Should Other CEOs Follow Tesla’s Musk and Open Their Patents?

Elon Musk, CEO of Tesla Motors, has shaken up the auto industry again, this time by announcing that Tesla Motors will let other companies use its patents, in a move inspired by an open-source agenda. And he promised that Tesla wouldn’t pursue lawsuits against any company that wants to use its technology “in good faith.”

The move has raised questions. Why did Musk do it? What impact will it have? And, for other CEOs and business owners, is Musk doing something we should be taking a look at?

“As altruistic as that approach may be, it still creates victims out of companies that aren’t innovating fast enough to keep up in an open environment.”

Such an open-source approach has swept the computer-software industry, of course, as the attitude has prevailed that technology and the industry as a whole move ahead faster if the structure of innovation invites contributions from everyone and isn’t restricted to patented corporate silos. But as altruistic as that approach may be, it still creates victims out of companies that aren’t innovating fast enough to keep up in an open environment, such as Microsoft and IBM.

As BloombergBusinessweek pointed out, Sun Microsystems once opted to open-source all of its products, but that move came under different circumstances. The company was known for its pricey proprietary software and had fallen on hard times because of it, the magazine noted, so it was looking for new ways to create interest in its hardware and save the company.

Would an open-source declaration work for rivals in other verticals? Would CPG companies, for instance, benefit by throwing open the pantry doors to all of the patents covering their hard-won gains with better-for-you ingredients? CEOs and business owners would need a lot of persuasion on that point.

Musk’s altruistic assertions aside, the long-term future of Tesla, even as it expands its model line downscale, depends on a further broadening of the skinny base of electric-vehicle sales beyond rich people who buy them as sporty and green-tinted playthings. If sharing old technologies will help in that regard, Tesla has little to lose. For any Tesla competitor to capture the masses, electric stalls must be easier for people who live in apartments and condos to access.

And make no mistake: Tesla isn’t standing still, so its old patents are only going to be of so much use to any rival. “You want to be innovating so fast that you invalidate your prior patents,” Musk wrote on his blog in announcing this move.

“This, ultimately, is a strategy of convenience. Would Musk release all his patents to the purview of rival Virgin Galactic and let Richard Branson … cherry-pick the technologies and innovations he likes? Probably not.”

Besides, so far, Tesla’s big advantage hasn’t been in its electric-vehicle battery systems per se, but in arenas such as appealing design, high-quality manufacture and effective marketing featuring Musk himself at the center of the Tesla universe. The key to its success as a vehicle designer and manufacturer has been Tesla’s ability to focus only on electric vehicles and to optimize everything around making them work well, and no other automaker is likely to duplicate that laser-like concentration anytime soon. Or to bankroll such a venture endlessly in the face of marketplace nonchalance, the way Musk did for years.

What’s more, Toyota let all sorts of rivals come in and look at its factories over the years, but none has ever been able to match the efficiency of the vaunted Toyota Production System. Toyota kept ahead of its competitors in manufacturing, and its recent marketplace travails haven’t had anything to do with vehicle quality.

This, ultimately, is a strategy of convenience. Would Musk release all his patents to the purview of rival Virgin Galactic and let Richard Branson, who’s competing with Musk to establish a viable space-flight business, cherry-pick the technologies and innovations he likes? Probably not.

FORBES: Tesla’s Elon Musk: Take Our Patents, They’re Yours

TESLA BLOG: All Our Patent[s] … Belong To You

THE GUARDIAN: BMW and Tesla executives meet to discuss electric cars

BLOOMBERG BUSINESSWEEK: Why Elon Musk Just Opened Tesla’s Patents to His Biggest Rivals

Dale Buss: Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other business publications. He lives in Michigan.