What Elon Musk did — and did not — do when he “opened” Tesla’s patents

It’s hard to say what was odder: the headline that sounded like it was written by a little kid, or much of the reaction to it. In case you missed it, the episode in question is this week’s blog post by Tesla(s tsla) CEO’s Elon Musk titled “All Our Patent Are Belong To You,” which has had the tech and automotive world buzzing about what he is up to. (Update: the title is a gamer reference, h/t Shiggity in the comments).

The hype also showed that many people just don’t know all that much about patents. To set the record straight, here is what Musk’s message means from a legal and business perspective.

No, Elon Musk did not “open up” Tesla’s patents

Major news outlets from the LA Times to BusinessWeek declared that Musk had decided to “open up” or “give away” Tesla’s patent. While Musk’s blog post was short on specifics, it’s safe to say he did neither of those things.

For starters, patents are “open” by their nature; that’s how they work. When an inventor submits an application to the patent office, an examiner will lay it open for all to see and then decide if it is new and non-obvious enough to receive a patent. That is the trade-off at the heart of the patent system: inventors are given an incentive in the form of a limited monopoly to share their invention and, in return, society gets to learn how they made it.

So, the hundred-plus patents that Tesla has been awarded are open already. Do a quick search at the patent office and you will see them, including this one for a “Vehicle Charge Connector,” this one for a “Rear vehicle torque box” and this one titled “State of charge range.”

Likewise, Musk did not, as some stated, give away Tesla’s patents to his competitors or anyone else. It doesn’t work that way; you can’t just give away patents like lollipops. You have to formally assign them or else they’re yours until they expire — during which time you can sue anyone who uses them without a license.

Tesla, for now, has not assigned or licensed the patents. Instead, Musk wrote a blog post saying, “Tesla will not initiate patent lawsuits against anyone who, in good faith, wants to use our technology.”

So what does that mean legally?

Who knows. Under contract law, such airy promises don’t really do much unless someone else gives something in return. That means that anyone planning to infringe on those Tesla patents will have to cross their fingers and hope for the best (or perhaps rely on a doctrine called “promissory estoppel” of which I’ll spare you the details).

If Musk is serious about this, and it sounds like he is, he may want to take a page from Google’s(s goog) “Non-Assertion Pledge” for cloud-related patents, which hasn’t really been tested in law, but sure looks more formal. Likewise, Twitter’s(s twtr) “IPA agreement,” which assures engineers the company won’t later use their work for patent trolling, could be a model for Musk.

And lest anyone think that Tesla just jettisoned all its intellectual property, keep in mind that the company still has a wealth of IP in the form of trademarks, trade secrets and so. This means that if anyone decides to copy Tesla’s cars too closely, Musk (who is no stranger to lawsuits) will probably sue the bejabbers out of them.

Tesla Model S, image courtesy of Tesla.

Tesla Model S, image courtesy of Tesla.

What Musk did do

As some Tesla watchers, including my colleague Katie Fehrenbacher, have noted, the company’s patent strategy is likely tied to its desire to expand the market for electric vehicles, which will in turn benefit Tesla.

One way to do that is to signal to potential competitors that Tesla won’t play nasty by invoking patents to keep them away from its market. The lack of a patent fence could lead to more competitors, which will bring more customers, and perhaps create a virtuous cycle of ever-increasing demand for clean vehicles.

Will the plan work? It’s too soon to say, but it’s certainly worth a try. And, at the very least, Musk’s announcement triggered another cascade of press for Tesla and its Model S, which are already racking up rave reviews.

The most important thing that Musk has done, however, transcends Tesla itself. What he did was send one of the most powerful messages yet that patents are not the same thing as innovation — and that the patent-trolling industrial complex is hurting industry by scaring off billions in VC funding, not helping it. This message has been repeated often by scholars and sites like Gigaom, but it is all the more convincing coming from a man who builds electric cars and rocket ships.