paper partners. By February 1, 1859, Morgan granted L. Whitney Jr. & Co. the license they had requested for all the New England states, except Connecticut, much of which would have been included in the territory within 100 miles of New York City granted to Upham and Henry Morgan. Territorial lines were thus quickly drawn for the entire Northeast corridor. Whitney and Priest agreed to pay Morgan $600 per year, quarterly, for the license to use four bag machines and $150 for each additional machine they wanted to use.
The machines could produce high volumes. Benjamin Smith in Watertown told Morgan on October 14, 1859 that “he made 187,000 bags last week on the Bag Mach. #1—in 63 hours running time, an average of 2,877 bags per hour & 48 per minute.”
By October, the paper bag business was clearly successful, with licensees as far west as Ohio and Indiana. Morgan was preparing to pursue the business full-time, leaving his position with Bigelow Carpet to move to Philadelphia. Before leaving Clinton, he drew up a summary of his assets and liabilities dated October 1, 1859. Written more for his own information than anyone else, his list of credits and debits has corrections and penciled-in totals in the margin. Many people had made small loans or extended credit to him, including his father ($6.85), partner Benjamin R. Smith ($1.85), his uncle J.B. Parker ($71.35) and a Clinton physician, Dr. George W. Symonds, for a total of $389.61. Certain items were noted as “Pd.” Assets included patent rent from three customers, payment from the Clinton Wire Cloth Company, and rent for his piano, among other sources, totaling $869.60. At least on paper, Morgan’s net worth stood at a healthy $472.40, or close to $12,000 in today’s dollars. Given that the nation was still suffering from the aftermath of the Panic of 1857, when banks throughout New York and New England suspended activity and the economy went into a tailspin, he had good reason to be optimistic about his prospects.
BATTLING INFRINGERS
It didn’t take long for others to see an opportunity for their own profits by making machines similar to Rice’s. This group included William Goodale (also a Clinton resident, but no relation to E.W. Goodale), whose July 1859 patent prompted Rice to sue for infringement.
Together, Morgan, Priest and Whitney hired New York City attorney Edward S. Renwick later that year to represent their interests, investigating the William Goodale patent and applying for a reissued patent, which the Patent Office approved in March 1860 to reflect the new assignees, but continued to refer to it in patent papers as the “Rice patent.”
As the reissued patent noted, Rice had invented “a certain new and useful Machine ... whereby paper bags of a novel and superior form are made cheaper and more expeditiously than by other methods hitherto in use.”
Morgan kept the sheriffs of Middlesex and Worcester counties busy delivering his own notices of infringement. He found a good template to follow—among his papers was an April 1859 notice of infringement sent out by sewing machine inventor Elias Howe, Jr. of nearby Spencer, who had spent eight years fighting for his patent rights against copycat sewing machine manufacturers, including Isaac Singer, finally winning in 1854, but continuing to pursue infringers in succeeding years. Despite Howe’s victory, however, it was Singer’s name that became synonymous with sewing machines.
Morgan’s reissued patent prompted a flurry of letters. In February, May and again in June 1860, Morgan and his partners sent out letters of protest