Tesla patents offer shows that patents a strategic asset even without going to court

Tesla patents - Elon Musk with Tesla Roadster

Last month, Elon Musk, the CEO of Tesla Motors, announced that the electric car company will be making Tesla patents available to other companies that want to use them. Specifically, he stated that “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology”.

Musk explained the move in both altruistic and business terms. First, he explained that Tesla’s mission is to advance transportation technology beyond the combustion engine, but that if Tesla “clear[ed] a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal”.

Musk also articulated a potentially compelling business argument for opening up at least parts of the Tesla patents portfolio. Though Tesla was initially concerned with companies taking its innovations and research to build competing products, Musk notes the real obstacle to Tesla’s success is the much larger combustion-engine car market. “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,” he notes.

Allowing free use of Tesla patents might then address some of the shortcomings that electric cars face. Not only can this help Tesla collaborate with other electric car makers in developing new technologies, but it may give the company a leadership role in developing standards that can apply to all electric cars and parts. For example, Tesla’s patent sharing scheme may help to expand the network of electric car charging stations. And perhaps more importantly, sharing its patents may help to put Tesla’s own technology and its standards (for example, chargers and plugs designs that fit and work with Tesla vehicles) into these stations. Given that one of the biggest shortcomings of electric cars is that their range is severely limited by the inability to easily refuel on long trips, this can be a huge win for Tesla, even if it means “giving away” any patented technologies it developed for car charging.

And of course, beyond the technological and business benefits, the move has largely been a public relations victory for Musk and Tesla. While a big part of business involves the hard reality of sales numbers and cost projections, a strong brand and reputation for innovation can be an incredibly valuable asset, especially in high-tech industry.

The world will be looking closely at how the Tesla patent move move will pan out, and indeed, much of it will depend on the details. For example, Musk has already explained in a conference call that Tesla is not making its entire patent portfolio available, but will start with a few hundred and then move to open up more. And you can be sure that potential licensees will be examining the actual licensing terms and conditions very closely. But regardless, Musk is demonstrating that patents can be incredibly valuable, even if you do not actually enforce them.

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