What's the Value of a Patent?

In the past year, two leading automakers have released some or all of their patents for use by the public or even competing manufacturers. Last June, Elon Musk set the precedent in his announcement "All our patent are belong to you," where he invited just about everyone to utilize the technology that Tesla innovated in hopes that electric vehicle development would be spurred. Toyota kicked off 2015 with a similar move, as they released 5,600 patents related to fuel cells and alternative fuels.

"At Toyota, we believe that when good ideas are shared, great things can happen," said Bob Carter, senior VP of auto operations at Toyota. Interestingly, weeks before Tesla made their patent announcement, Tesla and Toyota suspended their cooperation. In many ways, the technologies made available by these patent releases are competitive. Toyota is heavily involved with hydrogen economies, while Tesla continues to develop and sell all electric vehicles.

Essentially, Toyota and Tesla are the beginning the first true alt-fuel rivalry: electric vs. hydrogen. Releasing their patents should be seen as a way of hoping other manufacturers will take their ideas and run with them, and hopefully earn one of the technologies a leading edge. In other words, their patent releases are less about true benevolence and more just good business acumen.

That same attitude embodies patents as a whole. We live in a country where the patent system is arguably broken. Patent trolls are organizations that do not research or manufacture anything at all, and only exist to seek royalties by claiming existing products infringe their copyrights. A trial may cost more than $1 million, but the settlement is usually much lower and doesn't require the same resources or hassle. Some of these may be submarine patents, even though the number of submarine patents has been heavily reduced in recent years. In 2011, patent troll-related expenses exceeded $29 billion according to a BU study. Last year, a Harvard Business Review study concluded that victims of patent trolls substantially reduce R&D, therefore hindering innovation. Never forget, sometimes the U.S. Patent and Trademark Office forgets to do their job, resulting in ridiculous applications being accepted, such as a patent for a cat playing with a laser. (Stay focused Del!)

On the other hand, there is an open-source alternative for virtually any software. When developing a license-free alternative requires nothing but time, there are a plethora of programmers who will make an open-source knock-off Microsoft Word or Adobe Photoshop. Now consider the evolving state of manufacturing. 3D printing enables one-off, affordable manufacturing for the smallest-scale of operations. Open source blueprints for 3D-printable cars already exist--at last week's North American International Auto Show, Local Motors 3D printed a car in front of audiences. If such 3D printers reach consumer level it's not hard to imagine a world where at-home grease monkeys spend hours at the computer instead of under the hood.

If technology does stream towards an open-source singularity, patents will be meaningless, as some type of unregulated manufacturing will take place in every garage or basement in the U.S.

Patents are now used to prove a company owns an innovation, rather than prosecute actual perpetrators. Open-source alternatives are becoming more available as the technology to create and build in smaller arenas proliferates. So what's the value of a patent in 2015? And, perhaps more importantly, what's the value of a patent in 2020 or 2025?