In mid-June CEO Elon Musk made a surprising announcement about his high-tech electric car company, Palo Alto, California–based Tesla Motors. Or, rather, that announcement would have been surprising had Musk not mentioned his frustration with patents in the past, or if there hadn’t been a little bit of industry buzz in the preceding days that Musk was up to something. Conjecture circulated that Tesla was about to release all the patents related to its electric charging stations. But no one quite foresaw that it would release all of the patents related to its electric cars, period.
The decision seems crucial to Tesla’s future, and could signal a strong shift in both the automobile and technology industries. Why did Musk do it? And what might happen next?
It seems important to point out that as Musk and Tesla go, so may go the world of technology. Tesla cars — particularly the sporty Model S — are a potent symbol of the tech lifestyle and its values: innovation, sustainability, design. An early investor in PayPal, the South African–born, Canadian-American Musk built his first computer game at 12 and has since acquired more prestige and influence than almost any other futurist, founder or executive in Silicon Valley.
Just last year Musk released designs for a high-speed train between Los Angeles and San Francisco — an unpatented speculative system called the Hyperloop, which he “gave away” because he was too busy to make it himself. More recently, Musk ignited a battle between Tesla and several different states for the right to sell cars directly to consumers, hacking away at the space previously occupied by conventional dealerships. And that’s saying nothing about Musk’s work with SpaceX, the Hawthorne, California–based company he co-founded and whose stated goal is to spread human life to other planets.
Musk is a classic disrupter (to use the tech slang that has recently come in for its share of knocks in the past few months by the New Yorker and other publications entrusted with defending the language from complete degeneration into 140-character packets). He makes decisions that run counter to established wisdom — and purposefully. Now he has decided that patents dog innovation. Previously, Musk has compared filing a patent to holding “a lottery ticket to a lawsuit.” In the blog post that announced the company’s decision, he calls patents “intellectual property land mines” laid to “inhibit others.” Anyone who wants to make “good faith” use of Tesla’s technology is now invited to do so.
Leaving aside the question of what good faith might be, what’s at stake here? Competition depends on the ability of companies to protect their creations from duplication —often by those who had to invest none of the expensive up-front capital costs in research and development that the original inventor had to overcome. Whereas it might cost pennies to produce a drug once its formulation is known, discovering that formulation in the first place often costs billions of dollars — and, so the argument goes, who would ever be incentivized to spend those billions up front if they knew they could never even recover those costs once forgers waiting on the sidelines happily take those formulations and sell them for a pittance. That’s the reason for the existence of the U.S. Patent and Trademark Office and its hundreds of foreign relatives.
But Musk has explained that he now feels patents can hold inventors back and that the patent system was designed for the protection and entrenchment of much larger companies, at the expense of innovators. Google and Apple spend a large amount of energy and money defending their portfolios — they also buy companies to acquire those companies’ patents, often spending millions to avoid lawsuits down the line. Among software companies, Oracle Corp. is particularly famous; its founder, Larry Ellison, is known as an archetypal “patent troll,” meaning that his company makes money by suing other companies that come even the least bit close to building something that looks even the slightest bit as if it might owe something to a patent held by Oracle.
Musk would like to be a kind of businessman different from Ellison. As a business decision — and not as pure philosophy — the release of Tesla’s patents surely has to do with the company’s fear that it will be outcompeted not in its own category, by people who steal its technology, but by major manufacturers that haven’t yet invested anything at all in building electric cars. There just aren’t enough charging stations in the U.S. to make owning an electric car as convenient as filling up the tank. Though Musk did recently exhibit a system for instantly and automatically replacing a spent Tesla battery with a full one, charging also takes time. It makes a Tesla far less desirable than any car that runs on gasoline in any proportion, including highly efficient vehicles like the Toyota Prius.
What Musk must do is find a way to build out the network of charging stations available for electric vehicles like Tesla’s. Even a man who builds spaceships can’t undertake that kind of project alone. It seems clear that by giving away a complete set of instructions for manufacturing its cars — not just superficial details and geeky pleasures like the wing door designs for its forthcoming SUV but also important components for batteries and chargers in particular — Tesla is wagering that any decrease in its market share will be meaningless when viewed against increasing incentives for manufacturers to increase the overall size of its market. In other words, Tesla is tired of playing alone and wants to attract competitors into the market. Together they’ll build another market, not for consumers but for the infrastructure Musk’s company likely needs to survive.
This is the point where Tesla’s philosophical arguments reappear, both in terms of tech ethos and in terms of concern for sustainability (the two categories are not mutually exclusive; they share a middle concept you might call “elegance”). Releasing patents strikes against the walled gardens maintained by giant companies like Oracle, and positions Tesla closer to the open-source coding community in which programmers work together, sharing their code and relying on the wisdom and the skill of other people to push projects of mutual interest forward. With such projects, work doesn’t get duplicated, and multiple perspectives can drive rapid innovation.
And if gas-powered cars continue to make up the lion’s share of cars on the global road, then no reduction of emissions will occur. In this light — albeit a cagey light, in which ecological concern conveniently goes hand in hand with the establishment of more power stations for his cars — Musk’s decision seems a decidedly laudable one. It’s not certain which way things will fall for Tesla, or whether measured against the meager potential returns for doing things the old-fashioned way — holding Tesla’s intellectual cards close — Musk may well have made an excellent decision to lay his cards on the table. Tesla stock went up after the announcement. According to the Washington Post, BMW and Nissan have already requested copies of Tesla’s once-precious portfolio of patents.
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