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Despite the patent ‘giveaway’, Tesla has been monetising its portfolio all along

After Tesla’s widely reported – and much misunderstood – announcement earlier this month that it would not sue anyone who, “in good faith”, uses their patented technologies, a Thomson Reuters study claims that the company has concurrently monetised its patents by collateralising them to secure financing.

According to the Washington Post, a Thomson Reuters analysis of Tesla’s portfolio found that the electric vehicle manufacturer has securitised a significant number of its patents to obtain capital from financial services provider PNC and its affiliate Midland Loan Services.

There has been a lot of talk suggesting that, in committing not to enforce its patents, Tesla is making a statement about how it views the patent system. Discussing the company’s move in a press release, CEO Elon Musk said that receiving a patent was akin to buying “a lottery ticket to a lawsuit” and that patents “serve merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors”.

However, if the Thomson Reuters findings are accurate, then Tesla has been able to secure loans against its patent assets. That is something it could not have achieved if its lenders did not see value in its portfolio. As such, it seems a little disingenuous for Tesla’s CEO to suggest that patents are holding businesses back. Ultimately, Tesla has been able to leverage its patents to raise cash and to create the foundations for a new market for its products and services. As this blog said previously, Tesla’s reasons for making its open source move are complex, and it would be naive to assume that its motives are entirely selfless.

In light of the Thomson Reuters analysis, there is one interesting point to consider: What does the ‘opening’ of Tesla’s portfolio mean for the company’s patent-backed security arrangements with its lenders? Presumably, PNC and Midland agreed to loan against the patents on the understanding that, should Tesla default, they would be able to take ownership of the assets and, if necessary, monetise them. As far as we can tell, Tesla is simply making a commitment to not initiate patent lawsuits against anyone who wants to use its technology “in good faith” (interpret that last caveat how you will), rather than taking the further step of offering licences on a free and/or open source basis. As such, the lenders may still be able to enforce or sell Tesla’s patents, should they ever be in a situation where they need to do so.

Nevertheless, the fact that Tesla has almost given carte blanche to others to use its patented technologies without fear of litigation could cause headaches for the company itself, and its lenders, farther down the line. There may be circumstances where a company using Tesla’s technologies in ‘good faith’ then starts utilising them in a different way that constitutes ‘bad faith’; additionally, implementers of Tesla technology are unlikely to be happy if one of the company’s lenders accuses them of infringement  when, in their eyes, they have been using Tesla’s patents in ‘good faith’.


Jack Ellis
IAM Magazine
27 June 2014

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IP management, Patents, IP finance

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