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September 15, 2014

Tesla’s removal of patent restrictions a boost for electric cars

Christine Fimognari

In an unexpected move that may have a big impact on transportation, luxury electric car maker Tesla Motors announced in June that it will allow others to freely use its patented technologies in the spirit of the open source movement.

If disclosing the patents achieves Tesla's goal to expand the electric car industry, it will support Massachusetts' effort to decrease fuel emissions. The potential success of this move has already caused some to denounce the patent system as ineffective for technological development. But Tesla's decision represents just another in a history of technologies that lack competition within their industries and develop outside the patent system to combat threats from other industries.

Tesla's decision has received considerable attention from open source proponents because it runs counter to conventional logic on how patents work. Tesla CEO Elon Musk and other open source supporters insist that patents actually inhibit development. In contrast to the traditional patent structure in which companies protect their technology from competitors, companies operating under the open source model share their technology with other firms in their industries through free licenses.

Tesla's adoption of the open source model has increased skepticism of the patent system's usefulness. For example, William J. Watkins Jr., a research fellow at The Independent Institute and author of Patent Trolls: Predatory Litigation and the Smothering of Innovation, said in a Forbes article that Tesla's decision indicates deeper problems with patents.

Historically, similar patent problems have plagued industries such as railroads without eliminating patents' utility, indicating that Tesla's action will not lead to groundbreaking change to the patent system.

The electric car industry can benefit from a brief sharing of technology. Today, the market is tiny, but other companies using Tesla's technology will expand the industry. That will lead other firms to invest in complementary technologies such as charging stations. Also, Tesla's decision can allow others to produce cheaper models instead of high-performance luxury vehicles that would compete with Tesla. Once the industry has developed, Tesla can return to the patent system to protect its position.

Tesla's move also coincides with Massachusetts' efforts to promote electric car usage as part of its goal to cut fuel emissions. For example, the Worcester Regional Transit Authority uses environmentally friendly electric buses and new incentive programs aimed at expanding the use of electric vehicles.

Though Tesla's disclosure may decrease the prices of electric cars and increase their popularity, it's premature to celebrate the success of open source. Once electric cars become more popular, regular competition will resume, along with reinstitution of patents. When companies' true competition lies outside established industries, such as the traditional gasoline-powered car industry for electric cars, innovative processes may develop better outside the patent framework. But history indicates that while forays outside the patent system may prove useful for emerging industries that face little internal competition, the patent system remains as a way to incentivize innovation through the protection of new technology from competitors in standard competitive industries.

Christine Fimognari is a senior at the College of the Holy Cross in Worcester, majoring in political science and sociology.

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