Open Innovation or Anti-Competitive Abuse? A Case-Study on the Tesla Patent Pledge under European Union Competition Law

Abstract: Patent Pledges can be defined as “voluntary commitments by patent holders to limit enforcement of their patents, made to the public or large segments of specific markets”. In terms of IP strategy, it is a relatively new strategy, only having a history of 20 or so years. The most famous is doubtlessly the Tesla patent pledge, in which Tesla has pledged over 300 of their patents to be freely utilized by other actors in the automotive industry for the development of electrified vehicles. Patent pledges as a concept opens up interesting legal questions. Firstly, several of these pledges are only expressed as a page on a company's website with no negotiation, signing of a contract or indeed any contact at all being required by the pledgor. This opens questions regarding the bindingness of the concept in if one could apprehend them as an agreement. A second question relates to Competition law. Competition law has seen increasing importance in technology transfer and patent related agreements in the recent years due to the possibilities of excluding other actors or harming the market at large which patents can enable. On a prima facie, patent pledges may seem to fall outside the scope of competition law as they provide equal access to all actors to the pledgors proprietary portfolio of technology. Several authors, including Esteves, have however identified that dominant actors may find themselves falling under the provisions of competition law if care is not taken. This thesis seeks to further investigate the question of patent pledges under competition law. In order to do this, the Tesla patent pledge is taken as a concrete example of a typical patent pledge and studied as a case-study. Previous research indicates that the provisions of unfair trading conditions as well as predatory pricing may be relevant to assess in relation to patent pledges. As such this thesis focuses on these two provisions. Tesla is presumed to hold a dominant position in a relevant market for the purposes of this analysis, as the focus is on the abuse rather than on the dominance. In order to assess the potential effects on the market of the Tesla pledge or a patent pledge like it, 13 interviews were held with IP strategy professionals in the automotive industry. After this, legal analysis was conducted guided by case-law, commission communications and doctrine where relevant. My conclusions are that patent pledges may impact a market in a number of manners, and that the market effects may be considered to be far reaching in such a case where an actor is dominant. This includes the imposing of trading conditions in a nigh unilateral manner which could create an unreasonable control position. In assessment of whether this could reach the legal qualifications of unfair trading conditions, my assessment is that it is fully possible that such conditions imposed by Tesla overly restrict the rights of the pledgee in such a way that could be considered abusive. Secondly, I find that the provision of predatory pricing is of doubtful application. While patent pledges by a dominant actor may be considered likely to impact the pricing of patents in an industry, it is highly unlikely that such an impact would amount to the exclusion of competitors. This is due to market structures relating to the utilization of IP, and the purpose and function of patents in themselves.