Why Tesla CEO Elon Musk's Patent Move Is Political Genius

NEW YORK (TheStreet) -- As the media fawn over Elon Musk for opening up the Tesla (TSLA) patent portfolio and quote him as being concerned about global warming, few observers have called the move what it is: a public-relations stunt. One contributor at TheStreet astutely pointed out that nothing, indeed, has changed at all.

Why? Because Musk expects other companies to use Tesla's patents only in "good faith," which Musk later clarified in a conference call as meaning, "If car companies use Tesla patents, in turn the companies should not complain if Tesla uses theirs."

But that's how it is already with patents. If there's an agreement, nobody sues. So in the end, nothing has changed. Then what was the point? Obviously it was a PR stunt, but PR for what exactly?

Tesla has been battling state legislatures for years to be able to cut out the dealer middlemen and sell directly to consumers. Some state-level politicians are not happy about this because dealerships contribute a lot of campaign money, and selling directly to consumers hurts their business.

If electric car companies want to make their vehicles more affordable to the masses, then selling directly to consumers is a great, fast, and necessary way to cut costs so people can actually drive the things. Technological improvements are necessary as well, but they will be much slower in coming compared to a lightning quick cut-out-the-middleman move.

Tesla has engaged in several key battles with state governments for the right to sell cars directly to consumers. First there was a victory in North Carolina last year. In March a compromise was reached in New York to allow existing stores to remain open on condition that new stores only be operated through dealerships. That battle is not finished. Then in April, a similar compromise deal was etched out in Ohio allowing 3 direct-to-consumer stores. Just this month, Tesla won back the right to sell direct in New Jersey. On the Federal level, three FTC officials have expressed support for Tesla's direct sales model.

Victories have been won, but serious problems remain in large States such as Texas, which forbids selling cars without middlemen. Musk may win this battle yet, because Gov. Rick Perry wants Tesla's $5 billion battery factory deep in the heart of Texas. It's unlikely he'll get it unless Perry lets Musk sell cars there.

So what does this have to do with "opening" the patent portfolio?

It looks very good, generous and environmentally responsible to sacrifice one's patent for the sake of the electric car industry. It will buy Tesla points with the public on both sides of the political aisle and will help Tesla convince state governments to let it sell cars directly to consumers. There is no better way to apply political pressure than to get the public to love you.

Was it a coincidence that two days after Perry's speech, Musk opens the patent drawer? Maybe. Perhaps the intent was to get Congress to move on legalizing direct selling on the federal level for the electric vehicle industry. That would solve the problem much quicker than battling state by state.

Strangely then, Musk's opening of Tesla's patents may benefit other EV companies not because of direct technology sharing (which would happen upon mutual agreement in any case), but because if Tesla breaks through on the political front and gets permission to sell directly state after state, it will clearly benefit other companies as well. In that sense, Tesla's "opening its patent wallet" is indeed beneficial to the EV industry as a whole.

So companies really should thank him for the service. Direct-to-consumer selling should get Nissan's (NSANY)  Leaf to take off as well, and it will be a boon to car-charging companies like Car Charging Group  (CCGI) , which controls the largest independent EV charging network in the U.S. Let Tesla do the heavy PR lifting, and everyone else can swim in its wake.

At the time of publication, Farber was long TSLA and CCGI

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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