Tesla encourages free use of its patents—but will that protect users from liability?

Tesla Motors made big news yesterday with an open letter titled, “All Our Patent Are Belong to You.”

The gist of the letter was that Tesla Motors had decided that, in the interest of growing the market for electric vehicles and in the spirit of open source, it would not enforce its patents against “good faith” users. The key language was at the end of the second paragraph:

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

Tesla made clear it was not abandoning its patents, nor did it intend to stop acquiring new patents. Rather, it just wanted clear “intellectual property landmines” that it decided were endangering the “path to the creation of compelling electric vehicles.”

The announcement, made on the company’s website, immediately attracted laudatory media attention. (International Business Times, Los Angeles Times, San Jose Mercury News, Wall Street Journal, etc.) As one commentator for Forbes wrote:

[H]anding out patents to the world is smarter still when you think how resource-sapping the process is. Engineers want to build not fill out paperwork for nit-picking lawyers. Why bog them down with endless red tape form-filling only to end up having to build an expensive legal department to have to defend patents that would likely be got around anyway?

Patents are meant to slow competition but they also slow innovation. In an era when you can invent faster than you can patent, why not keep ahead by inventing?

That’s a pretty concise summary of the general response: Patents are bad, Tesla is good, and all friction in technological innovation would be solved if others followed Tesla’s lead.

Setting aside a pretty loaded normative debate, I had a practical concern. Just how legally enforceable would Tesla’s declaration be? That is, if a technologist practiced one of Tesla’s patents, would they really be free from liability?

The answer isn’t clear. (At least, it wasn’t to a number of us on Twitter yesterday.) Certainly, Tesla could enter into a gratis licensing arrangement with every interested party; a prudent GC should demand that Tesla do so, but it’s unlikely Tesla would want to invest the time and money. In a nod to the vagueness of Telsa’s announcement, CEO Elon Musk also told Wired that “the company is open to making simple agreements with companies that are worried about what using patents in ‘good faith’ really means.”

But assuming Tesla offers nothing more than a public promise not to sue “good faith” users, this announcement may be of little social benefit. Worse, it seems to me that such public promises could provide a new vehicle for trolling.

Sure, Tesla may be estopped from enforcing its patents—though estoppel requires reasonable reliance and this announcement is so vague that it’s difficult to imagine the reliance that would be reasonable—and Tesla isn’t in the patent trolling business anyway. (Sorry, patent-assertion-entity business). But what if Tesla sold its patents or went bankrupt. Could a third party not enforce the patents? If it could, patents promised to be open source would seem a rich market for PAEs.

Tesla is not to first to pledge its patents as open source. In fact, as Clark Asay pointed out, IBM has already been accused of reneging the promise. (See: “IBM now appears to be claiming the right to nullify the 2005 pledge at its sole discretion, rendering it a meaningless confidence trick.”) The questions raised by the Tesla announcement are, thus, not new. And, given enough time, courts will have to answer them.

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5 Responses

  1. What’s your theory on why reliance is unreasonable, given that while the details of the promise are vague, the core thrust is clear? And what’s your theory on why an estoppel wouldn’t bind successors in interest to the patents?

  2. Brad Greenberg says:

    James: That’s an interesting point, that even though the specifics are elusive, the purpose of the announcement is much-less vague.

    That said, how broadly would you define the clearly core thrust? To my reading, it clearly has electric vehicle technology in mind. More generally, maybe Tesla wants to encourage all sustainable transportation. Maybe even all eco-friendly projects. But would about practicing Tesla’s patents for something totally unrelated? The “good faith” couching seems to inject additional ambiguity.

    I spoke too emphatically about the unlikeliness of any reliance being reasonable. But in many situations, I think it would be uncertain.

    I had no separate theory of third-party enforceability; it was derivative of whether and when Tesla would be estopped or not.

  3. Paul Gowder says:

    Hmm… three thoughts.
    1) Is there any caselaw on what it would take to actually commit a patent to the public domain? Is there some formal process?
    2) Or what about an equivalent to Creative Commons for the patent domain? Would there really need to be individually negotiated license agreements, or could Tesla just post a website, put specs available for downloading, and say “by using these specs, you agree to these (open-source) terms?
    3) Finally, if Tesla turned around and sued, what about tort liability on some kind of fraud/interference with contract theory?

  4. Brad Greenberg says:

    1. Well, it’s not this: http://www.cbc.ca/news/business/tesla-puts-electric-car-patents-into-public-domain-1.2673617. I think the abandonment doctrine does that work: http://www.uspto.gov/web/offices/pac/mpep/s2134.html. An inventor also could publicize and fail to timely file a patent application, though I think the AIA makes this a risky move.

    2. I think so (and without the termination wrinkle that makes CC questionable in the longview).

    3. Tell me more about the theory.

  5. On the revocability of promises not to sue, I recommend the work of Chris Newman (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2010853) and Jennifer Urban and Jason Schultz (http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2040945) (the Defensive Patent License is a direct outgrowth of the latter).