[A2k] Bloomberg: Musk Applies Contrarian Style to Patents to Boost Tesla

Thiru Balasubramaniam thiru at keionline.org
Fri Jun 13 02:28:26 PDT 2014


Musk Applies Contrarian Style to Patents to Boost Tesla

By Susan Decker, Alan Ohnsman and Mark Clothier  Jun 13, 2014 9:34 AM

Elon Musk wants to apply the contrarian style that made him millions of
dollars from PayPal and billions from rocket ships and electric cars, and
revolutionize the litigious world of patents.

*Tesla Motors Inc. (TSLA)* <http://www.bloomberg.com/quote/TSLA:US> became
a rarity among automakers when Musk yesterday pledged that inventions on
his electric cars and batteries will be free for anyone to use “in good
faith.” The move may speed the adoption of technology that Musk needs to
make his fledging line of cars more than a luxury niche.

Patents are a trade-off that give companies the right to block others from
using a specific technology in exchange for making the idea public so
others can analyze and build on it. The alternatives are to keep the
technology a trade secret or, as in the case of the Linux computing system,
make the information available to everyone. Tesla is adopting a third way
-- continue to patent, but let the public use it at will.

“The more people that use the technology, the more valuable the market,”
said*Zorina Khan* <http://www.bowdoin.edu/faculty/b/bkhan/>, an economics
professor at Bowdoin College in Brunswick, *Maine*
<http://topics.bloomberg.com/maine/>, and author of “The Democratization of

The move shows Musk positioning Palo Alto, California-based Tesla for a
more open relationship with the global *auto industry*
<http://topics.bloomberg.com/auto-industry/> than the one-off projects it’s
had with investors *Toyota Motor Corp. (7203)*
<http://www.bloomberg.com/quote/7203:JP> and *Daimler AG (DAI)*
<http://www.bloomberg.com/quote/DAI:GR> to supply battery packs and motors.
He met this week with executives from Bayerische Motoren Werke AG and said
he recommended that BMW collaborate by using Tesla’s rapid-charge system
and even build its own battery factory.

BMW met to discuss strengthening development of electric cars, said Kenn
Sparks, a spokesman for the Munich-based automaker. He declined to comment
on Musk’s patent strategy.

*Industry Vault*

Tesla has more than 160 issued U.S. patents for things like a system to
protect battery packs from overcharging and an improved rotor construction
in an electric motor, according to the website of the U.S. Patent and
Office* <http://topics.bloomberg.com/trademark-office/>.

While Musk’s strategy is not unique to the technology industry --
Business Machines Corp. (IBM)* <http://www.bloomberg.com/quote/IBM:US>
employed it nine years ago -- it’s an unusual move for automakers. Car
companies “traditionally lock their intellectual property in a vault and
steal everyone else’s,” said *Erik Gordon*
<http://www.bus.umich.edu/FacultyBios/FacultyBio.asp?id=000191546>, a
professor at the Ross School of Business at the *University of Michigan*


*Open Source*

Neither General Motors Co. or Ford Motor Co., the two largest U.S.
automakers, responded to inquiries about Musk’s announcement. Nissan Motor
Co. spokesman Chris Keeffe declined to comment. *BYD Co. (1211)*
<http://www.bloomberg.com/quote/1211:HK>, China’s largest electric-car
maker, “already has the most advanced EV technologies,” said Edward Zhou, a
company spokesman.

Taking an “open source” approach can lead to others adding to the
technology and cross-licensing, as well as “greater goodwill” and benefits
“from the specialized skills of a competitor,” Khan said.

Linus Torvalds, who created the Linux computer operating system, made it
available for free to anyone. That’s led to its growth, including its role
in the creation of Google Inc.’s Android operating system. Google in turn
made Android free and found a way to make money from it through mobile
advertising. Android is now the world’s most popular operating system for
mobile devices.

*Common Sense*

Tesla is reserving the right to go after infringers in limited
circumstances. Musk said his company would use “common sense” in deciding
whether to assert its patents -- such as a carmaker that uses the
inventions to confuse consumers into thinking the car is a Tesla. It also
could strike back should Tesla ever be accused of using another company’s

“Somebody can’t go and use a whole bunch of our patents but then sue us for
using one of theirs,” Musk said “That seems like it wouldn’t be a very nice
thing to do.”

The 42-year-old billionaire cited the patent battles between *Apple Inc.
(AAPL)* <http://www.bloomberg.com/quote/AAPL:US>and Samsung Electronics Co.
over smartphones and tablet computers as something the car industry should

“Who’s really benefiting there?” he said. “You’ve got all these depositions
and dirty laundry getting aired and it’s a big distraction for the
management team.”

*U.S. Patents*

IBM, which has led the number of U.S. patents issued for the past 21 years,
has made patents freely available for open source software, ecological
research and health and education standards. In 2005, it made 500 of its
software patents freely available to individuals and groups working on the
Open Source Initiative as part of what it said was to be the basis of a
“patent commons” for information technology developers.

“The idea generally is that you hope that you will remove some barriers to
other companies coming into that space. You lower their cost of operating,”
said Manny Schecter, chief patent counsel for the Armonk, New York-based
company. “In all cases for us, we weren’t just promoting ourselves, we were
attempting to promote a technology, a very broad space.”


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