The Great Patent Give-away

Has the world gone crazy? Are companies spending millions on R&D, tens of thousands on patent protection and just giving it all away? Tesla, Ford, Toyota - all have attracted headlines along the lines of "Company X opens up patent portfolio" or "Company Y gives away patents". But what's really going on?

Not shiny leather

Firstly, to understand what we're talking about, a patent is a negative intellectual property right. It does not afford the holder the right to do anything- it gives them the ability to stop others from working an invention.

So what is there to give away? Knowledge, in a word.

Part of the "patent deal" is that the patentee tells the world how to work the invention.  In exchange for this act of sharing, the patentee is awarded a monopoly. If the patentee chooses not to enforce this monopoly, he is effectively donating his invention to the public. This is what the recent headlines lead us to believe has happened.

Cool- free stuff!

Not so fast. Before you race to the garage to cobble together your very own electric car production line, there is some small print. I'm going to take a look at the three high profile offerings.

Tesla

Tesla's bold offer was the first on the block in June 2014. It begins:

"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."

The implication is that the patents have been ditched. That is most certainly not the case though. Any basic search can demonstrate that their patents are very much alive and kicking. 

Instead Tesla stated that:

"Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology."

Therefore the patents are standing fast. All that's changed is that Tesla have invited their competitors to the table under their own terms. Who knows what "good faith" means to Tesla? No right-minded automotive OEM is going to infringe Tesla's patents without a written licence.

So rather than giving the patents away Tesla are in fact moving towards a licence model. They are using the patents to steer the market- in this case inviting licensees into the fold to encourage more widespread R&D in electric vehicles, which benefits Tesla's long term strategy.

 

TOYOTA

Second in line in January 2015 were Toyota, "opening the door" for hydrogen fuel cell development.

Interestingly, Toyota state that third parties can use the patented technology "royalty free":

"Today’s announcement represents the first time that Toyota has made its patents available free of charge and reflects the company’s aggressive support for developing a hydrogen-based society."

GREAT! I hear you cry as you rush out to electrolyse some H2. Before you do, note that the door may be open, but Toyota have their hand firmly on the handle ready to slam it shut. 

"The hydrogen fuel cell patents will be made available to automakers ... through the initial market introduction period, anticipated to last until 2020."

Patents filed in 2015 may last until 2035- so there's a pretty big question here- what happens in 2020? Toyota don't say, but you can bet your bottom yen that the royalties will start to flow. The clue is in that Toyota ask interested parties to:

"...negotiate individual contracts with Toyota."

In other words Toyota are removing the barrier to entry (the threat of patent injunction and substantial royalties during market entry), but will certainly come knocking when the "initial market introduction period" is up. Should the take-up be significant, then Toyota will have a huge amount of control over the hydrogen fuel cell auto industry.

FORD

In May 2015 Ford made a similar announcement. In their own words:

"Ford is opening its portfolio of electrified vehicle technology patents to competitive automakers to accelerate industry-wide research and development of electrified vehicles"

Reading on, the offer gets a little less generous- and unlike Tesla and Toyota, Ford are a little more open about what the deal involves:

"To access Ford’s patents and published patent applications, interested parties can contact the company’s technology commercialization and licensing office, or work through AutoHarvest – an automaker collaborative innovation and licensing marketplace."

They add:

"The patents would be available for a fee."

No such thing as a free lunch. Like Tesla and Toyota, Ford are trying to stimulate the relevant industry whilst keeping their defences in situ. The main difference is that Ford want to get paid at the same time.

So no free stuff then?

None of the companies are giving up their patents. Instead they are using them to stimulate the industry and gain long term commercial advantage. The marketing spin is neatly demonstrated by Elon Musk, who talks about the "spirit of the open source movement" and says that patents:

"...serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors."

Which may be true- but then again Tesla have maintained their patent portfolio, and are still filing patent applications. Like Ford and Toyota, they are simply using patents (albeit in a new an innovative way) to leverage a commercial advantage.