Elon Musk’s huge patent bet could doom Tesla, even if it’s great for the rest of us


(Steve Jurvetson)

Huge news: Tesla is basically telling everyone to use its patents and make their own awesome electric cars, piggybacking off of Elon Musk's corporate research. The company is vowing not to sue anyone who, "in good faith, wants to use our technology."

The announcement is great for everyone who wants to bury gas-guzzlers just like the dug-up fossils they run on. But is it good for Tesla?

Musk obviously thinks so, saying confidently in a blog post that the potential market for electric cars is so big that Tesla has no competitors to worry about.

"Our true competition is not the small trickle of non-Tesla electric cars being produced," he wrote, "but rather the enormous flood of gasoline cars pouring out of the world’s factories every day."

This is true as far as it goes, but history teaches that opening up your patents to the world can be a gutsy, even company-ending move. Take one of the most innovative firms that's ever existed: AT&T. Its research division invented the mobile phone, the commercial satellite — and the transistor, the basic electronic building block that makes all of today's technologies tick.

AT&T's main interest in the transistor was to reduce the costs of carrying phone calls, but its executives intuitively grasped how the technology could upend other industries, too. They didn't see why a phone company should keep the blueprints of such a revolutionary technology to itself. So AT&T said, to all comers, Pay us a one-time fee of $25,000, and you can use the transistor however you want. In the 1950s, this was an incredible deal. Eventually, AT&T would cut even that fee to zero as part of a deal with federal antitrust officials to keep control of its long-distance telephone operations.

These moves allowed little start-ups, such as Texas Instruments and Sony, to start developing their own technologies on the back of the transistor. These companies grew and grew into global behemoths, and over time they came to challenge AT&T's dominance as a technology titan as the focus of communications moved away from the telephone and toward computing.

Tesla faces the same basic dilemma. Sooner or later, someone could build a car — or something even more advanced — using Musk's technology and eclipse the nation's sexiest electric vehicle manufacturer. Tesla itself could get squeezed out of the business.

So for Tesla, to open up all of its patents is a pretty big, long-term risk. But the company doesn't really have much choice. Here's why.

Electric vehicles are distinct from other technologies in that they require a special network of electric charging stations all across the country. Unless a driver in California can be sure there'll be enough juice to get him to New Jersey, electric cars will never become a viable alternative to gasoline vehicles.

Tesla needs electric cars to become widely adopted if the company is to succeed. It'd be even better if all electric vehicles used the same batteries, the same plugs, the same everything. If some competitor designed a different system in Florida that was incompatible, you'd wind up with a patchwork of electric vehicle infrastructure, and that doesn't serve the national goal of cutting carbon emissions.

Musk is making a huge bet, but he isn't crazy. If he were, then he'd free up the patents owned by SpaceX, too. Musk knows that the market for space launches is much more limited; he's even sued the U.S. government because it insists on letting the same two aerospace companies put the Pentagon's satellites into space. The space launch industry also doesn't require a nationwide infrastructure (or mass public buy-in) to sustain it.

By contrast, the electric vehicle market needs both of those things.

Brian Fung covers technology for The Washington Post.
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