Saturday, June 14, 2014

Musk, Tesla, and patents

The subject of patents is almost endlessly fascinating.  Actually figuring out something new from the infinity of possibilities is already really difficult but figuring out something new that is useful and successful in the markets is nearly impossible.  Compared to making something the first time, copying a successful innovation is almost laughably easy.  Anyone who plays in the world of technology understands this which is why the idea of legally protecting the originator was born. The patent is supposed to reward the originator of a technological idea with a temporary monopoly (seventeen years.)

Unfortunately, while the idea of patents is legally and economically sound, the practice has been sullied by scheming lawyers, patent trolls, and the rest of the Predators who wish to prey on a good Producer Class idea.  Patents were already in ethical limbo back when a lawyer named George B. Seldon was granted a patent on the automobile in 1895.  The idea that someone could patent the idea of a self-propelled four-wheel vehicle is essentially absurd because a real motorcar is a combination of literally thousands of patentable ideas.  So when Seldon decided to enforce his patent against Henry Ford, a man who had actually made a successful car and knew the scope of the inventiveness it required to build one, Ford fought back and eventually beat him in court.  As a result, Ford Motor patented almost nothing while old Henry lived.  He claimed that an original idea was far less important than the execution of the idea anyway.  Not many USA manufacturers followed Ford's lead but we should assume they all knew his viewpoint.

The real blow to the patent idea came when Asia figured out modern manufacturing.  These are cultures that elevate copying to an art form.  Soon it became almost impossible to enforce patents in Asia.  All the advantages of being second resulted in Asian dominance in industries that made highly complex products—cars, cameras, electronics.  Of course, dominance means you have become a "first" just waiting for a new "second" to emerge.  And so we see the South Korean automobile industry slavishly copying the Japanese playbook.

It has become my contention that patents have very little to offer industrial progress any longer and that patent litigation has become this jobs program for lawyers.  Patents will not totally disappear because they are still culturally meaningful to the Producer Classes.  Being granted a patent means that you have become another refutation of the lie that there is nothing new under the sun.  Damn hard to shun such an honor.  It is noteworthy that when Elon Musk recently announced that he would no longer enforce his patents against those who copy in good faith, one of the signs of his seriousness was that his patents that covered a whole headquarters wall were removed from their frames.  But understand, they were up there in the first place.

Tesla Is Giving Away All Of Its Ideas For Free

The Huffington Post | By Alexander C. Kaufman 06/12/2014

Tesla is giving away its special sauce.

CEO Elon Musk pledged Thursday that the electric carmaker will not sue anyone who uses Tesla’s patented technology “in good faith,” in hopes of cultivating a bigger industry for rechargeable vehicles.

“If we clear a path to the creation of electric vehicles, but then lay intellectual property landmines behind us to inhibit others, we are acting in a manner contrary to that goal,” Musk wrote in a blog post. “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

At a shareholder meeting earlier this month, Musk had hinted that he planned to do something “fairly controversial” with the company’s patents.

The rock star entrepreneur, who also founded the private space transport company SpaceX, said he originally secured patents to prevent the auto industry goliaths from absorbing Tesla’s trade secrets and crushing the startup. However, Musk said, the big players don't seem all that interested in Tesla's work.

Disappointed by what he described as big car companies’ “small to non-existent” investments in electric cars, Musk said he is letting others use the patented ideas in order to foster some creativity among other entrepreneurs.

Tesla pioneered the electric car market with its luxury Model S. By allowing others to use Tesla's good ideas, including patents on the technology used to build its network of supercharger stations, Musk could create more options for consumers looking to make the switch to an electric car.

A Tesla spokeswoman did not immediately respond to a request from The Huffington Post for comment.

According to the blog post, the company has taken down patents previously framed in the lobby of its Palo Alto headquarters.

It's a bold move by a man who once so feared knockoffs of his inventions that he called publishing patents "farcical."

Carter Driscoll, a senior tech analyst at investment bank MLV & Co., told HuffPost that Tesla could be trying to entice innovators to build battery-powered cars that are compatible with Tesla chargers. Doing so would help Tesla become the industry backbone and expand its network of power stations without building them itself, he said.

"On the charging side, there is no standard," he said by phone. "This is [Tesla] trying to create some standardize the technology they've created."

Patent reform has been at the forefront of political issues in Silicon Valley, where Tesla is based. An entire industry of “patent trolls” profits by suing entrepreneurs who violate patents often registered to litigious companies that do little else other than hold those certificates. Holes in intellectual property law also fail to protect companies from international competitors. In China, Tesla recently won a legal battle with a businessman who trademarked the transliteration of the company's name.

A study published last month by MIT’s Sloan School of Business estimated that venture capitalists would have invested upward of $21.7 billion over the last five years if not for fear of litigation.

Still, the big executives in the car industry -- more concerned at the moment with a wave of high-profile safety recalls than electric competitors -- seem to scoff at Musk, according to auto consultant Edward Niedermeyer.

“When you ask auto-industry insiders about Musk’s affection for contrarian business models, they invariably roll their eyes,” he wrote in a post for Bloomberg View. “They see Tesla as too small to be anything more than a gadfly, and Musk as something between a well-intentioned amateur and a downright charlatan.”

However, save for a dip after lackluster fourth-quarter results last year, Tesla has remained a Wall Street darling since becoming profitable in the first quarter of 2013. Meanwhile, stock prices have stagnated for other major carmakers, including Audi, Toyota, Ford and General Motors.

And it’s those companies that Musk sees as his real opponent.

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

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