Tesla Motors announced recently that they are opening up their patents to anyone, who in good faith, wants to use their technology. The announcement caused surprise to many analysts and experts in the car industry, some considering it an “insane movement”, some others welcoming the “ wonderful altruism”.

For us, there is not altruism involved at all, but a sound business decision based in a clever understanding about how the rules of the game in business are changing,  just another sign that the ideas behind open innovation and collaboration are really taking hold. It is not just us being collaboration evangelists for so long, it is about reading carefully what CEO Elon Musk wrote in the company’s blog when he announced Telsa will not enforce its patents:

“Our true competition is not the small trickle of non-Tesla electric cars being produced, but rather the enormous flood of gasoline cars pouring out of the world’s factories every day. We believe that Tesla, other companies making electric cars, and the world would all benefit from a common, rapidly-evolving technology platform.  Technology leadership is not defined by patents, which history has repeatedly shown to be small protection indeed against a determined competitor, but rather by the ability of a company to attract and motivate the world’s most talented engineers. We believe that applying the open source philosophy to our patents will strengthen rather than diminish Tesla’s position in this regard.”

So, reading (not so much) between the lines: Fostering an ecosystem around electric vehicles can only help Tesla. More suppliers means lower costs; the more widespread the technology, the smaller the incentive for innovators to work on competing technologies. In other words: Open innovation and open source can be cost effective while limiting competition.

In the blog post, Elon Musk also stated that he was disappointed with the rate at which other car companies were adopting the electric vehicle technology. As the global production of vehicles approaches 100 million per year, electric vehicles only form less than 1% of that number.  So, by granting access to its technology, the company is hoping that more vehicle manufacturers will adopt the technology, thereby growing the market for EVs.

By utilizingTesla’s ideas,  competitors would improve the product and marketing so that all electric car manufacturers could sell more vehicles and establish new markets. At the same time, access to this knowledge will allow other companies to manufacture electric vehicles of their own, thus increasing the market size for Tesla’s vehicles. This will also mean that consumers currently unwilling to buy Tesla’s vehicles for fear of lack of infrastructure might be persuaded to adopt their vehicles.

Tesla’s gambit challenges conventional wisdom about patents as an innovation driver.  It invalidates our current patent-litigation dynamic that is routine for companies such Apple or Samsung. It also suggests that the theft of their ideas is not the most important barrier for an innovative company to overcome, but rather the development of new markets (for which, as we know, collaboration is key).

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