Tesla’s Latest Actions May Change the Face of Patent Laws in the US

A few days ago on the 12th of June, Elon Musk―the CEO of the electronic car company Tesla―made a very bold public statement. In a day and age when patent trolls are taking over the industry and patent lawyers are fighting legislations left, right, and center, the company’s honcho came up with this announcement that said that Tesla will not file a lawsuit against any company that decided to use their technology in ‘good faith’. Whether it was the company’s intention to cause a stir and rethink of the value and use of patents is up for debate, but that Tesla’s announcement has surely made everyone sit up and notice.

Tesla says no stifling innovation and lawsuits - upsetting their attorneys for sure.

Tesla says no to stifling innovation and lawsuits – upsetting their attorneys for sure.

Tesla’s Comments Sound Insane

In the current patent-litigation dynamic that the US industry and its patent lawyers are under, patents are considered incredibly valuable because these allow the patent owners to stop other companies from infringing on their technology. There are also fake litigations filed by non-practicing-entities (NPEs) who horde patents but do not use them and file lawsuits against companies alleging infringement. These NPEs or patent trolls, as they are commonly known, are one of the most important reasons why patent lawyers are so vociferous about new and improved patent laws so that they can better protect their own IP. In this situation, Tesla’s comments about not filing lawsuits for ‘good faith’ users sounds a little blasé.

Tesla Goes the Opposite Route

Apart from the fact that Tesla’s approach to patent does not take into account the nuisance of trolling, it seems to be contrary to the whole purpose of a patent in the first place. Having a patent awards you with a monopoly on a certain technology or a product which can be then kept secret from your competition for the time that the patent is valid. Take Coke’s secret ingredient for their soft drinks; for years the secret recipe was guarded by a patent and even though there are many soft drink brands in the market now, no one can use the recipe formulated by Coke or their trademarks for making their own drinks.

Of course Coke tastes terrible without ice so they probably do not have too much to worry about here.

These exclusive rights on technology allows the inventor to lord over the markets and anyone else who wishes to use the technology has to pay heavy royalties in order to do so. Patents, in a nutshell, are supposed to protect innovations and allow the innovator a certain edge over its competitors. This was what the conventional wisdom of the ‘protect or perish’ market for long until Tesla came along with its shattering news and the idea that protecting innovation is not as important for a business as developing new markets is.

This will not be Tesla.

This will not be Tesla.

Tesla’s Approach Aimed at Opening New Marketing Channels

Tesla is into making electric cars. While the market for conventional fuel cars is around 100 million units per year, zero-emission vehicles like the ones Tesla produces own less than 1% share of the market. The company obviously thinks that at this point of time opening up its technology to other users is the best bet for gaining new markets. As more and more manufacturers use Tesla’s technology to create non-emission cars, the technology will improve and Tesla will gain new markets for its cars.

Tesla also has roadside charging stations for electric car drivers, and if this too becomes a norm in the market then it will only add to the company’s benefit. If other manufacturers pair up with Tesla to create cars that can be charged at Tesla’s stations, the company can make a huge profit just by sharing the technology blueprint for its charging stations with other manufacturers.

Only time will show whether Tesla’s move helps the company gain new ground, but if it does then maybe it is time for other companies to reevaluate their outlook towards patents as well. Well, it just depends on the company, industry, and the violation. Tesla does not have the spare money for lawsuits considering they had to obtain special deals from the tax payer just to get this far.