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Phil's business partners had now invested $60,000 more than they planned. Some were ready to sell the idea to a large electrical company to recoup their investments. But Phil's vision was to file a number of related patents so that companies who wanted to use them would have to license these patents. In the long run this would be much more profitable than selling out so early in the game.
On Sept. 3, 1928, The San Francisco Chronicle described Phil's television as a "queer looking line image in a bluish light which smudges and blurs frequently, but the basic principle is achieved and perfection is now a matter of engineering."
Despite the growing publicity, financial difficulties were ever present and the original investors wanted to cash in. So a stock broker named Jess McCargar suggested they issue stock in the company. The new business was named Television Laboratories Inc.
In New York City, a Russian emigre named David Sarnoff was appointed vice president and general manager of the giant Radio Corporation of America. RCA had made millions by controlling the patents of radio broadcasting. They had purchased the patents of Marconi and other radio pioneers. Now every company that manufactured radio sets paid royalties to RCA, but these patents were due to expire. Sarnoff was most interested in Phil's work.
Sarnoff had learned of another Russian, a Vladimir Zworykin, who had also been experimenting with television. In 1929 he had produced images with a cathode ray tube. Zworykin had applied for patents also, but they had not been accepted. Sarnoff knew that television was the future. So he hired the Russian engineer to invent and patent television for RCA. Zworykin's first assignment was to visit Farnsworth in San Francisco to see what this young man, twenty years his junior, was up to.
Under the pretext of licensing the work, Phil showed him how the Image Dissector worked. Several eyewitnesses heard Zworykin exclaim, "This is beautiful. I wish I had invented it."
While Phil was out of town to see Bell Labs new improved cesium, David Sarnoff himself sought permission from the investors to see Phil's invention. When Sarnoff saw Phil's television working, he quickly offered to buy the Television Laboratories Inc. including Phil's services. George Everson rejected the $100,000 offer.
At this time the "Radio Trust" consisting of RCA, AT&T and GE had pooled their radio patents. Philco Radio Corporation, a smaller company that nevertheless sold a lot of radios, paid the usual royalties as others did. But they saw the opportunity and became the first television licensee. Farnsworth's company would move to the Philco labs in Philadelphia.
Phil's lab crew was out-of-place in its new corporate environment, but they continued to perfect their system. The F.C.C. granted them an experimental license to broadcast over the air. The first receiver was set up in Phil's home and his young son was fascinated with the broadcast of a Walt Disney film "Steamboat Willy." While there were no commercials, there was only the one program and it repeated itself over and over. A few miles away at the Philco lab Farnsworth's crew were manipulating the electronic circuits.
The relationship with Philco was straining to the breaking point. The final straw came when Phil and Pem's second son died before the advent of antibiotics. Grief stricken, Phil and Pem made arrangements to bury their son in their home town of Salt Lake City. Philco, however, would not grant Phil a leave of absence. Pem had to go without him.
The Great Depression was now in full swing, and according to their stock broker, the prospects of selling additional stock in Television Labs was unlikely. Farnsworth said he'd do it himself, if necessary. But whatever happened, he was unwilling to stay at Philco. Farnsworth moved all the equipment he owned back into the Farnsworth living room.
The stock broker offered to sell stock again if Phil would cut his staff drastically. The business was reincorporated as Farnsworth Television. With a core lab crew, the team began reconstructing their work, this time in a laboratory in the suburbs of Philadelphia. Over the last ten years, they had made a great deal of progress. The blurred image was much sharper thanks to their invention of the "sawtooth" waveform. Ghosting was eliminated by the introduction of a horizontal blanking interval. They were now achieving a horizontal resolution of 220 lines and the number of their patents had grown.
Back at RCA, Zworykin had developed a competing video camera tube called the "Iconoscope." RCA intended to claim priority over Farnsworth's "Image Dissector." They wanted to control television just as they had controlled radio. As Sarnoff said in private, "RCA does not pay royalties, we collect them."
The RCA legal guns were quite experienced in these kinds of battles. They attacked the Farnsworth patents in the U.S. Patent Office. Phil was forced from his lab to defend the charges during weeks of testimony. Phil's attorney was also an engineer and asserted that Farnsworth had developed his original idea at the age of 14. And to prove it, they located Phil's old science teacher who came to Washington and sketched the idea Phil had drawn on the blackboard back in his school days.
RCA did not counter with evidence that Zworykin had designed such a tube earlier. The Patent Office decided, "Priority of invention is awarded to Philo T. Farnsworth." But RCA could appeal and did so in such as way as to strain Farnsworth's legal bills to the limit. The legal maneuvers would continue for years.
In the summer of 1935, the first public demonstration of television took place at the Franklin Institute in Philadelphia. Farnsworth was given funds to build a brand new system for the Institute. People lined up for blocks to see this new wonder. One camera was placed near the door. When people entered, they saw themselves on the nearby "receiver," the bottom of a ten gallon jug.
Inside, a second camera transmitted a variety of programming, perhaps foretelling what we see today. It included athletes, vaudeville and a gaggle of eager politicians. The event was originally scheduled to run for ten days, but popular demand kept it open for three weeks. This event attracted international attention.
Despite the decision of the Patent Office, RCA was still litigating the Farnsworth patents. This caused needed research and development monies to be diverted to legal fees. Since the patents were in contention, Farnsworth was unable to sell licenses or collect royalties. One exception was a license sold to the BBC which helped keep the struggling company afloat.
Farnsworth's fame spread as a 1936 Collier's Magazine article dubbed him "Phil the inventor." The article predicted that television would find its way into American homes by the following Christmas. Such predictions were becoming common, but were unfounded because the patents were still being contended by RCA.
By this time Farnsworth's attorney had filed an additional 35 patent applications. Members of the Farnsworth "lab gang" had been responsible for 14 of the patents. This was the kind of team work that had helped them overcome the odds. In additional to their continuing work, Phil and the others now had to play host to a growing number of scientists and others who visited their lab in the suburbs of Philadelphia.
The investors wanted to sell out to RCA. Phil had been pushing himself for ten years now. His one licensee in England was in trouble. Phil and Pem left Philadelphia for England. When they returned, they found their lab team completely demoralized. Jess McCargar, the stock broker, had sent a money man to manage the Philadelphia lab. When Phil confronted Jess, Jess gave him an ultimatum to drastically cut the payroll. Jess won and took it a step farther by firing everyone.
Much later, a group of the Phil's core supporters met to see if they could find other ways to raise money. Much of the ownership and controlling power of the company had shifted to a board of directors led by a Wall Street investment firm. This firm had financed much of the capital needs since the beginning of the '30s. Phil met with the board and negotiated a new beginning.
The firm would arrange for financing and the Farnsworth company would have it's own factory to manufacture and sell radios. This would buy time until there was a market for television sets.
Other companies, too, were positioning for the television bonanza that was soon to come. These included Philco, DuMont, Zenith, and Emerson. The newly formed F.C.C. was given the task of allocating space in the electromagnetic spectrum so that television and radio broadcasts would not conflict.
The F.C.C. would also set standards for signal generation including scan and frame rates. These standards would enable one set to receive broadcasts from a number of different stations. Most observers believed that RCA would dominate this new industry as it had dominated the radio industry.
Sarnoff had spent millions to achieve this goal. AT&T was the other major player. Their Bell Labs had discovered the "coaxial cable" which was ideal for sending television signals from city to city. The F.C.C. granted them permission to run an
experimental cable from New York To Philadelphia. AT&T was ready to wire America.
It was later discovered that AT&T and RCA had cross-licensed each other's patents. The agreement gave each the power to use the other's patented work as long as they didn't compete. This notorious "Radio Trust" was somewhat modified by anti-trust proceedings in 1932, but many of these cross-license agreements are still in use today. To add television to this series of cross-licenses, RCA had a problem - the patents were held by Farnsworth.
Then the RCA engineers found a solution. They had completely redesigned the Iconoscope so that it produced better pictures than it ever had. The RCA legal team told Sarnoff that this was legally an original RCA creation. Patents were filed. Sarnoff vowed to launch commercial television at the 1939 World's Fair.
Phil Farnsworth was invited to speak to the F.C.C.. He welcomed this because he felt he had always been well-treated by the F.C.C. This time the commissioners wanted his opinions on the future of this new industry - television.
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