Introduction The World Trade Organization (WTO), via the TRIPS agreement, has set out various governing…
On June 12th, 2014, Elon Musk, CEO and Chief Product Architect of electric car company Tesla Motors announced that Tesla Motors will let other companies use its inventions under an open-source inspired agenda at the company. This is how Elon Musk put it in his blog post- “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” This initiative came as a huge surprise to the technology space and got a lot of people thinking. Considering Tesla’s exhaustive Patent portfolio, this move came as a bigger surprise to some, as the company holds the largest number of Patents in the electric vehicle industry having pioneered the technology and having gained constantly improved efficiency in process and technology in the industry. Tesla pioneered innovations lowered cost and increased the safety of battery packs. Its cars recharge much faster than others on the market, thanks to the connector, software, and power-management advances. Now this public company will offer these novel technologies to its rivals and ask nothing but goodwill in return.
Tesla has set the industry standard as far as their technology is concerned, which is quite evident from the hundred of Patents they hold and a number of applications pending. The question though arises that why would they open-source their Patents for competitors to use after having spent huge resources in the process. There is more than one perspective to the argument though. This was probably a step Tesla Motors was contemplating and waiting to initiate once they feel no threat from competition. From a competition standpoint, Tesla’s place is secure. “What we are doing is a modest thing,” he said. “You want to be innovating so fast that you invalidate your prior patents, in terms of what really matters. It’s the velocity of innovation that matters.” As long as Tesla keeps inventing and pushing the limits of the technology, it will remain ahead of rivals.
According to Tesla Motors opening up the patents around the charging technology could pave the way for important partnerships and collaborations. Musk has spoken to executives from BMW about sharing the cost of building recharging stations and creating a common infrastructure. Tesla’s nationwide network of recharging stations and its plans to build huge battery factories strengthens Musk’s point of view. Tesla’s planned Giga factory, due to start production in 2020, will be the biggest battery-making facility in the world. At peak production, it alone will create 500,000 lithium-ion packs a year, more than all batteries produced worldwide last year. That’s more than enough to fuel the competition. No other automaker is planning these types of investments in electric cars. The rate of innovation in the electric car industry when you look at Tesla’s competitors does not in any way match Tesla’s progress. Musk would like to see the industry focus shift and would want automobile manufacturers to invest more heavily in the electric car business, and change their thought process from treating electric vehicles as a hobby to making them a top priority. This could be one of the objectives behind taking such a drastic step to promote a culture that is more environmentally friendly and realizes the pace at which the climate change situation could drastically affect life in the near future, apart from being a culture that seems to be extremely business-friendly as well.
An interesting analogy can be drawn when we think of electric cars in terms of smartphones. Tesla, which has been long compared with Apple, with its sleek design, luxury prices, and chargers that exclusively plug into Apple products, now wants to become open-source like Android. Like the micro-USB chargers that fit Android and Blackberry smartphones, all compatible cars could use Tesla’s superchargers. That way, other companies will use and enlarge Tesla’s existing network of 100 charging stations that currently dot a path across the continental United States, making it more and more feasible to swap fuel-burning cars for battery-electric ones, even for long-distance travel. Also considering the electric cars account for less than 1% of the total cars manufactured and sold, this decision from Tesla seems like a smart strategy to encourage electric car manufacturing, get more players in the business and initiate profitable collaborations.
The reaction received from Tesla by the big 3 car manufacturers has been interesting though. General Motors Co. and Fiat Chrysler Automobiles haven’t reached out to Tesla, while Ford Motor Co. didn’t comment directly on the matter.
Although multiple reports said BMW inquired about the patents, industry analysts say most automakers find Tesla battery technology outdated or not compatible with their own programs, but would be open to collaboration on other parts like charging stations in the future. In a June blog post, Musk said, “If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal.” This sentiment was not strongly felt by a number of top automobile companies. The value, some analysts believe, may lie in Tesla’s charging stations. Tesla in June opened its 100th Supercharger station for its electric Model S car. The stations can charge an electric car in about 20 minutes, about 16 times faster than other public stations.
Detroit’s automakers said they’re open to working with other car companies. “We encourage the adoption of innovative technology across the industry,” Ford said in a statement. “We are the first and only automaker to have dedicated open-source hardware and software platforms, Smart Device Link and OpenXC.” Ford has a Focus Electric vehicle that’s powered by a lithium-ion battery, as well as C-MAX and Fusion hybrids.
GM has three plug-in electric vehicles: the Chevy Volt, the Chevy Spark, and Cadillac ELR. “We have not talked to (Tesla) about the patents,” said Kevin Kelly, GM’s manager of electrification communications. “We don’t have anybody looking at those right now. It’s not something that’s on the front burner for us to look at.” Still, Kelly didn’t rule out the use of shared technology in the future. “I think anything that can help to advance the adoption of electric vehicles is a positive,” he said.
“While Chrysler Group’s powertrain strategy includes vehicle electrification, a technology we have successfully demonstrated to date, we have no immediate plans for such outreach,” Chrysler said in a statement.
Gloria Bergquist, the spokeswoman for the Alliance of Automobile Manufacturers, said, “It’s such a competitive industry, that if anyone can find a benefit in sharing info, they will do so.”
If other manufacturers use Tesla technology and make cars that could plug in at Tesla Superstitions, Musk’s company stands to make a fortune simply from giving away its blueprints to competitors. This explains the strategy from purely a business standpoint ignoring other theories that this position is taken by Tesla in good faith for society at large. While the consequences of the initiative would definitely help society at large, the reason for Tesla going ahead with the bold move is a subjective matter.
Sun Microsystems (ORCL) once made a similar intellectual-property move in the computer world. Known for its pricey, proprietary software, Sun opted to open-source all its products. The decision was a result of hard times faced by Sun and was looking to generate interest in its products to revive the company.
Tesla is in quite a different situation. Its share price has been rising for a year helped by the excellent response received by the Model S. That car, just the second made by Tesla, has already swept the automotive awards, including top safety and customer-service ratings. Next year, Tesla plans to begin shipping the Model X, a sports-utility vehicle.
Considering Tesla’s excellent rate of innovation, further improving its own Patented technologies sooner than you would expect, their strategy has caused one to rethink patent terms. Technology and software have shorter life spans than most products in terms of their market value. In industries whose technology will be much different in a couple of decades, a twenty-year patent term is of little use to companies like Tesla. The benefit to such a long term is enjoyed by Patent trolls who can use old patents and subjectively argue them as prior art that anticipates genuine inventions.
Having said that, just because Tesla has decided not to sue good-faith users of its patents does not mean the company will not face litigation from patent trolls. This kind of mentality would kill the mere purpose of existence of patent trolls who hunt for older patents on technology still used in today’s products, including automobiles, and contribute heavily to the rising number of Patent litigations seen in the industry today. While Tesla’s initiative will provide limited relief to automotive companies from a Patent litigation perspective, only time will tell how well Tesla’s invitation to others to use its technology will work.
NOTE: Quoted text taken from certain sources such as ‘The Detroit News’
About the Author: Mr. Ankur Sehgal, Patent Associate at Khurana and Khurana and can be reached at [email protected].