Benjamin Wey, Musk’s Tesla Car Patent Giveaway Is Genius

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Benjamin Wey is a journalist and a Wall Street financier, CEO of New York Global Group.  A graduate of Columbia University, Benjamin Wey is a senior adviser to government entities and businesses. Mr. Wey shares his thoughts about marketing and operational management issues with our readers:  

Protection of intellectual property is, itself, a big business. Apple and Samsung recently duked it out in court for literally billions of dollars over patent protection. That was just one case out of hundreds, even thousands, that keep IP lawyers in business. So, when billionaire Elon Musk, chief executive of Tesla Motors gave the world free access to all of Tesla’s patents, lots of people thought he was crazy. Well, crazy like a fox perhaps.

On his company’s blog, Musk wrote, “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.”

His reason for opening up his IP portfolio to anyone who wants to use it in good faith is clear. The big car companies aren’t making enough electric cars, “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. We couldn’t have been more wrong. 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. At best, the large automakers are producing electric cars with limited range in limited volume. Some produce no zero emission cars at all.”

Musk also said, “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. We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.”

I don’t doubt his sincerity, and it’s pretty obvious to me that if you let everyone use the patents from the world’s most advanced electric car company, you’ll probably get a surge in electric car manufacturing. If Musk really sees gasoline-powered cars as the competition, more electric car makers aren’t competitors so much as they are allies.

But you don’t become a billionaire by giving things away without any return at all. From a business standpoint, Tesla is making a long-term investment in itself by giving away the patents it holds to anyone who wants to use them to make electric cars.

How? No one in business wants to re-invent the wheel, even when it’s attached to an electric car. If I wanted to start an electric car business today, it is much easier for me to base everything I am going to do on Tesla’s existing technology. Why would I go back to first principles and do all of that work when it has been handed to me on a silver platter?

And that’s the genius of this giveaway. All future electric car design is likely to be based almost entirely on the technology that Tesla has mastered. One area where this is likely to prove significant is in charging and battery technology. As of this minute, I can adopt Tesla’s standards in any new electric car I design and build — or I can spend millions coming up with my own or buying a license from someone less generous with their intellectual property. I’m willing to bet that Tesla’s standards become the industry standards pretty quickly.

Tesla’s main problems are no longer in making an electric car that people want to buy — they now stem from there being too few electric cars on the road to make charging stations and better battery technology cheap, simple and commonplace. Spending millions to make billions is good business sense, and that is exactly what Musk has just done.

Like Benjamin Wey said, Tesla’s move was crazy and smart like a fox.

Benjamin Wey is a journalist, financier, and a contributing journalist for TheBlot Magazine

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