Tesla’s Patent Pledge: An altruistic act or a stroke of marketing genius?

It’s been more than five years since Tesla’s Patent Pledge, which saw Elon Musk announce that the company “will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology”. Musk explained his decision by referencing “the spirit of the open source movement”, the advancement of electric vehicle (“EV”) technology, and the urgency of the carbon crisis. Many articles have since written about the legal enforceability of the patent pledge and whether or not companies should begin using Tesla’s open source patents.

The immediate aftermath of the patent pledge was mixed with both public admiration and expert skepticism. Much of public reaction praised Musk for his efforts to combat climate change despite making moves that would hurt Tesla’s immediate and long-term goals. Share prices of the company dropped 1% that day despite strong growth year-to-date. Others were more suspicious of the patent pledge. Business leaders focused on the potential revenue boost from car battery sales with a more robust adoption of Tesla technologies. Lawyers focused on the “good faith” criteria and analyzed the legal requirements for using Tesla’s patents. In effect, adopting Tesla technology would mean opening up tremendous vulnerabilities of a company’s IP portfolio and giving up future actions against Tesla and other third parties that infringe on a company’s IP assets. At the end of the day, many of these experts suggested companies consider the cost-benefit before taking up on Musk’s offer.

Little has been reported whether competitors have taken up on Musk’s offer. The lack of news on companies adopting Tesla technology, however, is a strong indicator that many of their competitors have resisted. There was a brief mention in 2015 that some competitors have started using Tesla patents. But in 2019, Musk tweeted a reminder of Tesla’s Patent Pledge. Considering this fact, Musk clearly doesn’t think enough of his competitors are using Tesla technologies.

But whether or not you believe Musk has only good intentions or is publicly dangling a trap for his competitors, Tesla has already won. Since Tesla’s conception, the company has put tremendous emphasis on its branding and marketing materials. Its focus on eco-friendly and sustainability has struck a chord with the forward-thinking public. The pledge has already generated free publicity and furthered their brand. If companies begin using Tesla technology, Tesla gains access to more IP, expands on existing revenue sources, and adds protection to their IP assets. If not, the public would think Tesla’s competitors are unwilling to work with Tesla or sacrifice their competitive position for the greater good.

Written by Ryan Wong, a second year JD Candidate at Osgoode Hall Law School. He is a guest contributor with the IPilogue and is one of the Student Coordinators with the Innovation Clinic.

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