Tesla drives home use of patents
Company in move to share technology
USING crafty wordplay on a well-known internet meme, the brilliant South Africanborn US entrepreneur and businessman Elon Musk announced that Tesla Motors would not initiate patent lawsuits against anyone who, in good faith, wants to use its technology. Instead, Tesla Motors would only use its patents defensively.
In a symbolic move towards an open-source approach to technology development, Tesla Motors even went as far as to take down its wall of patents in the lobby of its Palo Alto headquarters. What does this mean for the electric motor vehicle industry? And, should local companies in the technology sector follow suit?
To answer these questions it is important to consider the legal effect of this shift towards a quasi open-source position. First, it is important to appreciate that Tesla Motors is by no means abandoning its existing patents — well, not yet. A move to take down its patent wall does not constitute an abandonment of its patent rights. For this, Tesla Motors will have to take the conscious decision to abandon its patents at the various patent offices worldwide. This ties in with the proviso in Tesla Motors’ statement that it will not take legal action against anybody who, in good faith, uses its patented technology.
This statement clearly tasks one to distinguish between infringement of patent rights in good faith and infringement in bad faith, something that we can only speculate about. At which point will Tesla Motors decide that competition has hit too close to home, that bona fide use of its technology had turned into mala fide use that justifies an infringement lawsuit? Maybe this point will come when one of the large motor vehicle manufacturers com- petes with Tesla Motors using Tesla’s own technology? However, Musk does not seem to be bothered by this.
According to his entry on the Tesla Motors blog, it appears he is convinced that the real enemy is hydrocarbonburning engines and that the electric vehicle market is large enough for all to tap into. This move by Tesla Motors might just be clever enough to ensure the bulk of electric vehicle industry is built on Tesla Motors technology.
By making Tesla Motors technology available to everyone, presumably also the large motor vehicle manufacturers, there is a real possibility that it will be used as the base on which future electric vehicles are built. Should this happen, Tesla Motors could be in the driving seat, so to speak.
It is also safe to assume that, while the rest of the vehicle manufacturing industry designs its electric vehicles on existing Tesla technology, Tesla Motors would without a doubt look to employ the best engineering minds to guarantee it remains at the cutting edge of electric vehicle technology. This again fits into the intellectual property strategy which it has adopted, as the filing of patent applications requires the technology to be published.
Such publication would disclose the latest technology to Tesla Motors’ competitors. This latest move by Tesla could therefore also be seen as a shift in intellectual property strategy from one of patenting its most valuable technology towards one of keeping it internally as know-how. These two strategies are mutually exclusive. You can either patent your technology, which would grant you a 20-year monopoly in exchange for the publication of the technology, or you could seek to keep your technology secret in an attempt to keep it out of reach of competitors.
Although the second option might seem attractive, and in some instances it is the correct strategy to employ, most companies should be extremely careful in adopting this stance to intellectual property.
This secret body of valuable and not readily ascertainable knowledge, which is referred to as know-how, is only protectable for as long as it remains confidential. Should the technology fall into the public domain it no longer forms part of the company’s know-how and is free to be used by everyone.
This brings us to another aspect of intellectual property which often comes as a surprise to many inventors: copying is allowable in terms of South African law provided, obviously, that such copying does not infringe on the statutory or common law rights of the proprietor of the technology. For example, the South African Copyright Act specifically makes provision for reverse engineering. In terms of Section 15(3A) a person is allowed to make a reproduction of a three-dimensional product if that product has a utilitarian purpose and was released into the market by the rightful owner.
You can either patent your technology, which would grant you a 20-year monopoly, or you could seek to keep it secret
Using Tesla Motors as an example, should it release a product into the market that is not protected by any registered right its competitors are allowed to make such a product without there being any recourse available to Tesla Motors. It comes as no surprise most patent attorneys would advise clients not to follow Tesla Motors’ example without careful thought.
In his blog entry, Musk also made the bold statement that “receiving a patent really just meant that you bought a lottery ticket to a lawsuit”. There is certainly some truth in this. After all, patent rights are negative rights in that a patentee has the right to exclude others from commercially exploiting the patented technology.
There are no patent police looking to enforce a patentee’s rights. The decision against whom to enforce its patent rights always vests with the patentee. However, by obtaining patent rights a patentee not only buys a ticket to a lawsuit but also buys a ticket to the negotiation table. Patent litigation is an expensive exercise and in many instances it is suitable for both parties at the negotiation table to settle out of court. For example, patent rights often form the basis of licence agreements that in effect make the infringement of the patentee’s rights lawful provided that royalties, if it is not a royalty-free licence, are paid to the patentee.
Without patent rights, an inventor in most instances misses out on an invitation to the negotiation table. Returning to the case of Tesla Motors, its decision not to abandon its patent rights formally might seem to suggest it is still intent on joining the discussions around the negotiation table.
Bona fide use of Tesla Motors’ technology might just embody licensing its patented technology to other manufacturers. This is pure speculation but, either way, Tesla Motors definitely stands to gain in a rapid rise in the production of electric vehicles based on its technology.
There is also a point of view that, for Tesla Motors to benefit to the full extent, it has to ensure the boom in electric vehicle technology takes place while it is at the pinnacle of its technology development, and preferably while the bulk of its patents are still in force. The term of a patent is 20 years, after which the technology is free for commercial exploitation by everyone. This latest decision by Musk might therefore just be an ingenious way of speeding up the development cycle of electric vehicles so that Tesla Motors sees the maximum benefit before the expiration of its patents.
At this point we can only speculate on the extent to which Tesla Motors is willing to allow bona fide use of its patents. The true reflection of Tesla Motors’ and in particular Musk’s opinion on the patent system will, however, only be revealed in due course.
It will be interesting to see whether or not Tesla Motors file any new patent applications in the future. In the meantime from a patent attorney’s perspective the decision by Tesla Motors is seen as a clever utilisation of the patent system rather than a shift away from it.