Why Tesla and Toyota’s Patent-Sharing Strategies Are Not for Everyone

Toyota and Tesla are clearly taking divergent paths when it comes to the alternative fuel of the future, with Tesla relying on the battery power in its electric vehicles, and Toyota basically forswearing fully electric vehicles in favor of new hydrogen-powered automobiles.

But Tesla CEO Elon Musk and Toyota CEO Akio Toyoda at least have agreed on one way to achieve their widely varying visions of the future of the automobile: open up their patents on the technologies they’re promoting in the hopes of encouraging other automakers to contribute their own efforts in that area and create a critical mass of technology adoption and development that will push the company’s choice of future power trains across the finish line first.

Toyota said recently that it would invite competitors to use its hydrogen-cell patents for free until 2020 in an effort to kick-start the market for hydrogen-powered cars such as its Mirai, which goes on sale later this year. Honda already has an advanced fuel-cell effort underway, too, while General Motors and Hyundai also have been pursuing the technology.

“Unless your company finds itself in a position where it absolutely needs to set the standard to guarantee the survivability of your approach, then opening up your IP in this way is likely of no use.”

The move echoed one that Tesla made last year in opening up its patents on existing electric-car batteries in the hopes of getting other automakers to help push the frontiers of the technology forward. In January, Musk criticized traditional-company auto executives in a speech in Detroit for not pushing forward with all-electric cars with determination despite the very limited market for the vehicles.

Intellectual-property experts told CEO Briefing that each automaker’s use of this technique makes sense in its own context but that its applicability to other industries’ IP might be limited.

“The Toyota and Tesla ‘open IP’ approaches are more than mere theater,” Salvador Bezos, partner at Sterne, Kessler, Goldstein & Fox, a Washington, D.C.-based IP-law firm said. Each company wants to make its approach “the industry standard,” making their approach “no different than that of any other participant in a standards organization.”

Toyota “stands to profit greatly from a hydrogen pump at every gas station, just like Tesla stands to profit greatly from a network of supercharger stations and electric chargers in every home,” Bezos said.

Can CEOs in other industries learn from and emulate the approach that’s being taken by Musk and Toyoda? Maybe. It would have to be a situation, similar to these, where a company is trying to create mass appeal.

“There is limited takeaway for others,” said Bezos. “Unless your company finds itself in a position where it absolutely needs to set the standard to guarantee the survivability of your approach, then opening up your IP in this way is likely of no use.”

Jeremy Cubert agreed. “I do not think this is a trend that will apply to other industries, which are either highly regulated, such as pharmaceuticals, or have other mechanisms for sharing technologies such as standards-setting organizations and patent pools,” the partner at VLP  Law Group said.

And, Cubert noted, it’s not as if either car brand is giving away the store. The available patents will be existing ones, covering their technologies to date – not the good stuff that they’re working on for the future. Neither company, he said, “has said they would not continue to pursue patent protection.”

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

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