Ford EV Patent Move - a Good Sales Strategy

Social media is exploding about the news of Ford following Tesla in making its Electric Vehicle patents available for others. Though not freely, as Ford is making the patents available for a licensing fee, the question is what is the ultimate motivation?

I’ve written on this topic following Tesla’s move in this post and would like to offer my opinion. First, let’s look at some of the facts. Over 600 patents have been made available for others out of about 2000 that have been filed in development for EV vehicles, according to Ford. It is somewhat difficult to grasp... 

• Why specifically these patents have been made available and not all of them?
• Why not just drop all the provisional patents as well?

Let’s not forget the patent filing is a pretty difficult, time consuming, and expensive process especially at the corporate level. Even individual patents filed by independent inventors are not easy breezy or cheap. The investment in intellectual property is still a very important concept in business. So, what is hidden in the intention to release such a significant amount of investment?

My opinion, it is not tied to competition or frustration with EV vehicle adoption. Though Ford is claiming to be a leader in EV vehicle space, their business model is not completely based on EV like Tesla.  They are a different company and have the luxury to take their time innovating by being supported by the revenue generated on the good old gas and diesel vehicles. But, you don’t necessarily need to have the best EV vehicle to make money in this space. You can be a big player in the market not by having the ultimate top product, but by having the best sum of the parts.

Essentially, when a company owns patents on parts and electronic components, it’s forcing the competition to innovate. Innovation has the capacity to produce an alternative design that’s better or just different. But, this type of innovation requires heavy investment. Instead of innovation, however, there is a cheaper alternative – to acquire a part or an electronic component necessary for the EV vehicle at a small licensing fee, or maybe just buy the part directly. In this case, there is no need to innovate – the barrier is low enough to lift the impediment and proceed to complete the vehicle.

Hence, what Ford is doing is basically employing a sales strategy of “We’re not going to play catch up and build the best product" In this case, the product is the electric vehicle. “Instead, we will have our parts in every single EV Vehicle out there!”

Just like Bell Atlantic owning the phone lines as infrastructure of communication in the 80s and 90s to capitalize on broadband and taking the company to new heights and like Power Utility companies owning the power lines for delivery of electricity and having solid control of their future, the ownership of infrastructure is one of the most secure and powerful revenue generating business models. Ford is doing the same by opening its patents with intention to benefit from design, production, and distribution of parts through licensing.

So, what are we seeing? It seems that the train of thought surrounding patents has drastically changed from the way patents were used before. The patents are now much more frequently being handled just like any other tangible assets similar to that of real-estate that can be leased, sold, given away as gifts, and held firm and protected. They are used as real property to conduct business, rather than just to protect a position. This is a very innovative approach, especially in light of a much faster and rapid pace of technology innovation and development and the constant pressure to compete and produce higher results.