In 1862 while at Oberlin, Gray met and married Delia Minerva Shepard.
In 1865 Gray invented a self-adjusting telegraph relay that automatically adapted to varying insulation of the telegraph line.
In 1867 Gray received a patent for the self-adjusting telegraph relay and in later years he received patents for more than 70 other inventions.
In 1869, Elisha Gray and his partner Enos M. Barton founded Gray & Barton Co. in Cleveland, Ohio to supply telegraph equipment to the giant Western Union Telegraph Company. The electrical distribution business was later spun off from Western Electric and organized into a separate company, Graybar Electric Company, Inc.. Barton had been employed by Western Union to examine and test new products.
In 1870 financing for Gray & Barton Co. was arranged by General Anson Stager, a superintendent of the Western Union Telegraph Company. Stager became an active partner in Gray & Barton Co., which moved to Chicago. Gray moved from Ohio to Highland Park near Chicago and remained on the board of directors. But he gave up his administrative position as chief engineer to focus on inventions that could benefit the telegraph industry. Gray's inventions and patent costs were financed by a dentist, Dr. Samuel S. White of Philadelphia, who had made a fortune producing porcelain teeth. White wanted Gray to focus on the acoustic telegraph which promised huge profits to the exclusion of what appeared to be unpromising competing inventions such as the telephone. It was White's decision in 1876 to abandon Gray's caveat for the telephone.
In 1870, Gray developed a needle annunciator for hotels and another for elevators. He also developed a telegraph printer which had a typewriter keyboard and printed messages on paper tape.
In 1872 Western Union, then financed by the Vanderbilts and J. P. Morgan, bought one-third of Gray and Barton Co. and changed the name to Western Electric Manufacturing Company of Chicago. Gray continued to invent for Western Electric.
In 1874, Gray retired to do independent research and development. Gray applied for a patent on a harmonic telegraph which consisted of multi-tone transmitters, each tone being controlled by a separate telegraph key. Gray gave several private demonstrations of this invention in New York and Washington, D.C. in May and June 1874.
Gray was a charter member of the Presbyterian Church in Highland Park, Illinois At the church, on December 29, 1874, Gray gave the first public demonstration of his invention for transmitting musical tones and transmitted "familiar melodies through telegraph wire" according to a newspaper announcement. This was the first electric music synthesizer using self vibrating electromagnetic circuits that were single-note oscillators operated by a two-octave piano keyboard. The "Musical Telegraph" used steel reeds whose oscillations were created by electromagnets and transmitted over a telegraph wire. Gray also built a simple loudspeaker in later models consisting of a vibrating diaphragm in a magnetic field to make the oscillator tones audible and louder at the receiving end.
On July 27th, 1875, Gray was granted patent 166,096 for "Electric Telegraph for Transmitting Musical Tones" (the acoustic telegraph).
Because of Samuel White's opposition to Gray working on the telephone, Gray did not tell anybody about his new invention for transmitting voice sounds until Friday, February 11, 1876 when Gray requested that his patent lawyer William D. Baldwin prepare a "caveat" for filing at the US Patent Office. A caveat was like a provisional patent application with drawings and description but without claims.
On the morning of Monday February 14, 1876, Gray signed and had notarized the caveat that described a telephone that used a liquid microphone. Baldwin then submitted it to the US Patent Office. That same morning a lawyer for Alexander Graham Bell submitted Bell's patent application.
The caveat allowed an inventor to delay filing the more expensive application, while still establishing priority of invention. If a patent application for the same invention was later filed by a different person, the patent office would declare an interference and contact the first person and allow him or her to file a substitute application within three months. When Gray was notified through Baldwin, his lawyer, of this interference, Baldwin advised Gray to abandon his caveat because he said Bell had invented it first and had it notarized earlier than Gray. This reinforced White's opposition to Gray's work on the telephone. When Gray agreed to abandon his caveat, the examiner granted the patent to Bell.
Contrary to the popular story, Gray's caveat was taken to the US Patent Office a few hours before Bell's application. But the filing fee for Gray's caveat was entered on the cash blotter hours after Bell's filing fee which led to the myth that Bell had arrived at the Patent Office earlier. Bell was in Boston on February 14 and did not know this was happening until he arrived in Washington on February 26. Whether Bell's application was filed before or after Gray's caveat no longer mattered, because Gray abandoned his caveat and that opened the door to Bell being granted US patent 174,465 for the telephone on 7 March 1876.
Although Gray had abandoned his caveat, Gray applied for a patent for the same invention in late 1877. This put him in interference with Bell's patents. The Patent Office determined "while Gray was undoubtedly the first to conceive of and disclose the [variable resistance] invention, as in his caveat of February 14, 1876, his failure to take any action amounting to completion until others had demonstrated the utility of the invention deprives him of the right to have it considered. Gray challenged Bell's patent anyway, and after two years of litigation, Bell was awarded rights to the invention, and as a result, Bell is credited as the inventor.
Bell's patent was still disputed because there had been rumors that the patent examiner allowed Bell to see Gray's caveat and allowed Bell or his lawyer to add a handwritten margin note describing an alternate design identical to Gray's liquid microphone design as opposed to Bell's design which required customers to shout into Bell's voice-powered transmitter/microphone. But the courts rejected this issue as Bell's original application has no such handwritten modifications, and the material in question initially resulted in a finding of interference against Bell.
Gray displayed his telautograph invention in 1893 at the 1893 Columbian Exposition and sold his share in the telautograph shortly after that. Gray was also chairman of the International Congress of Electricians at the World's Columbian Exposition of 1893.
Gray conceived of a primitive closed-circuit television system that he called the "telephote". Pictures would be focused on an array of selenium cells and signals from the selenium cells would be transmitted to a distant station on separate wires. At the receiving end each wire would open or close a shutter to recreate the image.
In 1899 Gray moved to Boston where he continued inventing. One of his projects was to develop an underwater signaling device to transmit messages to ships. One such signalling device was tested on December 31, 1900. Three weeks later, on January 21, 1901, Gray died from a heart attack in Newtonville, Massachusetts.
As of 2006 no book-length biography has been written about the life of Elisha Gray. An Oberlin physics department head named Dr. Lloyd W. Taylor began writing a Gray biography, but the book was never finished because of Taylor's accidental death in July 1948. Dr Taylor's unfinished manuscript is in the College Archives at Oberlin College.