Tesla Motors recently surprised the business world by releasing their patents to the open market, meaning their engineered technology can now be utilized by direct competitors. Perhaps even more surprising is business analysts are already hailing CEO Elon Musk’s bold decision as a savvy business plan.
Many observers viewed Tesla’s patents as a major competitive advantage – so why release it to their competitors? Analysts mark that Tesla’s situation is unique as electric cars are considered an emerging technology. Recent figures from 2013 indicate these cars are responsible for less than 1% of all traffic, a number that closely relates to total sales. Tesla is banking on increased competition similarly increasing the demand for electric cars overall – what better choice than the company that opened the door?
It’s a stark contrast to intellectual property wars constantly dominating American headlines in recent months. Companies like Apple have even been accused as being ‘patent trolls’, entities that impede the regular advancement of technology. The key differences in patent philosophy between companies like Apple and Tesla certainly suggest the issue of intellectual property is a complex issue.
Tesla’s strategy is considered non-translatable across many industries. Biotech startups could easily sink their operation by making their drug patents available to the open market. Large pharmaceutical agencies and generic drug manufacturers would be able to copy the drug and utilize their existing systems to force the startup out of business. Examples like this suggest intellectual property rights will always have their place in the market on some level.
The traditional argument for legal patents is they provide startups with the ability to protect their technology against larger incumbents, parties which could potentially box them out of the market. The decision to release Tesla’s patents almost certainly would prove disastrous had they lacked the means to produce their cars on a major scale.
For now Tesla Motors is comfortable enough with their hand to invite more players to the table. While time will ultimately decide whether the gamble pays off, it certainly bodes well for consumers in the near future.
Original story reported by Entrepreneur.