George Mason Law Professor Adam Mossoff published an article in the university’s Center for the Protection of Intellectual Property blog last week titled “Tesla’s New Patent Policy: Long Live the Patent System!” Mossoff’s piece is in response to a blog post by Tesla CEO Elon Musk, revealing that the electric car company would not sue companies who use its patents in “good faith.”
Mossoff writes that the announcement is not quite what it seems at first blush:
The reality is that Tesla is not disclaiming its patent rights, despite Musk’s title to his announcement or his invocation in his announcement of the tread-worn cliché today that patents impede innovation. In fact, Tesla’s new policy is an example of Musk exercising patent rights, not abandoning them.
Mossoff explains that Tesla’s “good faith” language is the key to understanding its strategy. In fact, Tesla is talking about a cross-license, which is a common practice in all industries:
In plain English, here’s the deal that Tesla is offering to manufacturers and users of its electrical car technology: in exchange for using Tesla’s patents, the users of Tesla’s patents cannot file patent infringement lawsuits against Tesla if Tesla uses their other patents. In other words, this is a classic deal made between businesses all of the time — you can use my property and I can use your property, and we cannot sue each other. It’s a similar deal to that made between two neighbors who agree to permit each other to cross each other’s backyard… Thus, each party has licensed the other to make, use and sell their respective patented technologies; in patent law parlance, it’s a “cross license.”
Tesla’s strategy is a sound business approach, argues Mossoff, and one likely to bring commercial and brand value to the company:
Tesla’s decision to cross license its old patents makes sense. Tesla Motors has already extracted much of the value from these old patents… Now that everyone associates radical, cutting-edge innovation with Tesla, Musk can shift in his strategic use of his company’s assets, including his intellectual property rights, such as relying more heavily on the goodwill associated with the Tesla trademark.
Let us know what you think. Is Tesla abandoning its patent rights or, in fact, exercising them to the full extent of the law and opening the door to a more fulsome view of patent licensing models?