The Journal likes the patent strategy: Microsoft, not Apple

The Journal likes the patent strategy: Microsoft, not Apple

"Tesla may be worth $25 billion in the stock market, but over in the real world, it is still just a tiny car maker operating in a segment so small it barely qualifies as niche. While it is growing fast, the company delivered in the first quarter 6,457 cars—all of 0.03% of the global light-vehicle market."

Bloomberg News
Tesla Motors is synonymous with sleek, highly priced technology. But in opening access to its patents this week, it has realized it needs to be more of a Microsoft than an Apple.

Tesla may be worth $25 billion in the stock market, but over in the real world, it is still just a tiny car maker operating in a segment so small it barely qualifies as niche. While it is growing fast, the company delivered in the first quarter 6,457 cars—all of 0.03% of the global light-vehicle market.

The electric-car market remains so small that Tesla's pricey vehicles account for a large portion of it. Indeed, established auto makers' enthusiasm for electric vehicles, never high, has waned relative to stepped-up efforts to build more efficient versions of vehicles burning gasoline.

One aim of Tesla's patent plan is to alter that equation. Through it, established car companies might not have to sink as much into research and development to produce electric vehicles. And having a common technology platform could accelerate innovation and reduce production costs for everyone.

Rather than hurt Tesla, this could help it. If established players were selling cheaper, mass-market electric cars, more drivers might eventually upgrade to a pricier, higher-performance Tesla. A larger electric-car market would also bring beneficial network effects for Tesla—most importantly, the establishment of more charging stations—that would broaden its vehicles' appeal.

As Apple found to its cost in its earlier incarnation in the 1980s, occupying a rarified position in technology wins plaudits from fans—but can mean ceding the market to a rival like Microsoft -that has a more mass-market approach. By opening its patents, Tesla appears to be embracing the latter model more forcefully.

This supposes that car companies will take Tesla up on its offer. At a time when they are pushing to reduce car weights, improve fuel-injection systems and implement software and other technologies aimed at increasing efficiency, they may not. After all, if they can offer gasoline-powered vehicles that cost customers only pennies per mile to drive, the extra upfront cost and range limitations of electric vehicles become harder for many customers to justify.

Tactically, Tesla's move makes sense. Competition in electric vehicles is hardly hot, so those patents weren't really protecting Tesla from anything. The hoped-for sales growth underpinning its lofty market valuation won't happen without a large and varied market for electric cars from multiple manufacturers. Investors who focus on the boldness of Tesla's move risk missing the insidious competitive context that spurred it.

Write to Justin Lahart at

Earl and Nagin ... | June 14, 2014

Unfortunately, comparing Microsoft to Apple is like comparing lemons to orange trees (pun-like reference to the nature of lemons intended:-).
This is because Microsoft is a software company, Apple is a hardware and software company.
Also, its kind of irrelevant, even for those who don't know the difference between hardware and software. This is because, last time I checked, neither had opened up their patent portfolios or any of the IP internal to the products they sell.
Microsoft sells proprietary software to run on somebody else's (Intel's) proprietary hardware. Apple sells proprietary software to run on their own proprietary hardware. Both provide ICDs (Interface Control Documents) to enable others to write software and develop hardware to run on with their software and hardware.
While I don't know whether Tesla's policy to open their patents up is a good idea, I don't know of any precedent. There have been plenty of private patent sharing agreements in the past but this is more open than anything I've heard of previously.
This should be an interesting experiment to watch take place. I suspect history will prove it to have been a good idea, kind of like the use of commodity cylindrical battery cells clearly was.

redacted | June 14, 2014

While I sort of get the WSJ's point, the Microsoft/Apple comparison is awful (Microsoft never gives anything away to its competitors, and I imagine is very unhappy indeed with Samba, for example).

Also the only ICE that might be considered to cost pennies per mile is the Prius, which might cost around $0.08/mile in good weather. It's been this way for the last decade and a half, and I haven't noted significant improvement in the Prius or any other vehicle in that time.

LEvans | June 14, 2014

This is why I like Tesla and why my house is an Apple free zone where no Apple products are bought. Sick of all the BS patent lawsuits over rounded curves and circular icons while Tesla goes ahead to revolutionize the industry.

This patent announcement will enable Tesla to focus on product innovation. Apple could learn something from this.

As for Microsoft, hate them if you must (and I can't stand the Windows 8 tiles from hell they tried to cram down my throat) but Microsoft has done much to make PCs accessible and affordable to the masses. Seems this is Elon's vision with EVs.

Red Sage ca us | June 14, 2014

A decent article, but it still misses the point. The other major auto makers will not make viable electric cars. Ever. This is not a move to woo them to the fold. They had their chance already. It is a means to jump-start a fledgling new electric vehicle industry that will eventually supplant the existing market for motorcars.

Gadfly | June 14, 2014

"Tesla may be worth $25 billion in the stock market, but over in the real world, it is still just a tiny car maker operating in a segment so small it barely qualifies as niche. While it is growing fast, the company delivered in the first quarter 6,457 cars—all of 0.03% of the global light-vehicle market."

Worth repeating.

Many of the cultists on this forum simply cannot see the forest for the trees. The tesla is a terrific toy owned by almost no one, relatively speaking.

Bighorn | June 14, 2014

It was pretty clear you posted this article to highlight that quote rather than start a discussion about the topic at hand.

murraypetera | June 14, 2014

Microsoft has been known to sue companies out of existence by using patents. I.e. Stacker
Microsoft = evil company with no morals
Tesla = good company with morals

SCCRENDO | June 14, 2014

Gadfly for the record are you an owner? How long have you had your car? Are you happy with your car? How many miles driven? Have you had any issues? Do you have any significant connections to the oil or ICE vehicle industry? Please don't take this the wrong way. This is not meant as an attack. I respect your right to your opinion. The above info would be useful to me and I suspect others in evaluating your opinions.

Red Sage ca us | June 14, 2014

The Unknown Contributor wrote, "Many of the cultists on this forum simply cannot see the forest for the trees."

Actually, we see all of that, but focus on the upside of the equation. The last days of old technology are better than the first days of new technology. Remember, the Shorts on Wall Street, the Big Three in Detroit, and a whole bunch of naysayers from FAUX News, to WSJ, to NYT, to S&P all said that Tesla Motors wouldn't even get THIS far... As Livery Stable owners of lore were blind to the progress of the Horseless Carriage, they have no clue how far the Electric Vehicle industry will go, because they are too busy waiting for the fall that isn't going to happen. Once again, Kool-Aid is better than Hater-Aid any day of the week.

negarholger | June 14, 2014

@Earl and Nagin ... - there are many precedences... it is called cross-licensing. Many industries share their patent portfolio and it's only purpose is to protect against patent trolls.

Brian H | June 15, 2014

Opera meets Firefox?

Plugged In | June 15, 2014

I remember when the PC first came out for consumer use: It was pricey -- in excess of $2,000 -- and it only ran a few applications, and you had to be careful about it because those flimsy 5 1/4 " floppy disks would get damaged easily. There was no such thing as "online access", because outside of the workplace there was no "online".

Remember that?

Could anybody tell how things would change -- in short order -- year by year over the next 20 years? Think of the last time you used a typewriter. It's been a while.

Why? Typewriters were cheap. Paper was and is cheap. The PC was a glorified typewriter with a 256 column / 2048 row ledger sheet as an extra-cost program (called VisiCalc or Lotus 123 if you remember).

Why? Because when people discovered what having a PC could do in the office, they couldn't live without it. Eventually, when the price came down far enough, they became part of our home life too. It took awhile -- into the 90's perhaps -- but it happened.

It is obvious that over time the future is not going to be on the side of internal combustion, any more that it was on the side of horses around 1905 or on the side of railroads as a primary method of intercity travel around 1950. The future is not going to be with diesel or hydrogen fuel, either. It will take a little time, but within 10 years or so the fight will be over.

What is left to find out is which automakers will still be around by 2030.

After all, it's not every day that anyone sits down and starts working on their Olivetti or Smith Corona any more.

Thomas N. | June 15, 2014

Gadfly seems to be full of self-loathing. I can't figure out why he even posts here.

He seems to be an owner with small problems - nothing crazy.

But everything he/she posts seems to be negative. Angry at the fanbois. Quick to point out that nobody owns a Tesla. Fast to tell you there are problems and you're looking at the world through rose-colored glasses.

I don't get it. I wouldn't spend 100K on something, hop on the actual manufacturer's forum and yell at everybody for being happy with their purchase. It's flat out weird.

It reminds me of a friend I have. He's from a certain European country and absolutely hates that country and people. He constantly refers to them as stupid, impoverished fools. He hates being the nationality he is. It's so strange to me.

At least Gadfly had a choice in buying a Tesla. My buddy was just born into it.

AmpedRealtor | June 15, 2014

@ Thomas N.,

I think you've correctly identified some of the classic symptoms of self hatred.