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Tesla’s patent strategy

Elon Musk doesn’t care about patents. See for example this report by IPwe.

But this is cleverly played by Elon.   The biggest reason why Tesla isn’t patenting is China. The truth is that:

(1) because there is no such a thing called ‘international patent’, a US patent has absolutely no protection in China;

(2) even if you have a patent in China, the patent protection is still weak in that country. 

This poses a dilemma for the US companies. When you have a patent in the US, you essentially provide a public educational material to your competitors in China.  The patent publications make the most effective system of tech info dissemination and education, all for free. 

Patents are not merely information made public. A lot of information is public today but not easily found because the information is scattered, and people are not paying attention to it. When there’s too much information out there, things could be hidden in plain sight. But patent publication is perhaps the biggest exception because it has become the default place to go to find tech innovation related information.

This is intended by the patent law, but with unintended consequences in a heterogeneous global scene.

In addition, the US patent law has the best mode and enablement requirements, meaning that a patent disclosure must disclose the best implementation mode the inventor is aware of, and the disclosure must be sufficient to enable one who is skilled in the art to practice the invention. This makes the US patents especially vulnerable (or valuable, depending on the angle you’re looking at).

Musk knows about this very well. He made a calculated decision, because he knew his primary competitors are from China, and he would rather try to keep everything secret than publish the best recipe to benefit his competitors.

(With Tesla’s operations in China, I doubt the company could keep its secrets, but that is a different matter.)

A counterargument to his strategy is that if Tesla has patents in the US, at least they will be able to use it effectively against Chinese EV makers that come to the US to compete with Tesla. 

I’m not sure if Tesla has considered the above point, but the truth is that, timewise, facing Chinese EVs in the US market is a far less pressing issue for Tesla. 

But to the Western audience, Musk has played his card cleverly.  Rather than acknowledging a disadvantage and a compromise Tesla was forced to make with regard to IP due to China, he spun it as an advantage. He lauded an ideological appeal tailored to the unique sector of Tesla customers:  


For China, this is two birds with one stone, a double advantage, because not only have you forced Musk’s hands in China, you also have him promoting anticapitalism and socialism in the US.

It’s not that China believes in socialism. It doesn’t. China itself is building on national capitalism (not socialism – if you think China is socialism, you do not understand what is going on in China). They know well that socialism is one of the most effective ways to weaken the US and the West. It is China’s version of color revolution.

A broader issue

At the same time, this opens up a much broader topic.  

For example, how do you assess Microsoft’s China strategy? Bill Gates made the decision in 1990s to go to China, fully knowing the following: (1) there will be little IP protection in China; and (2) there will be no real market for its software in China because the usage there will be predominantly theft. He did it with that knowledge, not with ignorance. In his own word, if they’re going to steal anyway, we want them to steal ours.  

It may still be too early to judge whether that calculated decision was wise, but I’d like to point out some facts:

(1) Microsoft has contributed to China’s economic and tech development tremendously. Just imagine a country of China’s size essentially having a free supply of an Operating System and Office system for decades. China will eventually move away from the Windows OS and the Microsoft Office system due to national security concerns. But 30 years of free IT support is a great deal, especially considering that information technology has been a major driver and foundation of the last three decades of China’s leapfrogging development.  

(2) Compared to other US IT companies, Microsoft did do better in China (Apple is a different story because Apple is primarily consumer hardware with software integrated). Microsoft has enjoyed in China a much better relationship, much higher level access to talents, and a growing market largely thanks to cloud computing which has made software theft much harder.  

On the other hand, China market represents less than 3% of Microsoft’s revenue. That is disproportionally small because it should be close to 20% given the size of the Chinese economy.  

Intellectual property is a serious matter in today’s global economy, business competition, and even broader geopolitics. Most people underestimate the significance of this matter.