On June 12, 2014, Tesla Motors, Inc. released its patents to the public, and announced that it wouldn’t sue anyone who infringed on its hundreds of patents. This type of release is essentially unheard of in not only the automobile industry, but also any industry. This release could either mark a revolutionary period in technological innovation, or it could be the end of Tesla as a result of its own hubris.
On a basic level, a patent provides the owner or inventor of the patent exclusive rights to use the patent for 20 years. This 20-year period is extremely advantageous, and allows the inventor to create a monopoly by excluding all interested parties, or to obtain extensive royalty and licensing fees for the use of the patent. In exchange for the exclusive rights, the patent owner must register the patent, and make the information available to the public. However, the public may not use the patented information until the term of the patent expires. Therefore, it should be critically clear that releasing patents into the public domain is an extremely risky move. By releasing its patents, Tesla allows any competitor or member of the public access to its technology, and can no longer create a monopoly or request royalty or licensing fees.
While this is certainly a risky move, Tesla’s official position is posted on their website. Tesla’s ‘secret plan’ has always been to create a high performance electric car that reduces or even nullifies carbon emissions. In their mission to achieve this, Tesla began using patents not to achieve a monopoly, but instead to prevent large companies from using their already-established manufacturing processes to overwhelm the small company. However, since Tesla’s inception in 2006, these large manufacturers have generally ignored the electric car industry. Therefore, Tesla finds its real enemy to be the stream of gasoline-fueled cars produced every day, and keeping its patents constitutes an act contrary to that goal. Instead of fighting these competing manufacturers, Tesla embraces them, and encourages the innovation and competition that will likely result.
While Tesla’s cause may be noble, businesses need capital to survive, and several other theories could explain the unexpected release of Tesla’s patents into the public domain. The first explanation might be to support Tesla’s proposed ‘giga factory’ that will recycle and repurpose old batteries. By releasing their patents, Tesla may expect a large influx in demand for its own batteries. Competing companies are now able to produce batteries based on Tesla’s patents, but by this point Tesla has industrialized and streamlined the process, and demand for its own types of batteries may rise.
A second explanation could be that Tesla desires electric cars to become the industry standard. If gasoline-powered cars are no longer manufactured, Tesla may become a dominant force in a narrow industry. This may increase demand from Tesla, the company that enabled the industry to thrive. A third explanation could involve a simple public relations stunt. While Tesla generally has not struggled with sales, the release of their patents made international news. Consumers who haven’t heard of Tesla certainly have now, and may be more willing to invest in its products.
Yet another theory may derive from the company’s dislike of the patent process in general. In the post by Tesla’s CEO, Elon Musk, Musk illustrates that ‘technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers.’ Instead of relying on the exclusive rights granted by the patent process, it appears that Tesla intends to rely on the ingenuity of its engineers to maintain Tesla as an avid competitor.
Whatever the reason, Tesla is once again on the revolutionary side of the technological industry. The release of Tesla’s patents into the public domain, if nothing else, means that Tesla has enough confidence in its own product and engineers that it openly invites competition. While this confidence may ultimately be its downfall, Tesla remains a strong forerunner in the environmental automobile industry. If you have $100,000 to spare and want to invest in an extremely environmentally friendly vehicle, Tesla’s confidence, business model, and products certainly warrant a second look.
Special thank you to Rexford Brabson!!
http://www.freedigitalphotos.net/images/view_photog.php?photogid=4036 photo by Victor Habbick