On June 12, 2014, Tesla CEO Elon Musk said on the company’s web site that “All Our Patent Belong to You.” In adopting an “open source” policy to allow others to use the company’s patented intellectual property for free, Tesla’s stock (NASDAQ-TSLA) went up and the company got lots of publicity. But the statement preserved patent rights by requiring “good faith”, which is definitely not “open source.”
Now, in a bizarre move, Musk has announced unlimited free-use of Tesla’s patents. Twenty-four hours later, Apple leaked that it is designing an electric vehicle and is now bidding to recruit Tesla employees.
As Breitbart reported last week in ‘Tesla Blows through Cash; Stock Plummets on Loss,” Elon Musk said at a recent press conference in Detroit that missing deliveries and a stunning loss of -$107.6 million in the fourth quarter of 2014 were inconsequential for the company. Musk said he was committed to the future and believed Tesla’s stock value would rise by 28 times over the next decade to equal Apple’s $700 billion value.
Due to Musk’s cheerleading, the -$18.30 crash in the stock was cut to a loss of -$9.92 by the end of the day. Musk did not mention that the stock had been as high as $291.42 in early September, before oil prices were cut in half and electric vehicle (EV) competition rose from such pesky upstarts as Mercedes, Audi and BMW.
Musk’s June statement said Tesla opened-sourced its patents because the company had no intention to lay “landmines” to serve as impediments to other companies producing EVs and advancing the state of the art in electric transportation. Despite the “loftiness in the tone” of Musk’s statements, analysts at Technology Equity Strategies “focused on a vague limitation in the announcement that potentially eviscerated the action, or at minimum undermined the clarity of the grand gesture.”
By adding what lawyers call a hedge clause, “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.” In other words, Tesla only agreed not to “initiate” a lawsuit. Tesla still requires “good faith” use of their patents, which may include the user being forced to give a free cross-license for all of their patents to Tesla. Without “good faith,” Tesla retains the right to countersue on the value of its patents.
The fact that no auto company has asked in “good faith” for free use of Tesla’s patents seems to confirm that Musk’s comments were meant to provide a type of free publicity for Tesla’s moral superiority over the industry, rather than a free gift of patents.
Maybe it was the stress of trying to defend bad earnings, but Musk said at the Detroit Car Show press conference that he was there “to talk about electric vehicles and to do what I can encourage the other car companies to accelerate their electric vehicle programs.” Musk said that not only included Tesla’s “open-sourced” patents, but also: “We actually don’t require any formal discussions. So they can just go ahead and use them.”
In the live broadcast interview, the questioner asked: “Is there a license required? Musk replied: “No. You just use them. Which I think is better because then we don’t need to get into any kind of discussions or whatever.”
Tesla’s competitors must have jumped for joy. Musk’s explicit statements created a legal “estoppel,” meaning Tesla made a “promise” not assert its patent rights against product developers. Such a promise has the same legal value as an unlimited license.
Patents are very valuable assets! GM and Toyota each have over ten thousand patents representing tens of billions of dollars in development costs. GM was issued 1621 patents in 2013 and has led all U.S. companies since 2002 in the receipt of “clean energy” patents. Toyota was the number one recipient of U.S. auto patents in 2013.
If Steve Jobs was still alive, he would have warned Musk that Apple financially learned the hard way what the loss of patents can mean. By Steve Jobs opening up Apple’s intellectual property to the basic Mac interface with a royalty-free license to Microsoft, Windows took 95% of the entire PC market from Apple, and nearly bankrupted Jobs’s company.
Following Musk’s generous gift, Apple leaked that it has hundreds of people working on Project Titan to build a self-driving electric vehicle. The effort is led by former Ford engineer Steve Zadesky, who helped build the iPhone, and Johann Jungwirth, who was Mercedes Benz’s R&D chief before being hired by Apple in September 2014.
Apple is trying to recruit from Tesla staff by offering $250,000 starting bonuses and 60% pay bumps to jump to Apple, according to Bloomberg. Apple already has at least 50 former Tesla employees on the books, according to LinkedIn.
If you are interested in California, please click on: Cal High Speed Rail Confiscating Farms for Development Rights.