Failure to Collaborate Kept Households without Reruns for 7 Extra Years
Why would I say this?
This week I saw an interesting television show “Farnsworth vs. Sarnoff” about the invention of the modern version of television, one that’s all electrical. It was a David versus Goliath story that made me want to cheer for the underdog…in my mind at least.
Like many, I had heard about Robert Kearns who invented and patented the delay system for windshield wipers, but ended up in court fighting for money owed to him. However, this was the first time I heard that television also had a contentious start.
The show talked about Philo Farnsworth as the inventor of modern television. He had conceived the critical portions of television when he was only 14, built the first functional TV system at 21 (1927) and had 165 patents to his name when he died.  All incredible accomplishments to be sure.
The wrinkle in this story develops in 1931 when RCA’s David Sarnoff offered to buy Farnsworth’s patents for $100,000, with the stipulation that Farnsworth become an employee of RCA. Sarnoff realized that his radio empire was at risk from this disruptive technology and also that it held incredible monetary potential. 
When Farnsworth refused the offer, Sarnoff began investing sizeable amounts of money and time in the efforts of Vladimir Zworykin, trying to bypass Farnsworth’s patents. At the same time, he put up a significant legal battle trying to invalidate Farnsworth’s patents. 
For Farnsworth, this situation was made even worse because many prospective licensee companies shied away from him fearing reprisals from the deep pockets of RCA. 
Finally in 1938 (after Sarnoff had spent $10 million on television development and legal costs), RCA’s lawyers began drafting a cross-license agreement with Farnsworth. 
Using some back of the napkin math, David Sarnoff might have delayed the adoption of television, one of the most disruptive technologies ever, by up to seven years and created up to $10 million in extra costs to utilize TV technology. Of course, $10 million back then had significantly more buying power than today. As someone who prided himself on being an innovator in the mass adoption of radio, it’s not likely Mr. Sarnoff would want to claim these added costs and delays to his other accomplishments.
So, Why the Delay?
Sarnoff/RCA wasn’t able to act on what should have been a huge opportunity because of its overly strict company policies and corporate pride. Sarnoff was quoted describing the iron-clad policy: “RCA doesn’t pay royalties, we collect them.” 
Part of the delay can also be credited to Donald K. Lippincott, an insightful attorney who created an iron-clad patent portfolio for Farnsworth’s first patent applications in 1926-27. 
I’ve learned over the years that people’s personalities and corporate cultures have a significant relationship to business results and the progression of technology, or the lack thereof.
In this case, David Sarnoff’s bravado combined with RCA’s snobby and outdated corporate policy caused a significantly delayed license arrangement, along with the intended anguish and delays to Farnsworth’s research and development.
Sarnoff’s tactics were intended to push down an underdog to save his radio empire. Ultimately he caused both of them significant delays in getting this disruptive technology to market, costing them both significant amounts of money and seven years of lost opportunity.
Clearly, both Farnsworth and RCA would have been more profitable much earlier by negotiating to pool their knowledge and resources for mutual benefit. And the massive industries that surround television production, programming and advertising could have taken root that much earlier, too.
Here are a few pointers:
- Be open to collaboration — even when there is a culture clash — if it could save you pain, higher legal hurdles, and lost opportunity.
- Invest in expertise. Farnsworth’s choice of Donald K. Lippincott to represent him and draft his patent applications was a very smart choice. While it cost more than writing and submitting his applications by himself, this small investment paid off significantly.
- Recognize when practices or policies are hindering the business plan and take steps to address them, preferably before a significant opportunity lands on your doorstep.
Is there anything in your personality or company culture that is similar to David Sarnoff’s/RCA’s? In retrospect, would you operate differently?
Picture credit: CBS Television, 1966