On June 12th, 2014 Elon Musk cannon-balled the tech and manufacturing world and got everybody wet. If you haven’t heard, he told the world that if people wanted to use the patents that Tesla had, they were welcomed to. There would be no lawsuits coming from Tesla trying to sue people for using their technology as long as people were using it in “good faith.”
In case you missed “don’t be stupid” class in second-grade, let me reassure you that you are right in thinking that decision makes about as much sense as trying to get ducks to knit. Patents allow a person or company to have a monopoly on the item patented for 20 years. That means no one else can make what you’re making. If they do, you can sue the pants off them and then sell their pants and make even more money. Any way the dice falls, patents secure your revenue.
So why in the world would you give away your patents? Is Elon Musk just trying to do humanity a favor? Maybe that’s part of it, but I really don’t think that’s the case. Tesla is a for-profit company. Elon Musk might be a really kind hearted guy, but somewhere in this crazy scheme is a desire to make money. The question is where?
The Biggest Hurdle to Hurdle
Conventional wisdom says that the highest hurdle that innovative companies face is creating new ideas and holding onto them so no one else can use them. However, some experts think that Tesla’s move shows that Musk thinks the biggest problem his company faces is creating the market for their product.
That makes his decision make a lot more sense. There might be billions of potential customers (that’s right billions) if they can create cheap, electric cars. However, if no one wants to use them, then why bother? If the release of their patents helps develop the market, then their decision starts to make sense. The question then is how does releasing patents help develop a market?
The More the Merrier
The first way that Tesla can get more business by releasing their patents is simply by having other competitors. More competitors aid the development and the advertising of the electric car. If Ford, Toyota, and Honda really went after the electric car market, then we’d probably be looking at the death of gasoline engines. The problem is that those companies haven’t really found the electric car to be that lucrative because no one wants to buy a car that takes 20 hours to charge. Our culture tends to be all about convenience and right now the electric car is anything but. However, if those companies started competing then we might be looking at the electric car “arms race” that could lead to electric cars that could charge faster than Kanye could grab a mic.
The second way that Tesla can make money off this deal is if other car companies use Tesla’s charging technology. Tesla has built charging stations across the States and Europe in order to allow people to take road trips. The stations allow people to get a half charge on their car in twenty minutes. The idea is that when you buy a Tesla, you can charge at these stations for free for the life of the car. If Tesla’s charging stations become the industry standard, Tesla stands to sell more cars. Not only that, but if Shell decides they want in on the electric car business and start putting in charging stations at their gas stations, then you have even more reasons to buy one of Tesla's cars.
Ultimately, it seems Tesla patent release was made in order to kick-start the slow-growing electric car industry. However, Tesla’s patent release could do more than just make Elon Musk some cash. It could revolutionize patents on whole.
Slaying the Patent Trolls
Patent trolls are people who come up with ideas for patents without ever intending to produce them. They wait until someone else starts to manufacture it and then they sue them. They also look at old patents that might be the base of something in a new patent. They then buy the old patent and sue the people with the new patent for infringing on their technology. Not only is it shady, but it makes companies like Apple and Google spend more on patent law suits than their research and development.
People like Mark Cuban have bought shares of companies whose sole aim is to troll patents because he dislikes the way our patent system works. He hopes the patent trolls start winning legal cases in order to show how ridiculous our patent system is. That’s like Luke joining the Dark Side because he wants peace in the universe. Good intentions but you’re helping the bad guys! Increasing the power and influence of patent trolls is not going to hurt the patent trolls. It is going to increase their power and influence!
That’s why Elon Musk’s approach is so cool. Essentially he’s telling everyone, “Keep up with me. I dare you. You can use my ideas but I am going to be two steps ahead of you, and I’m going to make money no matter what you do.” It helps that he has a small fortune, but if all the guys with big ideas and fortunes had the cohunes this guy does then its seems our innovations would start looking more like the Jetson’s than the Flintstone’s.