IP Considerations for the Food and Beverage Industry Series: Patents for Sustainable Technologies—Why the Tesla’s Open Patent Portfolio Isn’t for Everyone

Elon Musk shook up the intellectual property world when he announced that Tesla would allow competitors to freely use its patents. Although Tesla is betting its open-source model will expand the electric vehicle market, this gamble is not the best choice for most companies. 

Many sustainable products companies may be interested in forgoing patent protection altogether, believing that free access to their products will lead others to adopt their technology. This is especially tempting for smaller companies, where every investment in intellectual property may mean cuts elsewhere.

But the simple truth is that sustainable product companies must operate like traditional companies in many aspects, and patent protection is one of them. As of 2012, the U.S. Department of Commerce estimated that intellectual property comprises 35% of total U.S. GDP. In 2015, intellectual property and other intangible assets made up over 80% of the market value of public companies on the S&P 500. And a study published in the International Journal of Industrial Organization found that patented products and services generate 50% more return than unpatented ones.

Just like any other company, success for a sustainable products company is due to a combination of good timing, the right marketing, and a solid intellectual property strategy. Thus, to be able to compete with traditional technologies, sustainable companies must have the protection for their products that encourages investors to fund the company. On average, 40% of startup companies have patents, but of those receiving investment from venture capitalists, 80% have patents. In this way, patent protection improves a company’s ability to infiltrate markets and successfully provide sustainable technologies to the world.

So, given the importance of intellectual property protection, how can a sustainable company maximize their investment? There are several ways to minimize the costs or to spread them out over time. For example, a company may decide to file a single application that covers many aspects of its invention, but only pursue narrow claims. This should allow a patent to issue quickly as narrow claims to the most distinctive aspects of the invention are the easiest to patent. And once those claims are found to be patentable, a second set of claims based on that same application should be filed. For example, the second set of broader claims or claims directed to a different aspect of the invention should be filed. In this way, instead of allowing the entire application to lapse after only one patent, the application is kept alive by the second set of claims. This gives the company the opportunity to pursue whatever claims it wants in the future, once the funding is available. An issued patent plus the option to obtain further patents is a valuable combination to investors. These and other techniques can allow sustainable products companies to find intellectual property approaches that meet their needs now and as they grow.

With the right strategy, a sustainable company will be able to do well (financially), which will allow them to do good.