Best technology news in weeks: Electric car maker Tesla opens up all its patents.

Tesla, under charismatic CEO and founder Elon Musk, has become “the new Apple.”

Its share price has doubled in the last twelve months, taking its market value to $25 billion, as its cars are voted Car of the Year, Best Car Ever Tested, etc.

By pricing electric cars in the $100,000 – $200,000 range, Tesla have made them highly desirable. (Performance may also be helping. The Tesla Roadster reaches 100km/h in 3.9 seconds.)

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Last night the company did something unprecedented. It has released its patents (In a press release entitled “All our patent are belong to you.” (Don’t understand why they’d use that grammar? Click here.))

Tesla has an eye for good PR. But this is more than that. It’s an attack on the whole 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.” – Elon Musk, June 2014.

Musk has tapped into something vital. Patents (like copyright and trademarks) have long since broken their moorings to the island of usefulness and drifted off into an ocean of fantasy, where piratical lawyers rule the waves.

It’s not just inventions that can be patented, but “business processes.”

This is the embodiment of “patent trolling.”

Patents are private property though, so this should be fair enough, right? Wrong. From society’s perspective, possession of patents is very different to possession of something physical.

Owning an idea is a contrivance invented for the sole purpose of encouraging ideas. But ideas work best when they spread. A patent is therefore of most value when it balances encouraging new ideas and spreading existing ideas. Exclusive, indefinite use of a patent is arguably worse than never having a patent at all.

Some industries thrive without patents. Australia’s restaurant industry, for example, is electric with innovation. But you never see a chef hiring a patent attorney to show that a pumpkin and fennel soup on a menu across town is similar enough to warrant the paying of royalties.

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A patent for a process for turning warm bean juice into a big deal by the application of hipsters? I may have just made a fortune with this idea.

Unlike the US, Australia is not a rich environment for patent trolling, thanks to our rather more discriminating legal system.

The Australian government’s current review of competition policy has patent law under the microscope. The issues paper (released April 2014) appears to show willingness to move Australia even further from the clutches of the patent trolls.

“…[P]roviding too much protection for IP can deter competition and limit choice for consumers… Are there restrictions arising from IP laws that have an unduly adverse impact on competition? Can the objectives of these IP laws be achieved in a manner more conducive to competition?”

But a risk to this benign environment is on the horizon, in the form of the Trans-Pacific Partnership. Documents obtained by Wikileaks suggest the TPP will require signatories – which Australia is likely to become – to adopt laws as stringent as America’s, or more stringent.

That could see patents renewable where a new use can be found for an existing product, and copyright protections lasting up to 70 years beyond the life of the author.

Australians could pay more for drugs and medicines, movies, computer games and software, and be placed under surveillance as part of a US-led crackdown on internet piracy…” according to an article in the Sydney Morning Herald.

In Australia at present, copyright is a bigger issue than patents.

Consider the copyright over the tune “Kookaburra Sits in the Old Gum Tree.” That classic children’s tune was composed in 1932. But when, in 2008, a faint similarity was heard with the Men At Work song Land Down Under (itself released in 1981) the record label that owned copyright to Kookaburra pursued the songwriters. Some months later Men at Work’s Greg Ham – who played the riff deemed to be plagiarised – was dead by his own hand.

The courts required five per cent of royalties from the hit song to be paid to the owner of the copyright, and in 2011, the Federal Court refused to hear an appeal.

(The Song Happy Birthday is also copyrighted. It is owned by Warner/Chappell Music, which collects a reported $2 million a year in royalties.)

I’d be willing to sell off every childhood song we have, from Twinkle Twinkle to the Incy Wincy Spider, if it spurred more innovation in childhood songs. Similarly, I’d be happy for patents to establish a chokehold on the technology industry, if they clearly generated better products for consumers.

But there’s plenty of evidence patents don’t work, and worse, they make the innovation environment worse.

And that’s what inspired this surprising move by Tesla. Let’s hope many more follow them.

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. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.” – Elon Musk

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thomasthethinkengine

Thomas the Think Engine is the blog of a trained economist. It comes to you from Melbourne Australia.

5 thoughts on “Best technology news in weeks: Electric car maker Tesla opens up all its patents.”

  1. I think Tesla did this not for altruistic reasons. Indeed if they did, their shareholders would be very unhappy. They snow have such a leading premium position in the market that they need other players to come in with cheap bulk electric cars to make the market bigger, increase pressure for electric car infrastructure (charging stations etc), which may very well end up using their patented plug/adaptor designs etc.

    They need electric cars to become mainstream to maintain their growth. As a boutique operation (relatively) they will always hit barriers from the path-dependence of our cities and infrastructure on petrol cars. And indeed, they will hit vested interests that will be upset along the way (e.g., dealer distribution in some US states). With the whole auto-industry on board, they can push through these barriers.

    Google gives free stuff away all the time. The economic logic is that the more people they can attract to their services, the more time people spend online, the more money they make because they essentially hava a monopoly on online advertising.

    Look I think it’s a good thing for society in general, but don’t think it isn’t also a good thing for Tesla.

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  2. Interesting article and I think it is pretty obvious that both excessive copyrighting and patenting are stifling innovation not fostering it. The question that needs to be asked is why politicians go against both the interests and wishes of the majority of the country when they negotiate trade deals and make laws. Take a simple issue like a bottle deposit scheme which has widespread support in the electorate but none in parliament. It’s time to admit the current political duopoly is not working out for trivial or important stuff and narrow commercial interests have a lock on the policy process.

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  3. The catchy riff that underpins ‘Somebody that I Used to Know’ sounds remarkably like the tune of ‘Baa Baa Black Sheep, Have You Any Wool’, but nobody has taken Gotye to task for copyright breach yet. Maybe no one owns the Baa Baa copyright?

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