Elon Musk Launches the Tesla-Patent Commons

About six years ago, a handful of tech companies launched the Eco-Patent Commons.  This initiative to share environmentally friendly patented technologies is administered by the World Business Council for Sustainable Development (WBCSD), a Geneva-based organization that promotes sustainability in business.

Last week, of course, Elon Musk, CEO of Tesla Motors, made quite a splash by announcing on the company blog that the EV maker would “donate” its entire patent portfolio.  To be precise, what Musk said was “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

Although Musk’s move is very much in the tradition of the Eco-Patent Commons, it is more significant and likely to have a greater impact.  The significance of the brand new Tesla-Patent Commons is best understood by comparing and contrasting it with the Eco-Patent Commons before it.  This comparative analysis reveals both major relative strengths and some flaws.

The greatest distinction between the two is in the nature, quality, and breadth of the available patents.  The Eco-Patent Commons is comprised of tiny random slices of technologies developed by an eclectic mix of donating companies.  An entity that wishes to commercially exploit technology in the Eco-Patent Commons would have to locate a donated patent directed to an important innovation, and any business opportunity would have to logically flow from that patented innovation.

Commercial success in this way seems unlikely for two reasons.  First, aside from patent “troll” activity and similar secondary market business models, businesses do not flow from patents.  It works much better the other way round:  innovate, start a business around the innovation, and then, if possible, patent the innovation.

Second, the patents in the Eco-Patent Commons are those which the donating companies had little interest in exploiting themselves (or licensing to others) so the odds are slim that they are directed to important innovations that will be worthwhile for others.

Tesla’s patent portfolio, on the other hand, is large in scope, holistic in its breadth (i.e., supporting established commercial products) and presumably includes the crown jewels of the company.  Everyone knows the technology areas, product areas, and business ventures Tesla’s patents can support.  One can easily envision a number of well-defined businesses successfully selling electric vehicles, advanced batteries, and charging systems based on the freedom to operate provided by the Tesla-Patent Commons.

Keep in mind, though, that no commons can provide 100% freedom to operate.  True, if you manufacture and sell EVs, batteries, or charging systems employing innovations that are entirely coextensive with the claims of Tesla’s patents you won’t be sued by Musk.  However, these are complex technologies.  What if your EV includes Tesla-patented innovations along side other technical features patented by another less commons-y patentee with enforcement proclivities?

Perhaps the possibilities are not so limited.  Maybe instead of the need to match the features of their products to the donated patent claims, budding Tesla-tech businesses could copy the EV maker’s actual products, e.g., manufacture the Tesla Model S under another name.  After all,  the company has been around for a while and, to my knowledge, hasn’t been sued for patent infringement.  So it seems Tesla has the freedom to operate for its existing product lines.

Then the question becomes whether there are any mechanisms besides its patents that confer upon Tesla this freedom to operate.  For example, does Tesla license any of the technologies in its vehicles from other patentees?  If so, a budding Tesla-tech business might need to ask Musk if he would consider assigning the rights under any relevant license agreements to which Tesla is a party.

So the Tesla-Patent Commons is very significant, and unlike any prior (small “e”) eco-patent commons, but the commercial and legal realities of dealing with patents and positioning technological businesses to be free to operate are always extremely complex.

Ultimately, the impact of Musk’s decision may turn on to what extent other such players will be motivated to invest in manufacturing vehicles, batteries, etc. using Tesla’s patented and patent-pending technology with the obvious upside being the proven innovation that technology brings and the down side being no exclusivity, instead of investing in their own R&D and patent protection where the upside may be exclusivity and the down side may be inferior or unproven technologies.

Only time will tell, and I’m sure this author and many other commentators will be watching this closely.