Toyota has just joined Tesla in declaring that they intend to make thousands of Patents royalty free. The patents owned by Toyota relate to the technology in and related to hydrogen powered vehicles and making the patents available on a royalty free basis is so that others can benefit from the hydrogen fuel cell technology that Toyota have developed.

In reality, however, the provision of a royalty free for a licence to the patents has many more benefits – mostly for the patent owner.

In making the patents available royalty free, Toyota are undoubtedly missing out on the short term gain of revenue that could be generated by granting licences to it’s patents. It is, however, encouraging the rapid growth an ecosystem relating to products it has already developed and is readying for release. By waiving licence fees to the patents, the developments of those products by others that rely on the patent will, more likely that not, benefit Toyota. Broadly speaking this means that Toyota increases demand not for its product, but for all products of the type it sells – the risk it runs that it decreases its market share is far outweighed by the overall growth of the market size from which its share is taken.

Although hailed by the media as a first-of-it’s-kind and way-of-the-future practice, making intellectual property (IP) rights available without cost is not a new or revolutionary idea. Open Source Software (OSS) underpins the majority of software that is provided as a service in the internet age. The basic principle is not dissimilar to Toyota or Tesla in that the code is provided under a licence that makes it freely available. OSS does have a catch, however; parasitic rights. Where OSS is used in conjunction with bespoke code there may be parasitic rights which mean that the bespoke code becomes OSS – something which has caught out the likes of BT in the past.

This means that royalty free licences to IP rights of the kind currently in the media are likely to have their own caveats to reduce risk to the IP owner and, of course, mean that they continue to benefit from the rights for years to come.

Stephens Scown offers a free review of the intellectual property in your business, including advice on copyright ownership, assignment and licencing. Our IP MOT service is provided without obligation or cost.