A patent conversation with Mark Cuban

Mark Cuban

Mark Cuban is a businessman, investor, TV personality and owner of the NBA’s Dallas Mavericks. The Cuban fortune came as the result of founding Broadcast.com, which was acquired by Yahoo! in 2002 for $5 billion in Yahoo! stock. Over the last five years Cuban has become even more of a pop culture icon as the result of appearing on the widely popular Shark Tank reality television series, where aspiring entrepreneurs pitch a panel of investors (affectionately called “sharks”) for funding.

Cuban is no stranger to the patent policy debate, and has gone on the record numerous times – including here on IPWatchdog.com – explaining that he thinks software patents should be abolished. In fact, in 2012 Cuban donated $250,000 to the Electronic Frontier Foundation (EFF) to create a position known as the Mark Cuban Chair to Eliminate Stupid Patents.

Recently Cuban has joined the discussion on IPWatchdog.com, commenting on a number of articles written relating to his activities and views (see here, here and here). I invited Cuban to do an interview for publication and he agreed to do an e-mail interview. On Monday, November 9, 2015, I e-mailed Cuban the questions. He turned around his answers almost immediately and even solicited follow-up questions. I sent him a few follow-up questions, which he responded to on Tuesday, November 10, 2015. Those follow-up questions and answers have been weaved into the Q&A where topically appropriate.

With the exception of our different views on software, which isn’t surprising, I find myself in agreement with Cuban on a great many things. Indeed, inventors can and should take to heart what he says about the importance of having a business and not just a patent. As I’ve said many times, just because you have a patent does not mean that a dump truck full of money will suddenly appear with lottery like winnings at your front door!

Before proceeding to the Q&A, it is worth noting that what follows is an interview, not a debate or argument. While I strongly disagree with Cuban on several fundamental issues (starting with the first question) the goal was not to allow disagreement to turn to argument. Rather, the goal was to have an open discussion about the issues so that Cuban’s views on various topics would come forward.

Without further ado, here is my interview with billionaire entrepreneur Mark Cuban.

[Patent-Business]

QUINN: Starting broadly first, do you believe the patent system as a whole fosters or inhibits innovation?

CUBAN: I think for technology it inhibits it dramatically.

QUINN: Most presenters on Shark Tank get asked if they have a patent, and it seems that when there is a patent that covers a product they are given higher valuations for their startup. Generally speaking, do you believe having a patent that covers a product or service increases startup value? Why or why not?

CUBAN: I’m not the one asking.  The other sharks ask, and it’s mostly for physical products. For many companies it shows the entrepreneur has no idea what they are doing and they have wasted valuable cash getting a patent before they know whether or not they have a legit business. Just because a patent is issued doesn’t mean the company will be successful.  Often the cash wasted obtaining a patent could be better used elsewhere. The few times I ask, I want to know if it’s a situation where the money is wasted, or I’m concerned they may get sued by someone else, so having a patent offers some form of protection against the idiocy of the system. Patents drive litigation.  Having a patent can give you a response to a suit. That is their greatest value in the tech industry these days.

QUINN: Burning through capital and wasting money is a big concern for any entrepreneur or startup, and sometimes pursuing a patent doesn’t make good business sense, that is true. But in your answer you seem to suggest that they need to first determine whether they have a legit business. Can you elaborate on that?

CUBAN: I can’t even begin to tell you how man times I get stopped by desperate people telling me how amazing their patented product is, but they went into debt to get the patent and have no idea how to make money with their product and pay off their debt. This past Sunday a guy wouldn’t let me eat, then he chased me into the parking lot. A patent by itself is worthless. If you don’t have a way to make money you have wasted thousands of dollars. To some people there is a patent pride of ownership. That’s fine.  It looks good on a wall. Punchless patents, those with no revenue sources, create huge problems for the system. They become golden tickets for trolls. Which is why I think that if you can’t monetize your patent in a given period, it should be invalidated.

QUINN: What advice would you give inventors and entrepreneurs? Too often they run head first in without laying the appropriate business foundation, but for Mark Cuban the investor what would that appropriate foundation look like?

CUBAN: First, never use Inventor Services. The ones I have seen advertised are a joke. Second, because a lawyer tells you something is patentable doesn’t mean you should. Third, if you don’t know how you will make money from your patent, then it’s not a business. Know how you will create revenue or don’t start the business.

QUINN: A great deal of the proposed patent reforms are viewed by many as harming independent inventors and startups who need strong patent rights if they are going to attract investment and not be pushed around by larger entities. Do you share these concerns about patent reform? Why or why not?

CUBAN: No.  I have invested in more than 150 companies and never has having or not having a patent impacted the final decision. Small businesses can and do become great without patents. The problem for little guys with patents is that no patent lives in a vacuum. Particularly with software and technology. There is always a work around and you can always find a patent that enables the big guy to sue the little guy. So with just few exceptions the current system doesn’t protect anyone. If you get major patent reform hopefully the big companies have less incentive to try to bully anyone.

QUINN: What kind of major patent reform would give large companies less incentive to bully? What abuses do you see in business and how could the situation be addressed?

CUBAN: Big companies have every incentive to bully right now. They have the money to litigate for years. No small inventor does. So the current system benefits the big bullies over the little inventor. The first step is to get rid of software patents or at worst change to 5 years. Let smart people compete rather than litigate. In this day and age of advancing technologies small companies can out perform the big everywhere outside the court room. Reduce litigation opportunities and you improve the little inventors and small and medium businesses ability to compete.

Part 2 to the challenge of making a change is that small inventors feel like their patent is the most valuable property they own. They would give up everything before their patent. As long as they assign magical powers to their own patents you are going to get comments like we see on your forum about protecting patent rights. But the reality is that a patent without a business is worthless. But no one wants to ever think their patent is worthless.  They will fight to convince you of the opposite. That’s a huge problem as it applies to reform.

QUINN: In the past you have said that software patents should not exist. I have no doubt that is your honest opinion, but I wonder why you single out software patents in particular? Whether a process is carried out in software versus being carried out in hardware is really a design choice. Why should processes carried out by hardware be treated differently than those directed by software?

CUBAN: Code is code. Where it runs doesn’t matter. So it’s not different. I wrote software for 10 years. Not much, if anything, is completely original in software. Like Jobs said, it’s all a remix.

QUINN: I assume if you could make one change to the patent system it would be to eliminate software patents. Aside from the elimination of software patents, if you could make one other change to the patent system or patent litigation system what would that change be and why?

CUBAN: Getting rid of software patents or at worse limiting them to 5 or 7 years is a huge step forward. After that, if you don’t utilize the patent in a product or service, somewhat similar to how a trademark works, you lose it. I would also disallow patents created without knowledge of the other.  If multiple people INDEPENDENTLY come up with the same or comparable idea within a given time frame then to me, it can’t be original.

QUINN: No one seriously disputes the fact that there are bad actors, sometimes referred to as patent trolls, involved in what can probably be best described as extortion like activity, as several federal courts have called it. Why do you think it has been so difficult for courts and Congress to figure out a solution that punishes the bad actors without punishing the masses?

CUBAN: No bad actor thinks they are bad and neither do their attorneys.

QUINN: Having listened to you over the years and read many of your comments on the patent system, it seems you are driven by business concerns associated with being held up by nefarious actors using patents as a weapon against startups in particular. While it may be obvious to many, can you explain why the threat of patent litigation, or litigation in general, is such a serious concern for startups?

CUBAN: The greatest risk every tech company faces after execution and direct competition is the unquantifiable risk of patent litigation. On the flip side, get rid of software and tech patents and inventors would still invent. Coders will still code. Entrepreneurs will still start companies. That’s what we do. The goal of creation, no matter what it is, drives people.  Money is a great reward, but people will find a way to make their inventions, code, companies happen with out patents.

QUINN: I know we are never going to agree on software patents, but I’d like to take deeper dive on your answer about inventors inventing, coders coding and entrepreneurs starting companies. Fundamentally I know you are right. Creative people create, it is what they do. The question for me is whether we can get the level of creation we want from those creative people. I always use the example of Van Gogh. If he needed to work a day job he would have created a lot less and I think the world would be worse off for it. So I want people like that, whether inventors or artists, to be able to make plenty of money from the activity so that they do more creating. When it comes to software there is no doubt that people will create software even without patents, but what would that software look like? I can’t imagine IBM would have spent the billions of dollars investing to create Watson, for example. Granted, we have a one size fits all patent system, which is probably at the root of this problem, but I think you err in lumping all software together and treating it the same. The most useful software couldn’t be created without at least perceived ownership of the intangible rights.

CUBAN: Did Van Gogh get paid enough to live from his first painting or did he live at home with his parents 🙂  I don’t know. IBM isn’t going to let itself go out of business.  They are not going to stop investing in Watson because if they do all those stock options management owns become worthless. How and why did creators create software before it was patentable? And what happens when machines create software and do it at light speed?  They will create trillions of lines of code and parcel them automatically hoping to find the needle in the haystack that turns into something of value.  Then what?

QUINN: In comments to several articles on IPWatchdog.com you said that you did not threaten to sue Wal-Mart on U.S. Patent No. 8,738,278, which covers what many are calling a hoverboard. You also suggested that you do not own the ‘278 patent, or have an interest in that patent. It does seem that you are somehow at least an adviser to the patent owner. What is your relationship with the patent owner and what, if any, interest do you have in the patent? Were you involved with the decision to bring suit against IO Hawk?

CUBAN: I have a non-contractual business relationship with him. I was not involved in bringing the IO Hawk suit.

QUINN: How do you reconcile funding the EFF Stupid Patent Chair, your dislike of software patents and your decision to heavily invest in Vringo? It seems your decision to invest in Vringo was substantially related to their patent infringement lawsuit against Google, is that correct?

CUBAN: It was a cheap hedge. The company asked for support. I told them the same thing. Other shareholders asked for support. I said the same. When markets act with stupidity I will often hedge by buying instruments that I would not otherwise buy. I think high frequency trading is an enormous market structure risk. I spend far too much money hedging my investments as a result. Same thing. I picked Vringo out of nostalgia. I thought the old Lycos patents had at least a chance. If there wasn’t a Vringo I would have put the money elsewhere. If patent law was not so bad I would have kept the money in my pocket.

QUINN: With respect to your Vringo answer, I don’t doubt that you are telling the truth, but can you understand why people might think this position undercuts your views on software and patent trolls?

CUBAN: No. It makes no sense that they don’t understand it. The system is corrupt and doesn’t work. There is no more important time to hedge.

QUINN: It seems based on your definition of patent trolls you turned into a patent troll when you invested in Vringo. I don’t personally think Vringo is a patent troll, but the optics seem bad. And while my wealth pales in comparison to yours I find it hard to believe that there weren’t equally enticing investment opportunities that wouldn’t have required you to go against your beliefs.

CUBAN: Of course Vringo is a troll. That’s exactly why I used them as a hedge.

QUINN: If you were elected President in 2017 whom would you nominate to run the Patent Office?

CUBAN: No clue.

QUINN: When I do interviews I also sometimes like to end with fun questions that tell a little about the person. If you are game here they are: Favorite pastime or hobby?

CUBAN: Playing basketball.

QUINN: Favorite sport?

CUBAN: See above, rugby is second.

QUINN: Has owning the Mavericks been everything you initially dreamed it would be?

CUBAN: Totally different but amazing.

QUINN: Favorite movie?

CUBAN: I love any and all end of the world disaster movies.  No idea why.

QUINN: What historical figure would you most like to meet and why?

CUBAN: Steve Jobs. Never met him. Would love to ask him about patents and Xerox and the early days of apple 🙂

QUINN: The coolest invention of all time?

CUBAN: The semiconductor.

QUINN: The best fictional inventor, Emmett Brown (from Back to the Future), Q (from James Bond), Tony Stark (from Iron Man) or you can go off the board. Why?

CUBAN: Tony stark. He has fun with it all.

QUINN: Star Trek or Star Wars?

CUBAN: Neither.

QUINN: If you could go back in time and give the 25 year old Mark Cuban advice what would it be?

CUBAN: Be prepared for everyone to ask you stupid questions about now in 25 years 🙂