TOYOTA & TESLA: A few thoughts on open source patents and SEPs Stefano John / NAIP Education & Training Group , European Patent Attorney
Toyota recently announced that more than 5,600 fuel cell and related patents are available for royalty-free use in its CES 2015 presentation. This follows steps in the same/similar business by Tesla the previous year. This may seem counter-intuitive to the classic principle of a patent - either preventing others from entering a market or earning a profit from royalties. I would argue this is a good business strategy instead, because (apart from the positive publicity they gain) they need to incentivize others to provide a support system in the larger industry (automotive in general, including for example gas stations and other such industries) which requires their products and makes the sale of their products (hydrogen fuel cells and related cars) a viable future business.
This is done by accruing a large patent portfolio and using it as a leveraging tool to help others make your innovation into a viable commercial product by setting up accessory and intra-connected industries of scale. Hence, the first thing to note is that upon on entering a new innovative space, it pays to come well-armed with a large patent portfolio. The other interesting thing to note is that the first companies to “throw their hat in the ring” are more likely to reap gains from the future industry. This is because the industry will naturally veer towards the standards covered as much as possible by the royalty free patents on offer. Thus there is a good chance that some of the patents on offer by Toyota or Tesla may become a Standard Essential Patent(s) (SEPs).
It is impossible to manufacture many modern technological products, such as most modern digital telecommunication products without using technologies covered by one or more SEPs. SEPs are different from patents that are not essential to a standard (non-SEPs), such as European design patents, for example, which protect the design features of an invention. This is because, generally, companies can invent alternative solutions that do not infringe a non-SEP, whereas they cannot design around a SEP.
SEPs are a special kind of patently due to the indispensability of the technology they cover. In one sense, SEPs are more limited than other patents in the scope of their monopoly due to their strong anti-trust influence on a specific industry. In the EU, the EU Commission (with very strong anti-trust powers) has set up some guidelines on which SEP are supposed to be litigated and managed (licensed). Similarly in the US, the US Department of Justice and the US Patent & Trademark Office have set up some guidelines on what a SEP can expect to achieve. Basically SEPs can be litigated only in certain circumstances and licensed on F/RAND (Fair or Reasonable and non-discriminatory terms). However, these limitations are only in place because of the enormous commercial power they have
What is interesting is that in this case, Toyota and Tesla have by-passed the SEP to make the patents open-source (royalty (even F/RAND) free). One could argue that this follows the example in other sectors (Google, Qualcomm being previous examples); however it is an interesting business tactic because it is one the first time it has been employed by a big player outside telecommunication and electronics industry. I believe that they have made a strategic calculation that trying to obtain F/RAND terms (due to SEPs) may too onerous in an industry like any future hydrogen fuel cell economy and that their own patent portfolio may be a deterrent to the industry coming to fruition and making a viable income for their own production line. They have also probably factored in that any other SEPs within the industry in the future will find it difficult to use SEPs against them given their input to the industry as a whole (they have not relinquished the right to the patents, only stated they are royalty free). Thus they could have used their current portfolio to guarantee themselves a position in any hydrogen fuel cell business of the future. Whether this gamble will pay off has to be seen, but it is interesting to note that as such businesses become more technological, the need to have an IP portfolio and IP tactic within the industry become more crucial to survive or to even start it…
Author:
Stefano John, European Patent Attorney
Experiences:
European Patent Attorney, Bryers
Trainee European Patent Attorney, Bugnion SpA
Trainee European Patent Attorney, Notabartolo & Gervasi
Internship, EPO