Approach With Caution: Deconstructing Tesla’s Patent Pledge

This article was written by Emily Procyk, Patterson IP Law summer associate.

A company’s patent portfolio is often considered one of its largest investments, capable of providing a significant long-term advantage over the competition. Despite the advantages patents provide, some companies, including Red Hat, IBM, and Google, have begun opening their portfolios for public use.

Most recently, on June 12, 2014, Tesla Motors joined their ranks, when Elon Musk, Tesla’s CEO, released a blog post seemingly opening the company’s entire patent portfolio to the public. In his post, Musk pledged, “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use [Tesla’s] technology.” While appealing, companies should approach this pledge with an air of caution rather than taking the announcement at face value.

The Tesla patent pledge differs from previous patent pledges in two key regards. First and foremost, Tesla’s patent pledge does not contain any assertion that the pledge is intended to be legally binding. The announcement was made in a blog post, the enforceability of which has yet to be tested in a court of law. The analogous pledges of Red Hat, IBM, and Google all contained language to assure potential users their pledges were legally binding. For example, IBM’s patent pledge contains the specific language “IBM’s Legally Binding Commitment Not To Assert the 500 Named Patents.” The lack of such language in Tesla’s pledge is the first red-flag, and for this reason alone, the use of Tesla’s patents should be approached cautiously.

The broad loophole included in Tesla’s patent pledge only exacerbates the potential for concern. Musk included a “good faith” requirement for the unlicensed use of Tesla’s patents. These two little words, in actuality, carry a significant amount of weight. The term “good faith” is undefined in the post and therefore open to a broad degree of interpretation. Including this requirement leaves the door open for Tesla to later sue anyone they believe is using their technology in a manner of which they do not approve. While it is unlikely that the use of Tesla’s patented technology in a gasoline or hybrid vehicle would still be considered good faith, just how far the “good faith” limitation extends is unclear. This lack of clarity could prove troublesome for companies that embrace Tesla’s offer.

Although Tesla’s patent pledge was portrayed as an altruistic commitment to the furtherance of electric vehicle technology and climate change concerns, it is important to remember that Tesla is still a company. Accordingly, their business and monetary motives must be considered. Tesla’s patent pledge has the potential to encourage other companies interested in electric vehicle technology to partner with Tesla in the financing of their new lithium-ion battery plant and the construction of additional charging stations. Prospective users should approach cautiously and perhaps view Tesla’s patent pledge more as an offer to willingly engage in license negotiations than as free-for-all access to Tesla’s patent portfolio.