That was the so-called "Patent War". Gaisman outsmarted Gillette's executives in so many ways. This is an exaustive article from the Time Magazine for everybody interested in the dark history of wet-shaving. Prepare for a quite big wall of text:And just for kicks, here is the game changer: The Probak Razor from Autostrop. In the late 20's, Henry Gaisman patented his blade shape to fit this razor, putting the Gillette NEW in serious legal peril. Gaisman's blade patent was nearly identical to that submitted by Gillette a bit later. How could that happen? Industrial espionage? coincidence? Anyway, Gillette tried to fight Gaisman off, but they eventually had to settle, Gillette had been playing funny with the books, and Gaisman took over Gillette.
From the Oct. 27, 1930 issue of TIME magazine: Price of Peace
"In 1895, when I, King Camp Gillette, was 40, I first thought of the safety razor." So, a decade ago, wrote the father of a great company, a great industry. The proud ring in his words was justified. His invention was no haphazard one. For years he had pondered the possibilities of finding some cheap article that would be used daily, and have a constant replacement demand. The growth of Gillette Safety Razor Co. had been fast and sure, accomplished out of earnings. Into all countries had gone packages of blades, carrying the dollar-proud face of King Camp Gillette. Last week he still had reason to be proud. Gillette Safety Razor Co. is the undisputed world leader in the industry. But also justifiably proud was another inventor, likewise a razor-maker: Henry Jaques Gaisman, founder and head of AutoStrop Safety Razor Co. Inc. Last week Mr. Gaisman brought to what seemed a triumphant conclusion the corporate battle between his company and mighty Gillette.
Since early boyhood Inventor Gaisman, a bachelor, 60, has been having brilliant ideas. More than 1,000 of them have been patented. Swivel chairs, men's belts, carburetors have benefited from his inventions. And inventors are still spurred on by the memory of the $300,000 George Eastman paid Inventor Gaisman in 1914-for his writing-on-film patent. But his most profitable inventions have been in the razor field. He has created processes for making blades, has designed blades and razors. In 1906 he founded AutoStrop Safety Razor Co. which soon became important in the industry. Its chief product was the Valet AutoStrop Razor. For years the relations between AutoStrop and Gillette were as between any two competitors. But last winter, as shavers great and small remember, Gillette prepared to market a new razor & blade. And by a strange coincidence, Probak Corp., an AutoStrop subsidiary, was ready with a blade that fitted the new Gillette razor. Thus began the greatest razor-war of all time.
Chronicle of the Battle. The Gillette-AutoStrop battle dates back really to the year 1921 when came an important milestone in the Gillette history: the expiration of most of the Gillette patents. But a few extracts from the course of events in 1930 serves to tell the story of the battle. And the gradual reversal of the position of the stocks of the two companies shows how Wall Street, always eager to forecast, reached a correct verdict.
January 9 Every wheel in the Gillette plant at South Boston stopped at noon. Razor No. 115,272,539 had just been completed. A half hour later the wheels started moving again. Razor No. 1 of the new type was made. Great secrecy marked the brief ceremony. That day Gillette closed at 102½, AutoStrop at 38⅜.
January 14. Mr. Gaisman received further patents on his new blade, assigned them to Probak Corp.
February 7. Chairman John E. Aldred of Gillette: ". . . Rumors have been circulated, mainly in stock market circles, in regard to the Gillette Co. . . . Based upon the advice of our attorneys we are pleased to assure you that the patent situation ... is being developed in a usual and orderly manner and that we anticipate no delay or difficulty." By then, Gillette was $97½, AutoStrop $45.
February 28. Boston News Bureau: "Public response to the new Gillette razor and blade has exceeded expectations by the management."
March 8. Gillette began a $10,000,000 advertising campaign.
March 18. Gillette announced: "We are not only prepared for any legal controversy, but we invite it."
April 2. Probak accepted the invitation, filed suit asking an injunction restraining Gillette from making further blades of the new type, also asked damages on blades already sold. Gillette stock was then down to $912, AutoStrop up to $51.
May 29. Gillette answered by saying Probak's patents were invalid and void. Stock prices: Gillette $87½; AutoStrop $53⅞
July 25. Rumors that there would be a merger on a share-for-share basis. Auto-Strop, earnings up 95% over the corresponding period last year. Gillette, $68½ Auto-Strop, $53.
September 25. The case would come up in December, it was announced. Merger negotiations reported not dropped. Gillette $58¼; AutoStrop $75.
October 16. Plans for the merger announced. Gillette drops to $43!, the next day makes a new low at $38½ AutoStrop strong at $72.
Merger. Though last week's merger plan had yet to be formalized by stockholders' vote, statisticians began to compute the financial ramifications of the deal. Two facts stood out: the cessation of patent litigation is a costly peace for Gillette; Gillette has paid far more to get AutoStrop than AutoStrop is receiving.
In anticipation of the deal, perhaps expecting a share-for-share exchange, Gillette in July and August bought in a large block of its stock at an average cost of about $79 a share. This expectancy, if it existed, was shattered by subsequent events. What AutoStrop actually wanted was share-for-share, to be sure, but it wanted dividends guaranteed so that AutoStrop stockholders could get AutoStrop earnings whatever might happen to Gillette. AutoStrop agreed to take 310,000 shares of a $5 cumulative preferred stock for its growing business, which may earn $2,000,000 this year. Gillette, left with its block of stock and a big paper loss, decided to "reclassify" the block into preferred. A $20,000,000 bond issue was decided upon, to pay off loans made to buy this stock. This issue costs $1,000,000 a year in interest, would be retired should Gillette common sell over $100 again. The new, preferred stock will cost Gillette another $1,550,000 a year in dividends, is convertible into common share for share. These prior charges are partially offset by the reduction of Gillette common outstanding, but the altitude of the price Gillette is paying for patent peace is obviously impressive.
Viewed in the perspective of a long future, however, Gillette is well off indeed.
In obtaining AutoStrop it gets, besides good products and profits, several strategic plants, valuable sales machinery, smart management. More than that, Gillette avoids the costs of a long lawsuit, is totally insured against the calamity that a verdict against the company would have been. To date 14,500,000 of the new Gillette razors, 200,000,000 of the new blades have been manufactured. Should royalties have been awarded to Probak, they probably would have mounted to staggering sums this year, next year, every year that Gillette continued its present razor.
With the razor a huge success from the start, protection was vital.
Probably never answered will be the question that the situation suggests: Did shrewd Inventor Gaisman plan from the first to use the Probak blade to force Gillette to buy AutoStrop? If so, he succeeded brilliantly, with only one consideration not obtained: The greatest name in safety razordom is still King Camp Gillette, not Henry Jaques Gaisman.