WHY ELON MUSK HATES PATENTS

And why you should too, if your business is just like his.

I’m a Tesla Fan-Boy, and that means I’m a SpaceX nerd and am occasionally accused of being an Elon Musk worshipper.  So I couldn’t miss Elon’s appearance on Jay Leno’s Garage, where Elon gave Jay a tour of his SpaceX launch facilities down in the very southern tip of Texas, on the Gulf of Mexico right on the Mexican border.  The story was about the SpaceX giant Starship rockets that have 2.5 times the power of a Saturn V, and the cargo capacity of a 747.  The boosters are designed to be launched, “caught”, refueled, and relaunched the same day.  That’s why they don’t need 1000 boosters to make 1000 launches.  As you probably know, Elon’s planning to send thousands of people to colonize Mars.

I also was interested to learn that he’s planning hundreds of unmanned launches before trusting the technology with human cargo.  That suggests lots of Starlink satellites providing internet to the globe.  I would have given my eye teeth for that in Rural Nevada in the first decade of this century.

I hear that engineers float back and forth between SpaceX and Tesla, and that the giant rockets are 30-foot diameter tubes made of stainless steel.  That seems incredibly heavy, but probably provides strength, and helps with reusable longevity (not to mention so that they don’t crush like a beer can when grabbed out of the air for recovery).  What’s also special is that the imminent Tesla Cybertruck uses the same unusual alloy for its folded exoskeleton that promises to make that freakishly-faceted pickup truck one of the most profitable vehicles ever.  No formed body panels, no paint – just 1/8”-thick folded steel that drives the unusual design.

The innovations keep piling up at all Elon’s companies, and I suspect that the old automakers who think that can catch Tesla are sorely mistaken, as that company keeps advancing and widening the gap.  But I’m just a fan-boy.  Then, I swallowed hard when Jay asked about patents:

“We don’t really patent things.  I don’t care about patents.”

Could this be the secret to becoming the world’s first trillionaire?  Not wasting money on patents?  Should I be looking for another line of work if the world listens to Elon Musk?  Well, if your business has lots of competitive advantages, then you might be able to live without a few advantages like patents.  SpaceX has ample funding (Elon’s own billions) and more than a little infrastructure.  Things like actual launch pads and giant “vehicle assembly buildings” that some rocket start-up won’t be able to conjure from thin air.  And frankly, Elon has said he simply wants to help protect humanity from some catastrophic disaster in some future century, so presumably he doesn’t mind if Jeff Bezos joins in the effort.

But what about closer to home?  I know that firearms industry giants like Smith and Wesson would be in trouble with their shareholders if they skipped their aggressive patent efforts, but I could understand why they might.  If they develop a successful new pistol with several great innovative features, would it really hurt them much if competitors adopted the same features?  Brand loyalty is a powerful as owning the only launch pad in town, and fewer S&W loyalists than you might think would switch just because brand X adopted the same features.  Some, but when you’re king of the hill, you’re less vulnerable and can tolerate one fewer defense.

Another example is Tesla’s “Gigacasting” innovation.  They replace the rear structure of a car (which used to be made of 150 welded, riveted, screwed and glued parts of many different materials) with one giant precision casting.  The only problem is that the capital cost is immense, and it pencils out only for the very highest volume production – which is why Tesla offers very few vehicle models.  Even the big Detroit automakers have such diverse product lines (and entrenched ways) they aren’t adopting the innovation, patented or not.

Patents aren’t essential when you have other unassailable advantages.  But a start-up company in a hotly competitive industry unafraid to copy successful unpatented designs might worry about being obliterated once the big boys see the success of an innovation.

“I don’t care about patents.”

It goes beyond a cringe when a businessperson one admires says this, and one has devoted most of one’s career to patents.  But I can admire Elon and distinguish his special case not just from upstarts, but from multitudes of well-run major companies.

“All Our Patent Are Belong To You”

Elon told Leno (good anagrams) “At Tesla, we open-sourced all our patents.  Anyone can use them.” In 2014, back when Tesla’s first sedan had been produced only in small quantity (about 250 per month – compare the current monthly 100,000-unit production of just one of Tesla’s several current gigafactories), Tesla announced that all its automotive patents would be dedicated to the public, open source for all:

“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.”

There’s another unassailable advantage:  Talent.  Recruiting.  In a time now where we so regularly hear how “it’s hard to hire good help” in virtually any industry, Tesla and SpaceX have another unassailable advantage: Every top engineering and computer science graduate wants to work for them.  Year after year they are the first choice for America’s top technical talent.  The pay is Ok, and the real compensation is in hoping that the 15% of income you can put in the company stock takes off in years to come (Many believe it will).  The real benefit is working with top people on projects you believe in, with a desirable environment that is unmatched for creative geniuses.

This is another reason Elon can live without the benefits of patents:  He can always out-recruit his competitors, to continually widen the gap so wide that as he says: “Second place should need a telescope to see us.” (He reportedly said that in 2011).

“Patents are for the weak.”

Yes!  Elon hits it on the head.  Sure, it’s painful to hear it phrased this way, but I don’t know a single successful business venture that relies on innovation that doesn’t have leadership worrying about weaknesses and vulnerabilities.  Innovation is expensive, and risky.  It’s a major investment that would happen far less often without the knowledge that there was a way to enjoy exclusive power over the innovation if it proves a hit in the marketplace.  The Founding Fathers knew this, and enshrined “the right of inventors” in the Constitution.  They phrased this as a preexisting right being recognized – “like the right of the people to keep and bear arms”, and interestingly it is the only occurrence of the word “right” in the Constitution before adoption of the Bill of Rights.  I believe that is what made the US the leading economic powerhouse.

The first step to business strength is acknowledging one’s weaknesses and vulnerabilities, and Elon would probably confess to many, but competitors copying his patentable innovations probably isn’t a real concern.  Is it one of yours?

“The problem is that patents are generally used as a blocking technique…

They’re like using landmines in warfare.
So they don’t actually help advance things.
They just stop others from following you.” 

True, enough, Elon.  Patents themselves don’t advance things.  All they do is give you that “ticket to court” so you can threaten a lawsuit and get a competitor to stop copying your invention.  Hopefully, the competitors will be smart enough never to try during the 20-year patent term.  But there’s nothing shameful about blocking your competition.  And for most of us, the prospect of patent rights is a motivator to engage in innovation.  For Elon, it appears he has ample motivation without needing patents or exclusivity.  He says he wants to save the planet and humanity, and who am I to argue – I just like my car and am glad he developed it.

But any business owner responsible to himself, his family, his partners, or shareholders has a duty to block the competition from stealing the crown jewels.  Elon Musk’s crown jewels apparently aren’t vulnerable (or may be things other than patents – like the copyrights, trademarks, and trade secrets he fiercely protects).  If I weren’t such an admirer, I’d think he was just being arrogant and showing off that he’s so successful he doesn’t need patents.  But it’s probably true, so I’ll let it go.

“And most patents are BS.”

You probably think I’m going to debate this one, and argue that well run businesses wouldn’t invest in patent protection decade after decade if patents were BS.  Well, the keyword here is “most.”  I can’t promise that’s it’s more than 50% precisely, but in my experience, this is quite true.  I recall 30 years ago the senior litigation partner at the law firm I worked at before starting my own firm saying that only 25% of patents were “valid.”  Meaning that they didn’t have fatal flaws that rendered them unenforceable.  His point in teaching a greenhorn the lesson was to understand the reasons why patents that appear successful are actually invalid and won’t hold up in court.  His intention was to educate and inspire me to ensure that my batting average was much better than 25%.  In my experience, it is, but the reality that there are factors outside of the control of a patent attorney and his clients that can lead to the occasional disappointing result.

It’s impossible to be sure that you’ve found all the prior art that could limit the scope of your patent.  So when you accuse an infringer, they have a powerful motivation to do a patent search the patent applicant probably couldn’t economically justify.  There can be other unavoidable surprises, but our best techniques to avoid disappointment involve layering different strategies in a patent, so even if the broadest claims get knocked out, we have narrower underlying claims that can still be enforced.

We sometimes hedge our bets with a “Keep Alive” strategy that lets us go back to the patent examiner when we have to contend with unexpected prior art.  I sternly urge my clients to tell me everything they think I “don’t want to hear,” because problems that are hidden can be what turns a patent into what Elon calls “BS.”  Probably the best way to avoid BS patents that end up unenforceable is to have good communication with your patent attorney, so you can be sure he understands you, and so you can be confident you understand him.

So, as Elon approaches a trillion dollars of net worth, and the rest of us work hard to achieve our own objectives, I invite you all to contact me if you have any questions, and especially if you’re feeling “weak” enough to need a “non-BS” patent to help secure your own dreams.

 

By Ben Langlotz | October 4, 2022 | Firearms | 0 Comments