Tesla's Patent Sharing Plan: Brilliant, Desperate, or Both?

By William Peacock, Esq. on June 17, 2014 | Last updated on March 21, 2019

Last week, Tesla made a big, bold move: It opened its patent portfolio to everyone.

In a post titled, "All Our Patent Are Belong To You," a reference to a poor video game translation turned Internet meme, the company's CEO Elon Musk announced the move and explained why the company would only use the patents for defensive purposes. In short: acceleration of innovation.

A cynic might amend that a bit: acceleration of adoption of Tesla's proprietary and patented standards, ensuring that the company doesn't develop the Betamax of electric vehicles. But nonetheless, this was a huge move. But was it a good move?

Absolutely Brilliant

You know what kills a brilliant idea? Being the only person to accept that idea.

How great is an online video game that no one else plays? How great is a Betamax when nobody makes videos for it? And how great is an electric car standard when you stand alone?

Tesla has made insane progress for a startup in building up a mass of chargers and superchargers, but it is still one, small company. According to Ars Technica, Tesla has spoken with BMW about creating a common standard for chargers, but to date, Tesla has theirs, BMW has theirs, Nissan has one, and so on. And that's just one small part of an electric car. Imagine if manufacturers didn't have to design their own anything -- they could just add to the open source designs that will soon be out there, thanks to Tesla.

Desperate and Terrible

You know who else uses Tesla's technology? Toyota, in its Rav4, and the company paid for it. That's the problem with opening your patents: You cut off a potential revenue stream.

Plus, let's say Tesla gets exactly what it wants: Everyone starts making Tesla-esque cars using its patents. When BMW, Lexus, Acura, Maserati, Porsche, and Audi all have cars that run on the same plugs, and have the same features, which are you going to pick -- the small upstart company with gumption? Or the prettiest one? Or, even more likely, the cheapest and most reliable one?

The Verge calls Tesla's move "exciting, and a sign of weakness." Why? The company's bonds have been downgraded to "junk" status, which means investors see the company as a significant risk.

This move could pay off, if the company's head start in electric vehicles and trendy brand put them ahead of other companies. And it might pay off if other companies follow suit and share their own technology, or adopt common standards which make ownership of a proprietary electric vehicle (what the Tesla is now) more appealing (i.e., you can charge it anywhere).

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