Samuel Slater and the American industrial revolution: trade secret misappropriation then and now

For Kat readers who like to think about the misappropriation of trade secrets and know-how in terms of a black and white morality play—where the Chinese are systematically purloining industrial and cyber information (or they are not), the Americans respect the trade secrets of others (or they do not), and Edward Snowden is an honorable whistle-blower (or he is a scoundrel)—then this blog post is not for you. But if you want to consider the moral ambiguity of trade secret protection and exploitation, especially where national interests are at stake, read on. What follows is the tale of the man whom US President Andrew Jackson called “The Father of the American Industrial Revolution” for bringing the factory system to early 19th century America, while at the same time he was known in England as “Slater the Traitor”. The story of Samuel Slater (1768-1835) shows that, as far as trade secret protection and exploitation are involved, the ancient words of Ecclesiastes/Kohelet (1:9) are still valid:

“That which has been is that which will be, and that which has been done is that which will be done. So there is nothing new under the sun.”

Slater was born in Derbyshire, England, and at the age of 10 began to work at a cotton mill of Jedidiah Strutt, whose device used the water frame that had been developed by legendary inventor Richard Arkwright. At the age of 16 and upon the death of his father, Slater was indentured as an apprentice to Strutt. It is said that, by the age of 21, Slater had thoroughly learned both the management and technical requirements of cotton spinning. Instead of staying with Strutt, however, Slater chose to move to the newly created United States of America, having seemingly heard that there was great interest in developing such machines there as well. The problem was that British law forbade exporting the designs of the machines (recalling the Chinese attempt, hundreds of years before, to prevent information about the silk trade to leave the country).

It appears that Slater did not contravene that law. Instead, he committed to memory as much as he could about the machine and its operations. Armed with this knowledge, he set out for New York in 1789. There, he made contact with a group of industrialists in Rhode Island, who sought to manufacture cloth using spinning wheels, spinning jennies, and frames with the aid of water power. To this end, they had acquired a 32-spindle frame described as “after the Arkwright pattern”, but they did not succeed in operating it. Enter Slater, who in 1970 who made the following claim before the industrialists –

“If I do not make as good yarn, as they do in England, I will have nothing for my services, but will throw the whole of what I have attempted over the bridge.”

Slater went about to make good on his promise, as described in Wikipedia as follows:

“Slater knew the secret of Arkwright's success - namely that account had to be taken of varying fibre lengths - but he also understood Arkwright's carding, drawing, and roving machines. He also had the experience of working with all the elements as a continuous production system. During construction, Slater made some adjustments to the designs to fit local needs. The result was the first successful water-powered roller spinning textile mill in America. Samuel's wife, Hannah (Wilkinson) Slater, invented a type of cotton sewing thread, and in 1793 was the first American woman to be granted a patent. “

His brother, John Slater, joined him in the US in 1799, having worked as a wheelwright in England. One can surmise that John Slater had acquired knowledge and know-how in this field and perhaps directly regarding the spinning wheel. Slater also applied principles of management that he had learned from Strutt and Arkwright to institute the company-town approach to industrial organization, based on utilizing the family as the basic unit of manufacture (children from 7-12 years of age were the factory’s first employees).

As a result of Slater’s efforts, he established several factories and his net worth reached $1.2 million at the time of his death in 1835 (this amount was estimated to be 1/1312 of the entire GNP of the country). At the national level, Slater’s efforts spawned numerous adapters. As a result, despite the Embargo of 1807, which cut-off imports from England, and the effects on trade due to the War of 1812 between England and the US, by the end of the war in 1815, within 30 miles of Providence, Rhode Island, it is estimated that there were 140 enterprises engaged in cotton manufacture, employing 26,000 workers and having over 130,000 spindles in operation. Due in material part to Slater’s efforts in the early 1790s, by 1815 it is fair to say that the industrial revolution had taken hold in the US.

What does Slater’s saga tell us about today? Then, as now, trade secrets and know-how were valuable company assets; then, as now, while blatant attempts to misappropriate drawings and other physical embodiments of trade secrets can be managed, the broader know-how and skill set that employees carry with them are much less likely to be subject to regulation. James Pooley has emphasized the importance of cultural and moral norms in determining the scope of what is considered proper behavior with respect to trade secrets. There is no better example than the story of Samuel Slater—an icon in the history of US industry, but a prominent member of the rogue’s gallery of disloyal Englishmen. There is no doubt that Slater made use of trade secrets and know-how, which he had obtained during his apprenticeship with Strutt. As for “misappropriation”, however, it depends whom you ask, even 200 years later.