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Tesla's Patent Giveaway: Competitive Stroke of Genius

Don't get distracted by things that may be useful but not vital.
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Tesla Motors CEO Elon Musk made the company's patents open source by promising not to "initiate patent lawsuits against anyone who, in good faith, wants to use our technology." As many rightly noticed, the move was smart.

Musk had managed to potentially help the electric-car industry without putting the company into significant danger. And, it's true, if he can help turn electric vehicles into a normal choice for everyone rather than just the well heeled and technically inclined, the company could benefit.

However, this was a smart move more for other reasons. Musk invoked two of the most powerful competitive forces known in business: a sense of mission and customer loyalty. It's sadly easy to forget them and mistakenly lean on other aspects of business, like owning patents, which won't have anywhere near the impact on your company.

Why the patent boogie man is unimportant

Owning a patent can be useful as a defensive or offensive weapon to a large company that has the capital to undertake an expensive court battle. And sometimes a small company can use a patent to make a larger competitor that steals technology pay.

But a patent is more often like a feature that is not the life and death of the product or your relationship with customers. You find one way to offer the feature, and clever engineers will discover another path that your patent doesn't cover. What patenting does is allow you to protect an invention in a different way. Once patented, or even if you just publish the invention, the feature or development is part of what is called prior art and can't be patented by someone else and used against you.

Here's what Musk was really banking on.

Sense of mission

Passion is a powerful motivating force. Tap into it, and you can drive a business to amazing heights. That's what Musk did by opening the patents for the use of others. Certainly one aspect was the potential to build the overall electric-car market. But he also took a step to achieve a goal that he and his employees believe in.

People who believe in a cause work harder, become more creative, and make customers excited. A sense of mission and passion is one of the great tools that Apple has successfully used over the years. The same is true for Ben

Last updated: Jun 16, 2014

ERIK SHERMAN | Columnist

Erik Sherman's work has appeared in such publications as The Wall Street Journal, The New York Times Magazine, and Fortune. He also blogs for CBS MoneyWatch.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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