CXO

Tesla, pharma, and the state of open source patents

In a shocking move last month, Tesla "open sourced" its patents, while more recently, pharmaceutical companies have adopted aggressive patent lawsuits reminiscent of the tech industry.

2014teslamodelswc-002.jpg
Tesla Model S
 Image: Wayne Cunningham/CNET

Patents have become one of the most contentious issues in technology. Auspiciously designed to protect inventors from having their ideas stolen and someone else enjoying the fruits of their labor, the patent has now become an offensive weapon for some companies and the sole revenue source for others.

Adding a new dimension to the debate, electric car company Tesla recently announced that it would not sue anyone using its patents "in good faith," while pharmaceutical companies have embraced patent techniques reminiscent of the tech industry, filing rafts of lawsuits and acquiring patents as a new "gold rush" toward hepatitis-C drugs gathers steam.

Tesla: benevolent, business savvy, or both?

Much like Apple during the early days of its rebound, Tesla and its CEO Elon Musk are admired as corporate heroes. Both companies struggled against outsize aggressors, including century-old automakers and tech behemoths, while their CEOs seemed to blaze their own path, producing impressive products for the well-funded connoisseur. I believe Apple has lost much of that luster, and has oddly taken on the role of the entrenched incumbent, but Tesla's reputation gleams like a newly waxed Model S.

Much of the reaction on the release of Tesla's patents couched the move as motivated by sheer benevolence, and the Musk's post about it on the Tesla blog said the move highlighted the potential environmental impact of shifting more of the world's cars to zero emission elective vehicles. While it may be unfair to assume impure motives to Tesla's release, there are obvious benefits to the company to have the future of the automobile industry built around its standards. For instance, having the "supercharger" (a proprietary charging system and electric "fueling" station) become the global standard would benefit Tesla greatly through licensing the technology to accelerating the roll out of the stations and expanding Tesla's customer base.

Intriguingly, Musk's post notes that Tesla will not sue anyone using their patents "in good faith," a term any lawyer worth half their bill rate could define in several ways. Not suing doesn't mean Tesla doesn't expect a license, a manufacturing agreement, or some other benefit.

One of the defining moments of the early PC industry was when IBM handed ownership of the operating system for its new PC to a small outfit from Redmond, WA. While not directly equivalent to Tesla's move, it's instructive in that in allowing its OS to leave its control, IBM essentially cemented the x86 PC architecture as the dominant PC platform. Surely, IBM regrets that the spoils of setting the standard largely benefitted Microsoft rather than IBM, but Tesla could not only set the standard, but also be the primary beneficiary.

Even with reduced pricing, it's clear there's never going to be a Tesla in every garage, but if a few hundred dollars' worth of Tesla technology are embedded in every Ford, Chevy, Honda, and Toyota, that's likely far more profitable than owning a niche market. While the move to share patented technology may well be enlightened, it's certainly not purely altruistic.

Pharma goes trolling

Pharma is no stranger to patents, with massive R&D costs and long product development cycles, yet until recently has leveraged patents largely as they were intended, to protect legitimate innovation. Now, many are acquiring patent portfolios and even launching preemptive lawsuits to block competitors from releasing their own hepatitis-C drugs, which appear poised to create a $20 billion annual market. While tech experiments with liberalized patents, pharma may be the scene of the next Apple vs. Google-style epic legal battle.

What's next for patents?

Many in the technology industry like to suggest that the patent is completely outmoded, in the worst case with banal quips about how "ideas need to be free," or with suggestions that invention is easy work, and execution is the hard part. For empirical evidence of how that belief system operates in reality, look at the rampant piracy of everything from software to clothing occurring primarily in Asia, and take it to its logical conclusion. If there is no financial reward to inventing, why would anyone strive to invent?

The experiment launched by Tesla is an interesting one, yet not the altruistic gesture that some have made it out to be. Tesla still holds legal ownership to its patents, and allowing use "in good faith" is analogous to someone allowing you to use their property "in good faith," all while gripping the leashes of a dozen snarling attack dogs looking in your direction.

A legal structure that protects invention and innovation, and allows the inventor to freely sell his or her patented inventions on an open market, is more important than ever. If an individual or smaller company cannot protect new ideas from large competitors, we're basically signing over the innovations of the next century to billion dollar conglomerates.

While Googles, Apple, and Tesla will continue to innovate, their innovations will likely protect their current interests and markets, rather than defining an entirely new market. However, the grey area that allows patents to become a "product" and a stick with which to beat money out of other companies is ineffective, unless you're one of the growing cadre of patent lawyers.

Automatically subscribe to TechRepublic's Tech Decision Maker newsletter.

Also see

Disclaimer: TechRepublic, ZDNet, and CNET are CBS Interactive properties.

About

Patrick Gray works for a global Fortune 500 consulting and IT services company and is the author of Breakthrough IT: Supercharging Organizational Value through Technology as well as the companion e-book The Breakthrough CIO's Companion. He has spent ...

0 comments

Editor's Picks