Tesla Motors’ Open Source Revolution: Intellectual Property and the Carbon Crisis

Matthew Rimmer


On the 12th June 2014, Elon Musk, the chief executive officer of the electric car manufacturer, Tesla Motors, announced in a blog that ‘all our patents belong to you.’ He explained that the company would adopt an open source philosophy in respect of its intellectual property in order to encourage the development of the industry of electric cars, and address the carbon crisis. Elon Musk made the dramatic, landmark announcement:

Yesterday, there was a wall of Tesla patents in the lobby of our Palo Alto headquarters. That is no longer the case. They have been removed, in the spirit of the open source movement, for the advancement of electric vehicle technology.

Elon Musk observed that ‘Tesla Motors was created to accelerate the advent of sustainable transport.’ He maintained: ‘If we clear a path to the creation of compelling electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal.’ Elon Musk promised: ‘Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.’ This statement has attracted a wide range of interest, because it raises important issues in respect of intellectual property; open source strategies; business; and innovation in clean technologies to address climate change.

  1. Intellectual Property
The Tesla Motors Patent Wall, Wikipedia

In his blog post, Elon Musk of Tesla Motors discussed his growing disenchantment with the patent system:

When I started out with my first company, Zip2, I thought patents were a good thing and worked hard to obtain them. And maybe they were good long ago, but too often these days they serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors. After Zip2, when I realized that receiving a patent really just meant that you bought a lottery ticket to a lawsuit, I avoided them whenever possible.

He showed a particular sensitivity to the problems of patent lawsuits.

Elon Musk noted that Tesla Motors, at first, sought to build a significant patent portfolio: ‘At Tesla, however, we felt compelled to create patents out of concern that the big car companies would copy our technology and then use their massive manufacturing, sales and marketing power to overwhelm Tesla’. The company developed a significant portfolio of patents in respect of electric cars and associated infrastructure. Elon Musk observed, though, that such an assumption was incorrect: ‘The unfortunate reality is the opposite: electric car programs (or programs for any vehicle that doesn’t burn hydrocarbons) at the major manufacturers are small to non-existent, constituting an average of far less than 1% of their total vehicle sales.’ He lamented: ‘At best, the large automakers are producing electric cars with limited range in limited volume’. Musk observed that some automobile manufacturers produced ‘no zero emission cars at all’.

Tesla Motors has been involved in a number of legal skirmishes in respect of intellectual property. In a 2013 dispute, Tesla Motors was involved in a skirmish with pointSET. On the 30th April 2013, an attorney for pointSET sent a letter to Tesla Motors, alleging that ‘Tesla induces infringement of claim 6 of United States Patent No. 7,379,541.’ The patent concerned a ‘method and apparatus for setting programmable features of a motor vehicle.’ The letter stated that ‘pointSET is offering a one-time, fully-paid licensing flat fee of $500,000' that ‘will cover both past and future use of the technology.’ In response, Tesla Motors sought a declaratory judgment of patent non-infringement in the United States District Court for the Northern District of California. Tesla Motors requested a judgment that ‘Tesla does not infringe and has not infringed, directly or indirectly, the ‘541 patent.’

Such disputes are not uncommon. In my 2011 book Intellectual Property and Climate Change: Inventing Clean Technologies, I considered the significant patent litigation in respect of green cars and transportation. There was an epic dispute between Paice LLC and Toyota Motors over patents regarding hybrid cars, such as the Toyota Prius. Toyota Motors was indignant at the litigation, calling its opponent a ‘patent shark’. However, the company fared poorly in the long-winded litigation. This conflict was eventually settled, with Toyota Motors paying royalties to Paice LLC. The dispute highlighted that there are major patent thickets surrounding green cars and green transportation.

The San Francisco civil society group, the Electronic Frontier Foundation (EFF), welcomed the decision of Tesla Motors to adopt an open source philosophy in respect of intellectual property. Adi Kamdar of the EFF commented: ‘Patent trolls run rampage while some big companies spend more money on patent wars than research and development.’ He observed: ‘This is why it is so encouraging when companies commit to openness, ensuring their patents do not obstruct future innovation.’ Adi Kamdar observed that the EFF had a published a guide to alternative patent licensing. He implored: ‘We would love to see Tesla commit their patents explicitly under an agreement like the Defensive Patent License, which sets a clear standard that patents are to be both shared and used for good.’ Kamdar observed that Musk’s stance on patent law was supported by a recent study by MIT’s Catherine Tucker on ‘The Effect of Patent Litigation and Patent Assertion Entities on Entrepreneurial Activity’ [PDF]. Kamdar hoped that the initiative of Tesla Motors would inspire others: ‘We are encouraged by Tesla’s announcement, and hope other companies—large and small—follow suit.’

Brad Greenberg wondered about the practicalities of enforcing Tesla Motors’ promise not to sue for patent infringement.

The decision of Tesla Motors has been a fillip for the patent reform movement. Julie Samuels of the public policy think thank, Engine, commented: ‘What you’re looking at here is the beginning of a new culture with regard to patents.’ She observed: ‘A lot of companies in the high tech space are dismayed with how the system is shaping up, so they’re trying to come up with creative ways to navigating around that system and get back to the business of innovating and creating.’ The announcement of Tesla Motors may help provide impetus for President Barack Obama’s efforts to address the problem of patent trolls and reduce patent litigation.

It should also be noted that Tesla Motors has not abandoned its intellectual property entirely. he company has only offered access for ‘good faith’ uses of its patents — which still leaves open the prospect of the company taking action against ‘bad faith’ uses of its patents. Professor Orly Lobel from the University of San Diego commented: ‘There’s a lot of thinking in the research these days on the gap between the codified knowledge that is patentable and gets disclosed versus tacit knowledge that really exists in how you actually produce. She noted: ‘That gap is probably relevant in this market.’

The company has also been involved in battles over other forms of intellectual property — most notably, in respect of trade marks relating to the United States, and China.

2. An Open Source Philosophy

Abby Martin https://www.youtube.com/watch?v=acEi1RG2uIw&feature=youtu.be

In his address, Elon Musk commented: ‘We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.’

The use of open source strategies to encourage collaboration and disseminate new technologies has a long tradition. Richard Stallman was groundbreaking in his use of free software licences to ensure that computer code was accessible. Open source developers used open source licensing to support their information technology products and services. Lawrence Lessig helped set up the Creative Commons in order to facilitate accessible licensing across a wide range of copyright works. Open source strategies have also been adopted in other fields of endeavour. There has been open source tactics deployed in respect of plant breeding and agriculture. As documented by Glyn Moody, the biological sciences have used open source licensing in response to the proliferation of gene patents and commercial databases. There has been experimentation with open source strategies in the field of medicine — such as in open drug discovery.

Elon Musk’s decision to adopt an open source philosophy in respect of electric cars has precedents in the area of clean technologies. In my book Intellectual Property and Climate Change: Inventing Clean Technologies, I explored a number of examples of co-operative strategies in respect of intellectual property and clean technologies. There has been a great deal of interest in innovation networks, patent pools, technology clearing houses, and open source strategies. The UNFCCC Climate Technology Centre and Network has been established to encourage research, development, and diffusion of clean technologies. The UNEP is hosting the centre, and co-ordinating a network of climate innovation centres. The Creative Commons movement, along with Nike and Best Buy, helped establish GreenXChange. However, this venture is no longer active. While at IBM, David Kappos was instrumental in establishing the Eco-Patent Commons. This initiative was designed ‘to provide an avenue by which innovations and solutions may be easily shared to accelerate and facilitate implementation to protect the environment and perhaps lead to further innovation.’ After Kappos left IBM to lead the United States Patent and Trademark Office, the Eco-Patent Commons has struggled to have an impact. There have also been a number of open source initiatives in respect of individual clean technology projects. More recently, the World Intellectual Property Organization has established WIPO Green to promote the diffusion of green technology.

Eric Lane, a Law Professor at the Thomas Jefferson School of Law, considered the strategy of Tesla Motors in the Green Patent Blog. He considered the precedent of the Eco-Patent Commons, and its mixed success. Lane observed: ‘So the Tesla-Patent Commons is very significant, and unlike any prior (small “e”) eco-patent commons, but the commercial and legal realities of dealing with patents and positioning technological businesses to be free to operate are always extremely complex.’ He commented upon the gambit by Tesla Motors: ‘Ultimately, the impact of Musk’s decision may turn on to what extent other such players will be motivated to invest in manufacturing vehicles, batteries, etc. using Tesla’s patented and patent-pending technology with the obvious upside being the proven innovation that technology brings and the down side being no exclusivity, instead of investing in their own R&D and patent protection where the upside may be exclusivity and the down side may be inferior or unproven technologies.’

Don Tapscott and Anthony Williams have argued for the use of open source strategies in respect of clean technologies. In their 2010 book MacroWikinomics, Tapscott and Williams called for the establishment of a green technology commons. The pair recognised: ‘It is quickly becoming clear that climate change will be the biggest issue that human civilisation has ever had to deal with.’ Tapscott and Williams were concerned about the limitations of existing responses to the problem of climate change. The writers promoted open and collaborative responses to climate change: ‘Tackling climate change will not only require unprecedented transformations in our systems of commerce and industry, it will also require fundamental changes to our way of life.’ The pair concluded: ‘We need to take the sum of mankind’s knowledge about sustainable technologies and industries, and share it for the sake of the planet and the future generations that will inhabit it.’

Similarly, the futurist Jeremy Rifkin considers the rise of collaborative commons in his recent book, The Zero Marginal Cost Society. He has observed that ‘a powerful new technology revolution is emerging that is going to fundamentally alter our economic life.’ Rifkin predicts: ‘The plummeting of marginal costs is spawning a hybrid economy — part capitalist market and part Collaborative Commons — with far reaching implications for society.’ Rifkin envisages: ‘Millions of people are already transferring parts of their economic lives to the global Collaborative Commons.’ He observes: ‘Prosumers are plugging into the fledgling Internet of Things (IoT) and making and sharing their own information, entertainment, green energy, and 3D-printed products at near zero marginal cost.’ Rifkin’s thesis is that monopoly capitalism will be displayed by a collaborative commons.

3. Technology Leadership

Tesla Motors Reel for the 2014 World Innovation Energy Forum https://www.youtube.com/watch?v=fkm00ZffzNM

The announcement by Tesla Motors also promoted a wider discussion about economics, business, and innovation in respect of the automobile industry. Professor Joshua Gans, an economist from the University of Toronto, commented, ‘This Tesla statement on patents will become the Gettysburg Address for our age.’

In his address, Elon Musk emphasized: ‘Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers.’ He hopes that his open source stratagem will enable him to compete with the big automobile manufacturers. Elon Musk has long desired to turn Tesla into the car company of the future.

Elon Musk’s embrace of an open source philosophy will also be powerful in terms of marketing and public relations — both within the industry, and with the wider community. Associated Press noted: ‘The open-source movement has long appealed to the egalitarian mindset of most technologists, so the patent decision could help recruit talent.’

Silicon Valley entrepreneur Aaron Levie, the CEO of Box Inc observed: ‘By opening its patents, Tesla rightly realises it’s better to be the best product in a large industry than the only product in a niche one.’

Tesla Motors has been in discussions with BMW about standardizing electric cars. A BMW spokesman said: ‘Both companies are strongly committed to the success of electro-mobility and discussed how to further strengthen the development of electro-mobility on an international level.’ There has been speculation about the development of a long-term deal between the two companies.

Writing in Slate, Will Oremus considered the announcement of Tesla Motors from a business perspective. He recognised: ‘This might seem like a rash move for a company that still faces big hurdles on its path to long-term, mainstream success.’ Oremus anticipated a polarised reaction to the address of Elon Musk: ‘Some will hail Musk as a hero, while others might dismiss him as a naïve idealist when he says that his ultimate goal is fighting climate change.’ He stressed, though, that ‘Musk isn’t naive, and Tesla isn’t a charity.’ Oremus observed that Tesla Motors was concerned about ‘the much greater struggle between electric cars and their gas-powered counterparts.’ He commented: ‘Viewed in that context, the obstacles to Tesla’s success aren’t the Nissan Leaf and the BMW i3—they’re the constraints of technology, cost, infrastructure, and customer expectations.’ Oremus concluded: ‘Best of all, if Musk’s gambit works, it could pave the way for forward-thinking CEOs in other fields to take similar steps.’

There was recognition that Musk’s position was not an entirely altruistic one. Jacob Sherkow from Stanford Law School noted: ‘Even if other competitors copy Tesla’s design, Tesla still gets to sell them batteries, and that’s pretty awesome.’

Timothy B. Lee considered the business strategy of Tesla Motors. He observed: ‘In practice, the biggest challenge many inventors face isn’t fending off copycats, it’s developing a market for the product in the first place.’ He noted: ‘In a new industry, competitors can actually help with this by helping spread news about the invention, pioneering better sales techniques, and developing improvements that make the product more attractive.’

There has been pessimism amongst some critics that the automobile industry will squander the present offered by Tesla Motors. Jason Perlow wrote an incisive piece entitled, ‘Why Detroit will Squander Tesla’s Patent Present.’ He suggested: ‘I suspect that one of the reasons behind Elon Musk’s open source motivations is that he is looking for large partners to finance and build the many “gigafactories” needed to mass-produce the batteries at scale, which is the single largest component cost of his cars, and the patent portfolio of Tesla is the “carrot.”’ Perlow wondered whether traditional manufacturers would invest in electric cars: ‘In order for the Big Three and the rest to make that leap, even with the patents, they will need to make substantial investments, on the order of many billions of dollars.’ He observed that there were longstanding relationships between the automobile manufacturers and the oil industry. Perlow concluded: ‘Unless our world governments step in and give them huge incentives to do otherwise, I don’t see the big auto manufacturers taking advantage of Musk’s gifts and breaking up a century-old romance with Big Oil.’

James Bessen, an economist from the Boston University School of Law, provided a thoughtful historical analysis of Tesla’s patent-sharing in the Harvard Business Review. He suggested that ‘the conditions that make knowledge sharing advantageous today won’t last forever.’ Bessen predicted: ‘Eventually electric vehicles will replace much of the market for gasoline-powered cars.’ He observed that at that stage, ‘competition from other electric vehicle makers will affect Tesla’s profits and such extensive sharing might no longer be beneficial.’

4. Sustainable Transportation, Clean Technology, and Climate Change

In his address, Elon Musk emphasized the need to build clean technologies to address the problem of climate change. He observed: ‘Given that annual new vehicle production is approaching 100 million per year and the global fleet is approximately 2 billion cars, it is impossible for Tesla to build electric cars fast enough to address the carbon crisis.’ Musk recognised: ‘By the same token, it means the market is enormous.’ He maintained: ‘Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day.’ Musk commented that there was a need to develop the innovation ecology in respect of electric cars: ‘We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.’

The decision to open source electric cars was praised by environmental leaders — such as the Sierra Club and the Climate Council in Australia. Jeff Tittel of the New Jersey Sierra Club has maintained: ‘We need zero-emission vehicles, which means we also need to educate consumers and inform them about the benefits of owning an electric car.’ Mark Ruffalo — the actor famous for playing the Incredible Hulk in the Avengers — was also admiring of Elon Musk’s elan, commenting: ‘Bravo Elon Musk you are a real super hero! So proud to know you. Such a cool thing to do!’

In its 2014 report upon mitigation, the Intergovernmental Panel on Climate Change devoted a chapter to the topic of Transportation. The executive summary noted that ‘Reducing global transport greenhouse gas (GHG) emissions will be challenging since the continuing growth in passenger and freight activity could outweigh all mitigation measures unless transport emissions can be strongly decoupled from GDP growth.’ The report warned: ‘Without aggressive and sustained mitigation policies being implemented, transport emissions could increase at a faster rate than emissions from the other energy end‐use sector and reach around 12 Gt CO2eq/yr by 2050.’ The report recommended: ‘Avoided journeys and modal shifts due to behavioural change, uptake of improved vehicle and engine performance technologies, low‐carbon fuels, investments in related infrastructure, and changes in the built environment, together offer high mitigation potential (high confidence).’ Amongst other things, the report considered the use of electric vehicles.

President Barack Obama has been keen to make electric cars more affordable and accessible to the American public. In his 2011 State of the Union address, he observed: ‘With more research and incentives, we can break our dependence on oil with biofuels, and become the first country to have a million electric vehicles on the road by 2015.’ He has sought to encourage United States innovators and entrepreneurs in the field of clean technology. Tesla has been supported by the United States Government through a US. Energy Department Vehicle Loan. Tesla was able to repay the loan to the government in 2013.

President Barack Obama, Commencement Address, UC Irvine, 14 June 2014.

As part of his agenda to act on climate change, President Barack Obama has been keen to promote United States innovation in respect of clean technologies — such as electric vehicles and other advanced green automobiles. On the 14th June 2014, President Barack Obama gave a commencement address to the University of California, Irvine. He told his audience:

We need scientists to design new fuels. We need farmers to help grow them. We need engineers to invent new technologies. We need entrepreneurs to sell those technologies. We need workers to operate assembly lines that hum with high-tech, zero-carbon components. We need builders to hammer into place the foundations for a clean energy age. We need diplomats and businessmen and women, and Peace Corps volunteers to help developing nations skip past the dirty phase of development and transition to sustainable sources of energy.

Obama recommended greater investment in renewable energy, and divestment from fossil fuels: ‘You need to invest in what helps, and divest from what harms.’ He observed: ‘You’ve got to remind everyone who represents you, at every level of government, that doing something about climate change is a prerequisite for your vote.’

It remains to be seen whether Elon Musk’s gift of patents will help President Barack Obama achieve his target of a 1 million electric vehicles on the road by 2015, and his larger ambition of reducing greenhouse gas emissions in the transportation sector.

Dr Matthew Rimmer is an Australian Research Council Future Fellow, working on Intellectual Property and Climate Change. He is an associate professor at the ANU College of Law, and an associate director of the Australian Centre for Intellectual Property in Agriculture (ACIPA). He holds a BA (Hons) and a University Medal in literature, and a LLB (Hons) from the Australian National University, and a PhD (Law) from the University of New South Wales. He is a member of the ANU Climate Change Institute. Dr Rimmer is the author of Digital Copyright and the Consumer Revolution: Hands off my iPod, Intellectual Property and Biotechnology: Biological Inventions, and Intellectual Property and Climate Change: Inventing Clean Technologies. He is an editor of Patent Law and Biological Inventions, Incentives for Global Public Health: Patent Law and Access to Essential Medicines, and Intellectual Property and Emerging Technologies: The New Biology. Rimmer has published widely on copyright law and information technology, patent law and biotechnology, access to medicines, clean technologies, and Indigenous intellectual property. His work is archived at SSRN Abstracts and Bepress Selected Works.

Reference: Matthew Rimmer, ‘Tesla Motors’ Open Source Revolution: Intellectual Property and the Carbon Crisis’, Medium, 16 June 2014.