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.’

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.

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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