Electric Bus Firm Gambles on Open Patents

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  • Electric bus maker Proterra joins Tesla in pledging patent nonaggression.
  • Proterra hopes more competitors will make the industry more stable.

By Joseph Marks

July 1— An electric bus manufacturer is gambling that offering some royalty-free patents to competitors will improve business rather than hurt it.

Proterra Inc. announced June 28 it would open up three patents focused on its system for overhead charging of electric buses – essentially a method and design for a charging plug on the top of a bus.

The goal, CEO Ryan Popple told Bloomberg BNA, is that the charging patents will help standardize how all electric buses charge up, giving a boost to Proterra’s competitors and helping to expand the nascent industry. That, in turn, should make cities more willing to trade in traditional diesel and gasoline buses for electric alternatives—a boon for Proterra and all its competitors, he said.

Proterra controls about 80 percent of the U.S. market for electric buses, Popple estimated. That’s a market share that makes the company’s potential clients nervous, he said, because if they make the jump to electric buses they might get locked into a single vendor whose prices aren’t reined in by competition.

“We think we’re nice people, but, at the end of the day, monopolies tend to lead to higher prices and worse customer service,” he said.

Proterra buses manage a portion of routes in Seattle, Reno, San Antonio and Nashville, among other cities, he said.

Following Tesla

Proterra’s not the first company that’s tried to open up electric vehicle patents.

The electric car maker Tesla Motors Inc. made a similar pledge in 2014, declining to enforce the entirety of its patent portfolio. In a bombastic blog post announcing the decision, Tesla CEO Elon Musk complained that the current U.S. patent system too often “serve[s] merely to stifle progress, entrench the positions of giant corporations and enrich those in the legal profession, rather than the actual inventors.”

Musk argued that enforcing Tesla’s patent rights would inhibit the growth of the electric vehicle market, rather than supporting it.

Popple, who worked at Tesla from 2007 to 2010 and rose to the post of finance director, said Tesla’s open source philosophy was an important aspect of the Proterra decision, but he described Proterra’s decision in more pragmatic business terms.

“Our customers are scared they’ll be stuck with Proterra, and that’s holding up our next phase of deployment,” he said.

One distinction between the companies is that Proterra opted to only open up its patents in one sector rather than across the board, as Tesla did. The bus maker was concerned that other companies might implement some of its other technology in unsafe ways, Popple said.

Plenty of Precedents

Patent nonassertion pledges aren’t new. IBM Corp. pledged in 2005 to not assert 500 U.S. patents against developers working in open source software, which can be freely used by anyone, providing they agree to certain license terms. Google Inc. made a similar pledge in 2013 for a list of U.S. and foreign patents that’s grown to roughly 250. Red Hat Inc. has made a similar pledge.

It’s rarer, however, for companies to make such pledges outside the software field.

Popple credited the Tesla and Proterra decisions to the electric vehicle industry’s position at the intersection of cars and technology.

“The tech DNA of these companies is culturally more comfortable with concepts like open source,” he said.

Software industry leaders have typically embraced open source and patent nonaggression more than other fields, analysts said. That’s partly because of the comparatively rapid pace of innovation in software, but also because they’ve seen benefits from collaborating on core technologies and standards.

That could prove useful for Proterra, said Lawrence Rosen, a longtime patent attorney and former general counsel for the nonprofit Open Source Initiative.

“You’ll have steering wheels that work on [electric] buses as well as cars, batteries that work on [electric] buses, as well as cars,” Rosen said. “You won’t end up with an island of bus technology separate from automotive technology.”

Many industries that don’t embrace open source have developed a similar sphere of nonaggression around core technology through a web of patent licensing deals, said Keith Bergelt, CEO of the Open Invention Network, which pools patents to support Linux, an open source operating system.

“In core technology, where you’re collaborating and building on each other’s ideas, you can’t afford to be in pissing contests,” he said.

Patents Worth Less and Less

Another point in favor of the Proterra move, Rosen said, is that the value of enforcing and licensing patents has dropped significantly in recent years, the result of a fast track to invalidate patents established by the 2011 Leahy-Smith America Invents Act and numerous court decisions that have made patent invalidation more likely.

“In terms of the cost to get [a patent], the cost to enforce it, to protect it when people challenge it, to generate licenses from it, the odds of all that have gone way down,” he said.

Given those dropping patent prices, open source advocates are hopeful other industries will follow the electric vehicle lead.

Popple said he’s hopeful the solar industry, another nascent sector, will adopt patent nonaggression. Bergelt said he could imagine similar moves in banking and finance. Former Open Source Initiative President Simon Phipps said any industry where innovation has become sluggish might be ripe.

“There are many industries that you could consider to have plateaued in terms of innovation space, where one might expect a well-funded player could push the industry to a new plateau by opening up patents for creative purposes,” he said.

To contact the reporter on this story: Joseph Marks at jmarks@bna.com

To contact the editor responsible for this story: Mike Wilczek in Washington at mwilczek@bna.com

For More Information

The Proterra pledge available at http://src.bna.com/gtr

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