Denayrouze was born on October 1, 1837, at Montpeyroux, Aveyron, France, on the Aubrac plateau. In 1852, at the age of fifteen, he was admitted to the Naval School. He was promoted to lieutenant de vaisseau in 1862, and embarked on an expedition to Cochinchina (present-day Vietnam). He contracted a serious illness which rendered him unfit for service at sea. While recovering in the commune of Espalion, Denayrouze met Benoît Rouquayrol, with whom he took part in several inventions.
Since 1860, Rouquayrol had disclosed three patents for machines designed for mining emergencies, intended to furnish miners with air in case of firedamp or flooding of the mine. Denayrouze investigated the possibility of adapting the pressure regulator and developing it for underwater use. The two men thus designed and patented their "Rouquayrol-Denayrouze diving suit" in 1864. This would be the first diving suit that could supply air to the diver on demand. In the same year, the Imperial French Navy created a similar device.
In February 1865, August Denayrouze created the "Rouquayrol-Denayrouze Society" to commercialize their inventions for sale to both the Navy and to private enterprises. The same year, he created the "French Society for Fish and Sponges Of The Eastern Mediterranean," based in Izmir, Turkey. Two years later, the Rouquayrol-Denayrouze diving apparatus was presented at the 1867 World's Fair and won the gold medal.
Jules Verne, who attended the exposition, discovered the invention with enthusiasm and chose it as the equipment for his fictional Captain Nemo and the crew of the Nautilus in the 1869 novel 20,000 Leagues Under The Sea. Verne gave homage to the inventors by calling out the inventors by name.
In 1869, Denayrouze passed governance of the Society for Fish and Sponges to his brother, Louis Denayrouze, so that he could advance the commercial interests of the diving apparatus in the Eastern Mediterranean. In 1874, August Denayrouze dissolved both societies and created a single "Reunited Society for Mechanical Specialities," and his brother Louis became its director.
Denayrouze died on 1 January 1883, aged 45, of illness.
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