Why Did Tesla Motors Inc Play The ‘Open Source’ Card?

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Why Did Tesla Motors Inc Play The ‘Open Source’ Card?
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Tesla Motors Inc (NASDAQ:TSLA) has a total of 2,429 awarded and pending patents protecting its technologies. Like any other new innovative company, Elon Musk took the decision to invest heavily in patent protection. Without patents, Tesla won’t have any control over the commercial opportunities of its inventions. So, the markets were surprised when the electric vehicle maker announced to share its patent portfolio with other companies acting in ‘good faith.’

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Tesla is using its patents to attract more investment in the marketplace

Will Tesla Motors Inc (NASDAQ:TSLA) really be giving away its intellectual property for good? John-Paul Rooney of patent law firm Withers & Rogers says that the company is not dumping its patents for good. The San Francisco-based company is actually using them to attract more investments in the EV marketplace. The commercial motivation for the ‘open source’ move is clear as Elon Musk has stated that the EV market hasn’t developed as quickly as he would have liked.

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Tesla Motors Inc (NASDAQ:TSLA)’s Model S sedan has no real competitor in the market. That’s because rivals haven’t been able to invent electric car technologies good enough to challenge Model S. But the real reason behind the company opening up its patent portfolio is less obvious. Maybe Tesla has realized that time is running out, and it still doesn’t have the financial muscle or scale to develop the EV market on its own. The company is willing to relax its grip on the market to attract investment.

Tesla’s open source approach far from altruistic

Tesla Motors Inc (NASDAQ:TSLA)’s open source approach is far from altruistic. Rooney says the company’s decision is about securing its position as the leading player in the green car market. Patents will play a crucial role in that future. Opening up its patents to other companies is like telling the market, “Tesla’s technology is the de facto standard, so use it.” Moreover, the move would make it less likely for rivals to invest in developing alternative technologies.

John-Paul Rooney says a lot depends on the definition of acting in ‘good faith.’ It’s possible that Tesla Motors Inc (NASDAQ:TSLA) would require other companies to enter a licensing agreement, if only to prevent a potential lawsuit in case Tesla decides to back track. No matter how the open source card plays out in reality, Tesla is far from dumping its patents for good. Rooney says the company is using them to attract investment in the marketplace that it will ultimately benefit from.

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6 COMMENTS

  1. While I can’t disagree that Musk is a business-man and Tesla is a business like any other, I’m not sure I fully buy the cynic’s argument on this. If you look at Musk’s record with Tesla and SpaceX in particular, he is more vision oriented than bottom-line oriented than many with his job title. Absolutely he intends to deliver to shareholders, but he has repeatedly shown an interest in taking risks that challenge his investors in favor of moving the market and technology forward. And ultimately that has been the greatest source of the rewards his investors have offered Tesla as clearly the traditional financial measures of success as a company aren’t the guiding factor in their support. Tesla is a disruptor because it’s value lies in its dedication to the pace and scale of its technology and not merely on delivering quick profits and market share.

  2. I don’t have enough knowledge to comment on the fires, but the supercharger network would be separate from anything installed in a home, so the bulk of what’s being built out today and what others would want to conform to will be separate from whatever may have been home installed.

    In terms of Leaf and Volt, where their networks and vehicles fall short is largely in charge time, as I understand it. Tesla’s goal with the supercharger network wasn’t just to provide a Tesla branded charging network, but to provide a charger/vehicle interface that could offer significant charge (I can’t recall if it was half or full charge) in 20 minutes or less, which by their research was the average service station stop. No other providers I am aware of approach on this level. Additionally, Tesla’s batteries have generally longer miles/charge ranges than competitors, which are still viewed (accurately or not) as largely in-city commuter vehicles.

    But what Musk notes elsewhere is that the Leaf and Volt are the stand outs. Chevy and Nissan are the two main players out there with an electric vehicle and it’s the only model they offer while most other companies are either completely ignoring the zero emission vehicle concept or moving at a snail’s pace.

  3. Please correct us for any inaccuracies, but was Tesla Motor technology the cause of several early garage fires? One in Irvine, California, and the other in Toronto, Canada. The later incident has never been explained by Tesla. At this time, no online article regarding Toronto can be found by us, that details the Tesla investigation’s final determination. Meanwhile Nissan Leaf and other PHEV are seen charging all over the place, without Elon Musk’s patents. Chevy Volt just announced a total of 500 million miles traveled, without Tesla patents. It looks as if PHEV and the Leaf, have eclipsed Tesla Motors last minute give away.

  4. It’s not complicated. The patents are mostly for the charging technology. It’s obviously in Tesla’s interest for other EV makers to use the same technology so charging stations will be standardized.

  5. Colonel Sanders did not give his secret recipe away to kick off adoption of other fried chicken franchises. McDonald’s never gave away their secret sauce so that competitors could share in a million sold daily.
    Focus attention away from Tesla troubles ahead, might be the reason why Elon Musk doesn’t fit conventional business savvy.

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