In the world of automotive technology, patents exclusive to one automaker have traditionally been guarded as extremely valuable possessions, never to make it into a rival brand's hands.
When an automaker's flagship sports car model can boast up to 416 horsepower from an electric motor that achieves a fuel efficiency equivalent of up to 97 miles per gallon — as Tesla's Model S does — that's the kind of technology that is likely to remain under wraps for a long time.
On June 12, Tesla CEO Elon Musk turned that line of thinking on its head when he effectively made the company's patents available for free. Why would such a savvy entrepreneur like Musk — who has been likened to Robert Downey Jr.'s portrayal of "Iron Man" Tony Stark — make such an unconventional move, and what implications does it have on the automotive world?
For starters, Musk's patent strategy is an unconventional one because the electric car subsection of the auto world is such a small one at the moment. Even though electric cars more than doubled their year-on-year sales in 2013, they still represent slightly more than 0.5 percent of all new cars sold in the U.S. last year.
During a conference call shortly after the announcement, Musk said Tesla would no longer pursue patent lawsuits against anyone who wanted to use its technology in "good faith."
"I don’t think people quite appreciate the gravity of what is going on or just how much inertia the climate has," Musk said. "We really need to do something. It would be shortsighted if we try to hold these things close to our vest."
Tesla Motors
The Tesla Model S boasts up to 416 horsepower from an electric motor that achieves a fuel efficiency equivalent of up to 97 miles per gallon.
But as Musk has even pointed out, the release of patents isn't a completely humanitarian move or to just curry favor with environmentalists. With Tesla an established brand leader in electric cars, Musk has an interest in growing that part of the auto world, making it more affordable and closing the gap between his company and other plug-in electric car models.
Currently, Tesla's high-performance electric vehicles range from about $70,000 to $100,000 — hardly a price range for a middle-class auto buyer. Other vehicles such as Nissan's LEAF have a more affordable sticker price, but sacrifice performance.
However, for Musk's strategy to fully pay dividends, other automakers have to see value in and interpret Tesla's patents. Some are skeptical that other companies will gather much at all from the patents.
"Tesla is not revealing its trade secrets. There often is only so much information that you can get from a patent. Only Tesla knows how to put it all together in a cost-effective manner," wrote The Motley Fool's Nickey Friedman, who also suggested that the announcement was more publicity stunt than game-changer.
In the immediate aftermath of the patent release, a Financial Times story reported that Nissan and BMW were "keen" on collaboration talks and developing global charging standards for electric vehicles, but nothing has been reported of their talks in the weeks since.
AutoblogGreen reported at the end of June that both Honda and General Motors were each not nearly as friendly as Nissan and BMW. Honda touted its own Fit electric vehicle, while GM said it was more interested in the business side of Tesla than its technology.
It may be months or years before the full effects of Tesla's patent decision are known. Given the way other automakers traditionally guard patents, many of the same companies who say they aren't interested in the technology or are comfortable with their own patents could be investigating Tesla's regardless.
On Wall Street, investors liked the move, sending Tesla's stock up 14 percent from June 12 to 17. If other automakers gain that confidence, it could have benefits for Tesla, car lovers and the environment.
