...Elon Musk doesn't say they are going to stop seeking patents, just that they pledge to use them as a shield rather than a sword.
In considering the Tesla patents story, one must first understand the rationale behind the patent system. The patent system rewards inventors who choose to publicly disclose their inventions with writing and representative figures that enable others to copy the invention (rather than maintain them as trade secrets). In exchange for explaining the invention to the public, the reward is the right to exclude others from making, selling, or using their invention for a limited time. Tesla has already given these inventions to the public through the patent disclosure; they seem to simply be promising not to exercise their right to exclude others from using, and to defend their patents only when needed.
Tesla’s "bold" move to grant royalty free licenses to its patents is fitting for a company named after Nikola Tesla. In the late 19th century, Mr. Tesla, inventor of the alternating current (AC) system, was in a well-documented AC/DC battle with the more famous Thomas Edison, who invented the direct current (DC) system. Only one system could prevail for a nationwide electrical grid system. Now in the 21st century, in order for electric cars to succeed, much like the decision between AC and DC, there has to be a uniform network of charging stations. Tesla's move allows other car manufacturers to freely use its patented technology in the hopes that Tesla’s technology becomes the standard over competitors.
This is a once in a century technological leap, and I think Tesla needs to force itself to be the standard (by making this free licensing move) if the company is going to have longevity.
So what does this mean for other companies considering their patent strategy? Probably not much. Very few companies would be in the technological predicament that Tesla finds itself, where it needs real infrastructure improvements to create a network of charging stations throughout the country to make its electric vehicles a reliable alternative to gas guzzlers, and a manufacturing network capable of creating enough supply for an annual demand of 100 million cars. Note that Elon Musk doesn't say they are going to stop seeking patents, just that they pledge to use them as a shield rather than a sword. Tesla’s announcement also means that there may be more value in the future for the Tesla design and the Tesla brand, rather than the underlying technology.
[Martha Engel is a patent attorney. She is an associate in the Intellectual Property practice group at Winthrop & Weinstine and regularly contributes to the firm's DuetsBlog. She actively counsels clients on the procurement, maintenance, and enforcement of intellectual property rights.]