PublishedJune 19, 2014

What Does Tesla’s Recent Pledge Tell Us About Patents?

In the spirit of fostering an open source movement, Tesla CEO Elon Musk reported last week on the Tesla blog that Tesla would not “initiate patent lawsuits against anyone” who would use their technology in good faith. Tesla, a pioneer in the field of sustainable transportation, drew accolades as well as criticism for their announcement.

Tesla hopes that their announcement will encourage others to support sustainable transportation and stop the “intellectual landmines” that patents can cause. Tesla wants to spur innovation amongst fellow inventors who can, alongside Tesla, address the carbon crisis faced by our country.

While Musk’s announcement may seem like a big deal, it may not be that big for others in the automobile industry. He noted that electric car programs at major car manufacturers “are small to non-existent constituting an average of far less than 1% of their total vehicle sales.” By essentially granting public licenses, Tesla hopes to grow the electric car market and subsequently grow its share in the automobile industry. However, this may change soon as both BMW and Nissan, two of the largest car manufacturers in the world, are reportedly in talks with Musk about helping Tesla expand their charging network stations and subsequently expand their electric car programs as well.

Whatever the intentions of Tesla, Musk’s announcement did, however, remind us about the urgent need for patent reform.

Could Tesla’s recent announcement have shown legislators that even major innovators dislike the current patent system?

Patent reform has been a pressing concern for some time now as patent trolls have increasingly and voraciously been suing startup companies left and right. A study by MIT’s Sloan School of Business, sponsored by the Computer & Communications Industry Association, found that almost $21.7 billion dollars worth of investments to startup companies were forgone by VCs out of fear of being sued by trolls.

The patent system originated when Congress took advantage of the power granted to it in the Constitution to “promote the Progress of Science and useful Arts, by securing for limited Time to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”

Currently, patents are perhaps the broadest form of legal protection an inventor can get on their product. If the USPTO does in fact grant an applicant a patent, the inventor has the exclusive right to make that product for 20 years from the date of filing and has the right to enforce their patent against anyone who infringes on their patent. With such a strong form of protection comes great innovation, but also at a price. Often times, the owner of the product is able to monopolize on the product and patents can suppress innovation in the particular industry.

Tesla’s announcement reminds us that if a prominent U.S. innovator is hostile to patents, maybe something is wrong with current legislation on patents. This begs that question, in what other markets might patents be stifling innovation more than incentivizing creation?

Either way, Tesla’s decision will hopefully bring similar considerations by other large companies and they too will get rid of their “wall of patents.” Going forward, whether critics or reformers like Tesla’s decision, the decision is sure to bring up debate and maybe this is time something will actually change for patent reform.

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