Tesla was one of the fastest-growing companies in the market in 2020, with its stock price jumping more than 400% since March of last year. The electric car maker posted its first profitable year in the middle of the pandemic, earning $721 million and delivering more than 500,000 vehicles for the first time. Both numbers were up from 2019, when Telsa lost $862 million and delivered about 368,000 cars.
It was the start of a hot streak for the company that’s expected to only accelerate going forward.
So, given all of that potential, why would the company decide to give away its IP for free? It sounds like the opposite of what a growing company like Tesla would do.
But it’s exactly what CEO Elon Musk did in 2014 when he posted his now famous “All Our Patent Are Belong to You” explanation to the Tesla blog, reversing the company’s longstanding push to develop its own patent portfolio in the spirit of the open-source movement for the advancement of electric vehicle technology.
As Elon wrote: “Tesla Motors was created to accelerate the advent of sustainable transport. 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. Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”
The idea was that the larger goal of creating a zero emissions automotive industry was more important that Tesla staking its own claim to the IP it was developing. And it would be impossible for Tesla along to build electric cars fast enough to truly address the carbon crisis. So, open sourcing its IP was the answer.
And Tesla isn’t alone in this. Executive coach Marshall Goldsmith is also giving away free access to his highly successful coaching principles, and Moderna last year pledged to license the technology underlying its COVID-19 vaccine to others in order to speed up vaccinations and bring the pandemic to a close. The fact that open-source software – in which the code is essentially available to anyone who is willing to also contribute back to the community – exists at all is another reflection of this impulse.
The case for free IP
Is it a good idea to give away free access to your intellectual property? Sometimes.
As an IP owner, when you open things up you are essentially tapping into free labor to further disseminate your innovations and extend the reach of your company beyond what you can afford to do yourself. You’re also stimulating a larger ecosystem of users and creators than you would otherwise be able to reach yourself. That way, you’re further legitimizing and broadening the demand for your own products. In other words, you’re open sourcing your R&D.
Think about it like a restaurant or salon owner franchising their business model. They might only be able to own and run a few locations in one local area, but by bringing franchise owners into the fold they are able to extend their brand and the product far beyond what they alone would be able to do.
It can’t always be done without any structure at all – many open-source software projects, for example, include specific attribution requirements that all developers working on the code need to follow in order to properly credit the community effort – but as long as the right requirements are in place and enforced, giving away your IP is a tried-and-true way to extend your own reach while also encouraging further innovation. You’re also speeding up the pace of innovation beyond what any one person or company can do.
All in all, that’s pretty cool and giving free access to your intellectual property can make good business sense in the right situations. Tesla certainly doesn’t seem to be suffering too much since it made the move.
One major caveat: It’s not clear whether or not Tesla’s battery strategy is the right one for the electric vehicle industry. While Tesla’s battery IP focuses on the liquid electrolyte-based technology, there are some industry indications that the future of EV batteries may be solid state. Will the Tesla battery IP go the path of Betamax? Time will tell.
At Patents Integrated, we aren’t patent attorneys. We’re not business consultants. We’re so much more than that. We’re patent agents who pull from multiple disciplines to help innovators create successful IP strategies that will serve them for years to come.
If you’re ready to turn your invention into a reality, we’re here to make it possible. Click here to get started.