What Tesla's Patent Giveaway Really Means

Here at Technoport we’re big fans of the South African-born Canadian-American head honcho at Tesla, Elon Musk. He’s a great example of how an entrepreneurial mindset can disrupt virtually any industry out there, from financial services (PayPal) to rocket technology (SpaceX).
tesla-patents

Here at Technoport we’re big fans of the South African-born Canadian-American head honcho at Tesla, Elon Musk. He’s a great example of how an entrepreneurial mindset can disrupt virtually any industry out there, from financial services (PayPal) to rocket technology (SpaceX).

But even we raised a collective eyebrow when a few weeks ago, Musk announced that Tesla will allow its technology patents for use by anyone in good faith, in a bid to entice automobile manufacturers to speed up development of electric cars.

“Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology. Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day. We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.” – Elon Musk

The announcement came after a time of rapid growth for Tesla, not least here in Norway, during which they invested heavily in research and patented a lot of key technology elements. In order to understand the strategic decision, I turned to Trondheim’s IP expert and “friend of the startups” Tommy Dahlen, partner at ADEB, first asking what the announcement actually means in practice:

“In effect, all competitors are now free to obtain and utilize any technological edge Tesla might have “encapsulated” in their patent portfolio and – in theory – establish a more level playing field in the manufacture and sale of electric vehicles”, said Dahlen.

Although the entrepreneurial spirit of coworking and collaboration seems to be behind the move, Dahlen believes the strategy from Tesla is clear:

“I find it hard to believe that Tesla ever saw – at any given time – its current inventions (as embodied in patent applications) as its key strength. Their vision is to thrive in the marketplace with what they have not yet even contemplated. A fast moving company, with the smartest people available, will be less inclined to think about ”static” patents as key assets moving forward.”

“It is likely that this in most respects is a market specific, strategic and business driven decision that could prove highly benefitial for Musk and Tesla and support their long term success in his particular market.”

“Opening the ”vault” on their current key technology will probably enable competitors to faster and more efficiently make better vehicles and ensure a quicker market penetration of electric cars. Tesla, as all of those in this market, know that penetration of electric cars in the global market is vital for maintaining market position against emerging alternatives like the hydrogen vehicle. Therefore, it seems that the primary driver is not neccesarily to ensure its own market share in an existing market, but simply to grow the market itself and reap the benefits by making more desirable cars than their competitors based on things that have not yet been invented and – obviously – capitalizing on their extremely strong brand recognition.”

“From an IPR-strategic perspective there are a number of lessons to be learned here. One key takeaway is that patents and other proprietary positions could effectively limit the potential for growth of emerging product markets, by slowing market penetration and widespread customer acceptance, thus leaving the door wide open for those who plan to introduce alternative solutions to the same problem.”

Further reading:

  • What’s Driving Tesla’s Open Source Gambit? (Forbes)
  • Honda, GM, Dismiss Tesla Electric Car Patent Giveaway (Transport Evolved)
  • Patents Are Eating the World and Hurting Innovation (Bloomberg)

It remains to be seen what impact this announcement will have on the electric car industry, but any R&D-based industry where patents and lawsuits are commonplace. Can you imagine a world where Apple and Samsung aren’t wasting billions suing each other, and instead making great, affordable phones?

What impact do you think this announcement will have?


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