Tesla Says “All Our Patent Are Belong To You”

Big news from Tesla. Elon Musk writes:

Yesterday, there was a wall of Tesla patents in the lobby of our Palo Alto headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology.

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.

When I started out with my first company, Zip2, I thought patents were a good thing and worked hard to obtain them. And maybe they were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors. After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible.

…We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.

Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.

I believe that this announcement will be discussed in business schools for years to come much like Henry Ford’s announcement of the $5 a day wage.


You're right - this is excellent news.

For whom?
I don't own TSL but if I did I'd sell.
Tesla shareholders should class-sue him so yeah, maybe he'll be discussed in books. That may turn out to be the good news for the US taxpayer who's being robbed blind by the green thieves.

I had the same reaction about shareholders suing. Damages though will depend on linking this to a stock drop, and so far today TSLA is down, but by less than 1%.

As are most indices. It may be that Tesla's market cap wasn't really based on patents and was based more on integrating the technology well (and capturing subsidies).

@Mike--you are right, Tesla is not really known for their innovation, ergo, like many companies including Dell and Cisco, and even Microsoft (in the old days) they are "patent light" and have no need for patents.

Doesn't work like that, sorry.

I'm increasing my holdings in Tesla on this news, and doing so purely for financial reasons. I see Tesla coming out of all this as a very profitable company, and this latest move will eventually be looked on as one of the many reasons why.

"robbed blind by green thieves" - hilarious.


The mass use of electric cars requires new infrastructure (e.g., charging stations). You don't get that when you're the only viable electric car company. This may actually boost Tesla's long-term growth even if it results in more competitors.

Quote: “robbed blind by green thieves” – hilarious. /endquote

Thank you for saying that. And saying it well.

No way. Business judgement rule.

Even if it doesn't persuade you, Mr Musk can make a plausible case that expanding the market of electric cars - even competitors - will lead to network effects. More ubiquitous charging stations, consumer acceptance.

If that doesn't come to pass, Mr Musk still acted with shareholder interests in mind, he was just wrong. Companies are wrong all the time. They think blue shirts will be big in the holiday season, but instead its red shirts and they lose a lot of money, just another risk of doing business.

To challenge the actions of a corporation's board of directors, a plaintiff assumes "the burden of providing evidence that directors, in reaching their challenged decision, breached any one of the triads of their fiduciary duty — good faith, loyalty, or due care".[2] Failing to do so, a plaintiff "is not entitled to any remedy unless the transaction constitutes waste . . . [that is,] the exchange was so one-sided that no business person of ordinary, sound judgment could conclude that the corporation has received adequate consideration".[3]

Of course, the complaint would say it is waste of corporate assets to give away all the company's IP (among other things). The lead plaintiff of the class would argue this is the equivalent of donating several of Tesla's factories to some charitable cause that warms the CEO's heart, such as to make shoes to give away to third world children. I hope that you are not using Wikipedia for your 2L corporations class, there are better study aides out there.

For large companies, shareholder lawsuits can be paid off to make the hassle go away, but it's just about impossible to prove that the actions were against shareholder interests. Unless the CEO does something stupid, like say "we were making enough money, so we lowered the price." Which happened once, and only once.

I've seen some really crappy things in small companies. Like, 3 of 5 members of the board belonging to VC firms, and the company selling out for the exact amount required to pay back those VC firms. That should be a clear shareholder lawsuit, but, like I said, small companies, so it's not worth the legal hassle even for the wronged parties.

Companies give away lots of money to charities that executives like and shareholders can't do anything about it because it's easy to say you did it for advertising or good will or as a long term strategy to make them look better with the government when trying for subsidies or to avoid some kind of regulation. Or some other more creative BS. Same as Tesla can claim here.

As people are saying over on HN, it's not actually clear what the deal being offered here is. Is there some kind of formal zero-cost license going on? If so, what are the terms? It's hard to imagine people being cool with using Tesla's patents on just the informal word of the CEO that they won't be sued.

Legally it's unclear what this announcement means in itself, but in principle I think it's simple: come to us and we'll give you a free license that you'll feel secure enough in to dedicate large amounts of capital into projects that rely on use of our patents.

There's still got to be attorneys involved, as with any big company decision around IP, but it's likely only as much or even less lawyer wrangling than if Tesla explicitly renounced all rights to the patents.

Wouldn't it be easiest for Tesla to upload a signed, witnessed, legally drafted document to the same effect on their website just listing the set of patents so licensed. That'd take out the guesswork.

An exception big enough to drive an electric truck through - 'Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.'

In other words, a business will still rely on Tesla's good faith in determine whether that business is meeting Tesla's standard of good faith. The patents, of course, remain in Tesla's hands.

Though if Tesla was truly acting in good faith, then the patents would end up in something like Open Invention Network - http://www.openinventionnetwork.com/

'The Open Invention Network (OIN) is a company that acquires patents and licenses them royalty free to entities which, in turn, agree not to assert their own patents against Linux and Linux-related systems and applications.' http://en.wikipedia.org/wiki/Open_Invention_Network

This is a good point.

My bet is you have to give to them your work and share with Tesla your plans for their patents. This is called a honey trap.

I wonder if he will propose something similar to the GPL - any derivative patents must be similarly available...

I doubt it. He wants companies to use the technology. Remember the whole "GPL is a cancer" problem. GPL is good for ensuring many companies won't want to touch something.

Musk isn't some IP-reform evangelist who wants everyone to agree that patents are bad - he just wants to make things better for Tesla. Which means he wants interoperable competitor technology and more users for superchargers and more customers for his battery factory and things like that.

Taking this farther, regular car companies heavily leverage the ecosystem that surrounds them. The autoparts industry is huge and means not everything needs to be developed in-house. So GM and BMW can both buy transmissions from ZF, saving money and spreading development costs. The ecosystem doesn't exist for electrics, which drives up costs.

GPL would be a good way to nip that ecosystem in the bud.

Also called "open source".

Open source doesn't require you to share anything in order to take and use it.

You are required to share modifications/extensions to open source software in some (not all) licences, but that is not quite the same thing.

This guy is going to be the first trillionaire. But it's primarily SpaceX that will get him there.

Sentence of the day: "I believe that this announcement will be discussed in business schools for years to come much like Henry Ford’s announcement of the $5 a day wage."

Ford did that to cut down on turnover. Musk doesn't, as far as we know, have any self-interested motivation.

Competitors adopting his technologies could lead to economies of scale that it would be hard to achieve alone. It's probably hard to keep Tesla's costs sufficiently low at present scale. He is betting on his ability to integrate better and innovate faster rather than counting on legal monopolies.

e.g. more and more supercharger stations that work with Tesla technology in other manufacturers as well. Incentive for other manufacturers to build or at least help finance more of these stations.

Finch, Brandon and Wonks 2 get it.

Yep, he's creating a common standard which allows interoperability of expensive infrastructure. That's a good move if you want to grow the market rapidly in order to beat incumbent competing technology (ie petrol engine cars).

Musk DOES have a selfish interest here. He wants to attract engineers/startups to his platform and build an ecosystem/network around Tesla and its technology.

LOL yeah, he's doing it out of the goodness of his heart.

And with our money.

"When I started out with my first company, Zip2, I thought patents were a good thing and worked hard to obtain them. And maybe they were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors. After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible."

Well, that kind of detracts from the altruism meme, Wonks. It appears that Musk has made a not unreasonable business decision that enforcing patents, more specifically his patents, is not worth the costs involved. That's self interest.

He's obviously aiming at economies of scale for charging stations. If every car company builds electric cars, charging station will become the norm everywhere, thus benefiting Tesla.

True, but there is still a free rider problem. The issue may not be the provision of the public good as much as setting the standard for recharging stations for their cars.

Interesting point you bring up.

I believe that this announcement will be discussed in marketing schools for years to come, much like the introduction of the phrase "finger lickin' good" by Colonel Sanders.

A patent as a lottery ticket for a lawsuit? Sounds nice but you get anyway a lawsuit for manufacturing and selling a prodcut if somebody else says he patented it before. The lawsuit is for selling something, not for trying to patent it, right?

I think he means that if someday somewhere someone makes a product that infringes on his patent, he "wins the lottery" and can sue them.

If I were to produce a clone of a Tesla, with everything but the trade mark, they're okay with that?

It may be that Tesla's secret sauce is their manufacturing expertise. It seems to work for SpaceX.

Speaking of, SpaceX doesn't have any kind of patent portfolio, but 1) their products are shot into space, not released to the public to copy, and 2) Musk says his biggest competition is from China who wouldn't respect the patents anyway.

I think Tesla's secret sauce is not being a 70-year-old company filled with vested interests. That's a big part of what SpaceX has going for it as well. It's extremely hard for Toyota or GM to do anything quickly. Suppose GM wanted to clone the Model S and faced no legal fight whatsoever. When do you think they could sell the first copy? 2020? Maybe?

If you name a specific company, I suspect it wouldn't be able to reliably clone the Model S within a decade.

However, if a bunch of car companies try to clone a model S, I think one of them would pull it off. And they might hire away enough Tesla talent to really hurt Tesla's ongoing efforts.

This is not like Kodak inventing the digital camera and then going bankrupt because of digital cameras. The digital camera changed a (really big hand wave coming up there) $100 billion market into a $10 billion market. Even if they went from having 20% of it to having 100% of it, it would still require killing half the company to complete the transition.

Electric cars, even if they were to complete dominate the market the way digital did to film, aren't going to shrink the car market by any significant amount.

Actually, the thing that killed Kodak was that it turned photography into an electronics game instead of a chemicals game and Kodak was/is a chemicals company. Electric or ICE the fundamental nature of carmaking will stay the same.

...and by the time the "Tesla Clone" came out, Tesla would be making the S Mark 2 or whatever, that was that many steps ahead.

And while they may hire away Tesla's talent, they will also create a larger jobs marketplace for college grads to persue.

As well as produce engineers that TESLA can hire away.

'If I were to produce a clone of a Tesla, with everything but the trade mark, they’re okay with that?'

IBM was - you do remember how the PC came to dominate the home computer market, right?

'IBM PC compatible computers are those similar to the original IBM PC, XT, and AT and able to run the same software as those. Such computers used to be referred to as PC clones, or IBM clones. They duplicate almost exactly all the significant features of the PC architecture, facilitated by IBM's choice of commodity hardware components and various manufacturers' ability to reverse engineer the BIOS firmware using a "clean room design" technique. Columbia Data Products built the first clone of the IBM personal computer by a clean room implementation of its BIOS.[citation needed]

Most early IBM PC compatibles used the same computer bus as the original PC and AT models. The IBM AT compatible bus was later named the Industry Standard Architecture bus by manufacturers of compatible computers. The term "IBM PC compatible" is now a historical description only, since IBM has ended its personal computer sales.

Descendants of the IBM PC compatibles comprise the majority of personal computers on the market presently, although interoperability with the bus structure and peripherals of the original PC architecture may be limited or non-existent.' http://en.wikipedia.org/wiki/IBM_PC_compatible

Whether that was a good or bad decision for IBM is at least debatable. That it was of massive benefit to the then nascent home computer market is indisputable.

IBM did the same thing with the magstripe. They didn't even patent it and it led to a lot of hardware sales.

Decades later, IBM is out of the PC business entirely, while Apple (which took the opposite, closed approach) is the most profitable computer maker by far.

I'm not complaining about IBM's approach, though--it was clearly beneficial to the public.

'while Apple (which took the opposite, closed approach) is the most profitable computer maker by far.'

Yes, but when it comes to mobile systems (tablets and smart phones), Apple's long term in this area looks clouded by the continuing reality of Android. Apple survived with the active involvement of Bill Gates era Microsoft doing its best to convince the American DOJ they were not a monopoly -

'BOSTON--Microsoft (MSFT) is lending Apple Computer (AAPL) an unexpected and somewhat controversial helping hand.

Microsoft chairman Bill Gates said today As the Macworld turns that the software giant will invest $150 million in Apple and will develop and ship future versions of its Microsoft Office, Internet Explorer, and development tools for the Macintosh.

Gates, who appeared via satellite link, and Apple director Steve Jobs made the announcement here today at the Macworld Expo trade show.

Both Apple and Microsoft executives denied that the Microsoft investment represents a path to converging the companies' operating systems. However, they said they had agreed to work out a settlement to a long-standing dispute over whether Microsoft's Windows operating system infringes on any of Apple's patents.

More important, Microsoft said it has pledged to offer the Office business productivity software suite for the Macintosh platform for the next five years. Mac Office 98 is expected to debut by the end of the year.

"This deal strengthens Apple's viability. It's a new era in terms of Apple and Microsoft working together," said Apple chief financial officer Fred Anderson, who has been assigned to run the company's daily operations until a successor to outgoing CEO Gilbert Amelio is found.

Observers say the deal, while a shot in the arm for Apple, also may help Microsoft by keeping antitrust charges at bay. Apple represents one of the only alternatives to Microsoft's Windows and the Microsoft-Intel hegemony.' http://news.cnet.com/2100-1001-202143.html

Pretty much peak Tesla.

Although, if you had to pick a bond villian, it would be incredible hard to pick between Musk, Page and Sergey.

Musk, hands down. The other two are too nerdy.

Consider the magnanimity of this compared to wealthy who give to charity. What a great guy.

Here's how Ford's $5 day wage is not like Tesla's patent offer: people actually wanted those jobs. It's not obvious that anyone wants Tesla's patents, or will ever put them to any economically meaningful use.

This is a PR move to try and get some value from patents that would otherwise produce none.

This wins the award for the most myopic comment in this thread.

Many, many firms are already involved in motor vehicle production and might get into electrics, but the specialized computer code that makes long battery range and life possible is a gigantic investment that would take them years and years to match, and even longer to debug, which can only de done using results from vehicles in the field.

If Tesla really wanted to spur development of electric cars, they'd release the source code for their software. But they are not doing that, just 'giving away' patents that no one ever wanted in the first place.

@Chris, is it clear that Tesla's patents are high-value? Some evidence would be nice.

Basic electric car technology has been around a long time. From a distance, it doesn't appear that Tesla has broken new technological ground; instead, they just found a way to package and market it successfully.

Keeping the battery running safely and with performance turns out to be a non-trivial problem. Boeing had issues with it in planes. The GM Volt did it much better than the Nissan Leaf, against my expectations.

Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology. - [removed scummy auto-url feature]

Wait, what would it mean to use their patents in *bad* faith? "I'm building an electric-battery-powered torture device!"

Using their patents to patent something new to sue Tesla back.

Wow some cynical commenters here. I think it is a good thing though not likely to change much.

Except for that whole IBM PC precendent, that is.

That depends on Tesla cars being as revolutionary as IBM PCs.

The opposing view is that Tesla is just producing high-priced environmentally-conscious vanity products, and that the basic constraints that prevent widespread adoption of electric cars still haven't been solved. If this is true, then it won't change much.

Lots of companies do this. Nothing particularly new. Patents are indeed weak protection, hence it will make little difference in the long run.

Of course, there's a long literature on why companies patent, and protection isn't always the main reason.

Besides, business schools aren't the best at picking "cases" these days. Sometimes, they jump too fast into the bandwagon of the latest "cool" thing, only to discover 5-10 years down the road what a miserable idea/company the case was build upon. Case in point: Tata Nano. Boy, was that a failure. And it was a failure that was obvious to many of us years ago, too. You wouldn't know it by the B-school case studies from a few years ago, however ;)

I just read this about the Tata Nano: http://www.theguardian.com/global-development/2014/jan/31/tata-nano-safety-crash-test-results

Curious: were safety concerns the basis for your prediction of failure or were there other reasons you expected the car to fail.

What exactly do people expect from a $2000 car?

I was an engineer prior to getting an MBA, where I encountered the Tata Nano case. It was obvious from the get go: the car was build with the aim of 160ppm defect rate. That's miserable by modern standards. Hence just from a technical POV, the way they managed to get a "cheap" car was to make a really "bad car", not some great business strategy. And, of course, the fact that the Third World is filled with second hand used cheap cars which are technically far better than the Tata Nano (all the Indian students in my class said the same thing.)

The Tata Nano case should be rehashed for MBAs as a case study of what not to do...rather than what to do.

Of course, no strategy is going to be sustainable in the long run. Eventually everything fails. But it's a bad idea when MBA schools try to jump "ahead of the curve" by making cases before the results of the strategy have played themselves out.

It's that whole "bottom of the pyramid" fad that was going on a few years ago. But there are so many holes in that idea.

Another case in point: GE in China. Every MBA school teaches that as a case study of how to do innovation in the developing world. Yet, that's probably one of the only examples to have paid off, whereas there is lots of evidence that that strategy is very unlikely to be successful. Unfortunately the MBA cases and teaching material seems very...unresponsive...to the research being done in business schools which provide no support or contradict what is being taught (not in all cases, of course, Just a few).

It's probably like that in every field, however.

How many brilliant Indian engineers will be that much more willing to dedicate their grey matter to Tesla's bottom line, knowing that their intellectual efforts are to be made freely available to humanity?

The thousand who want to learn how to build Teslas from the inside out so they can return to Asia and start a company making them.

I wonder which of those thousand engineers will be able to get the correct permits to do that.

One of the main uses for patents these days is to raise money from relatively unsophisticated investors who are impressed with the term "IP". In fact many of them unlikely to invest without it, even though the patentable forms of IP may have little or no value.

A noble experiment, but "too soon to tell"

Why would I buy a house?

Telsa + Google driverless technology + Uber + RVs = change in the trajectory of urbanization, increased value in rural real-estate, fundamental shift in the U.S. automotive-based economy (from energy to finance), fundamental change in infrastructure funding, death of the train as we know it, decreased demand in intra-continental flights, etc., etc., etc. My organic perma-culture farm is going to be amazing. Tack on increase demand for horses, I suppose.

Also, Telsa + Google driverless technology + Uber + 18 wheelers + Africa. Also, car bombs.

If only we had a functional predictions market.

A better approach would have been to freely license, and use the patents to get cross licenses for technology that impedes their own patents.

Poor choice.

I used to do antitrust work for a very high tech company whose founder did not believe in patents. In time he did, but the strategy was to use the patent portfolio as a bargaining chip to cross license technology that was impeding his advance.

Sounds like an offer to license on RAND terms, not for free.

Yes exactly.

Tesla is not giving away the IP (and of course noone would use the IP just because Musk promised not to sue).

Could be a simple business decision.

Tesla wants there to be lots of electric cars. That means charging stations, knowledgeable mechanics, aftermarket parts, whatnot. They want electric cars to be commonplace, not exotic, even if lots of sales go to competitors.

So maybe they think this is a way to encourage that.

Exactly. Which scenario is more attractive: 1) being among the best companies in a crowded field that dominates the industry, or 2) being the very best company (by a mile) in a field that doesn't even come close to dominating the industry?

You can debate the answer, but Musk clearly believes it's #1, as do I. If he could go the route Apple took with smartphones (invent the field, then protect your position as that field comes to dominate the industry), then undoubtedly he would. But he's not certain that electric cars will dominate the auto industry anytime soon without massive help from a lot of other companies, and for good reason. It will still take a long time, but I think it's a brilliant move.

Yes, a simple business decision. Perhaps what Mr. Musk wants is to diversify the Tesla Motors supply chain for free. The free patents are just the carrot for already motivated people that what to be part of Tesla supply chain.

Autos need many components like batteries, control software, seats, etc. Tesla is creating a "prize". If a supplier now provides a component for Tesla for X price, by making public the patents any enthusiastic person/company will try to make that component for less. The great thing is that Tesla pays nothing for the people that's going to do the development of the manufacturing process with the hope of becoming part of Tesla supply chain.

People is going to compete to develop a manufacturing process to make batteries cheaper and Tesla won't pay a cent for that, brilliant.


The limit to Tesla's growth is infrastructure and consumer acceptance. Consider the following. Someone starts a new company using Tesla's patent. They don't have the tacit knowledge or the brand equity to have a product of similar quality. But they help build the charging network and educate users. The latent demand in the market is still enormous (~99.9% still not electric). So, don't short Tesla yet.

This is not so unprecedented. There are various quasi-monopoly consortia which mandate RAND or royalty-free licensing to companies that want to participate.

Yes, some of you here have pointed out that the benefits Tesla is going after is the adoption of their technology by others, thus creating more complementaries for their platform, as their platform becomes a dominant design in the industry.

In fact there's evidence that that's a good reason why firms patent in the first place: i.e. reveal information on their products which otherwise they would have kept proprietary). But I don't think Tesla is giving up patenting, just "promising" not to sue. So it's not really "open source".

But, its highly doubtful that Tesla's platform will become a dominant design in this industry, or where this industry is actually going to go. In fact, there's little evidence to suggest that an electric car is a cheaper, or better alternative to the internal combustion engine, yet, given the massive increases in efficiency for normal cars over the past few years.

The electric car is...still...decades away.

If nothing else, this proves that the "All your base are belong to us" meme just will not die.

If the press confrence for this starts with Musk announcing "What happen? Somebody set up us the bomb!" I'm nominating him for UN Secretary General or King of Nerds, whichever is first available...

This didn't work too well for the inventor of Visicalc.

I have asked before if the main problem with patents is the open-endedness.

You don't know if a judge will destroy your business because of some marginal dependence in a marginally competitive application and the patent holdr has little incentive to deal.

So, if this takes the edge off that would be good I thinkm I'd rather he invented a patent clearinghouse on eBay or something.

In addition to the network externalities argument vis-a-vis charging stations, Tesla has also just made a $5 billion bet on it's ability to produce game-changing batteries (http://www.teslamotors.com/blog/gigafactory). If that venture is successful, other companies which build electric cars may very well end up buying their (very expensive) batteries from Tesla. Bold moves, but I like them.

According to the Economist, Tesla's giga-investment will lower production costs by ... 30%. Is there a better argument for The Great Stagnation?

It's not a bad strategy at all. Tesla/Musk can steal other people's IP with impunity knowing there is a low chance of losing a patent infringement lawsuit...and if the patentee is a start-up or individual, Tesla can bankrupt them through expensive litigation tactics.

As far as taking down the patents from the company lobby, I'm not sure how the inventors/employees feel about that. They worked hard to create those technologies, and patents are evidence of that. It could seriously hurt morale. Employees like to be recognized for their talent and hard work. He shouldn't have done that.

Semi:ot: I had the weird experience this morning of dropping my daughter off at camp in a car line between two Teslas. They're doing better around here than I would have guessed.

There is no leadership without courage.
There is no leadership without dissent.

So thank you Elon Musk for your disruptive leadership,
as a model of how it's done and what it takes to lead,
so that each of us can decide if leadership is for us, or not.

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