PROMETHEAN PIONEERS BRING ABOUT WINDS OF CHANGE

U.S. patent laws were created to encourage innovation. The logic behind patents is that an inventor would disclose to the public the specifics of their innovation in exchange for a controlling monopoly in the invention for a protected period of time. When the patent expired the protected idea would take on a new life and be open for public use and benefit. However, there has been recent conversation by academics and scholars that suggest that patents discourage innovation.

Alberto Galasso of the Rotman School of Management at the University of Toronto and Mark Schankerman of the London School of Economics published a study on patent invalidation early this year in the National Bureau of Economic Research. Galasso and Schankerman’s study found that the U.S. patent system inhibited innovation.

The scholars’ research showed that when patents are invalidated, there is a subsequent increase in innovation around the original idea. Galasso and Schankerman explained how protected upstream technology inhibits downstream innovation by limiting the downstream inventor from expanding upon an original idea. On the heels of this current wave of insight around invalidating patents, Tesla’s CEO and co-founder Elon Musk announced in 2014 that his company would allow its automotive technology patents for use by anyone in good faith.

Was this a clever plan by Elon Musk to entice automobile manufacturers to speed up the development of electric cars, an altruistic gesture, or does Mr. Musk lack an understanding in how patents work? The Financial Times reported that by freeing up its patents to automotive rivals such as BMW and Toyota, Tesla has started dialogue and innovation around the expansion of its charging networks across the U.S., thus standardizing the supercharger industry. Mr. Musk’s plan is “Promethean” to say the least. Mr. Musk has cunningly cut the expenses Tesla would incur educating the market and building an electric car infrastructure by ceasing the enforcement of its patents. Freeing up Tesla’s patents to the open market may appear to be a counterintuitive business decision, but this bold move will allow other companies to not only use Tesla’s current network of charging stations but to expand its footprint spanning the east and west coasts of the U.S.

Elon Musk is counting on his pioneering efforts to bring about the winds of change that would standardize electric car specifications, and revolutionize how patent protection is viewed. It appears Elon Musk has a very sound understanding of how patents can work to ones advantage when executing a Promethean business model.

By: William Taylor, Associate Editor of Business & Technology

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