Recently we have published several articles relating to the patent views and philosophy of Mark Cuban (here and here). Cuban himself read the articles and engaged in a vigorous debate on a variety of patent issues in the comments to those articles. During this back and forth Cuban remained steadfast in his dislike of software patents. While Cuban’s dislike of software patents is well known, given how he has in the past tried to capitalize on software patents financially it seems at least a little hypocritical.
In February 2013, Mark Cuban became the exact thing that he purportedly despises and, which he is quick to tell others, is wrecking the American economy. He became what many would call a patent troll by raising his personal financial stake in a non-practicing entity which was, at that time, enforcing its rights on a software patent for a technology that it wasn’t commercializing. While reasonable minds can certainly differ on whether Vringo is or is not an evil patent troll, the type of enforcement activity Vringo has engaged in would seem to unequivocally meet the definition of a patent troll by those, including Cuban, who have a strong dislike for software patents and licensing entities.
The genesis of the accusation that Mark Cuban is himself a patent troll has its roots in a multimillion dollar stake held by Cuban in the Israeli tech company Vringo, Inc. (NASDAQ:VRNG), which was suing Google, now Alphabet, Inc. (NASDAQ:GOOG), over patents that Vringo alleged gave it the right to extract royalties from Google’s U.S. revenues from its AdWords service. Vringo ended up winning an initial judgment in a jury verdict before the patents-in-suit were overturned on appeal in August 2014, nullifying Vringo’s earlier victory.
In what can only be described as surprising, or perhaps curious, it appears that Mark Cuban kept his investment in Vringo because of its suit against Google. In April 2012, Cuban took a 7.4 percent stake in a company that’s most valuable asset was a patent infringement case, which could have netted it as much as $250 million per year. Being a brilliant businessman, there must have been something attracting Cuban to Vringo other than its Facebook-integrated visual ringtone app or the company’s relatively slim revenues. Especially considering that fateful day in February 2013 when he reported to the U.S. Securities and Exchange Commission that he increased the number of Vringo shares he owned, from 1.03 million to 1.13 million. There seems little doubt that the prospect of an enormous payday thanks to the presence of software patents was what pulled Cuban to Vringo.
In a response given to Business Insider on the subject, as well as a related piece published by Forbes Cuban explained that he did have certain investments he viewed as “a hedge against the unlimited patent exposure all the companies I have investments in face.” He would go on to say that “Vringo’s IP… is the flip side of that risk and offers an imperfect hedge. So I made the investment.”
While hedging risk is a well known and widely accepted investment tactic, there is something rather bizarre about someone who is such a vocal critic doing exactly what they criticize others for doing. How can it be viewed as anything other than hypocritical, or at the very least opportunistic, for the person who funded the Electronic Frontier Foundation Mark Cuban Chair to Eliminate Stupid Patents to being seeking a lottery like windfall on the back of software patents?
To be sure, Cuban will almost certain say that those calling him a hypocrite just don’t understand. If the law allows someone to do something how could it be wrong to do that thing? It is certainly true that if the law allows for a loophole then those who seek to use the loophole shouldn’t be chastised for exercising their rights. However, when you are a champion to close a loophole and you simultaneously seek to use the loophole for financial gain that has to say something about just how deeply and sincerely views are held. It should be a legitimate part of the public dialogue so that others can fully understand biases, and that Cuban is walking both sides of the street.
If Mark Cuban had an investment stake in Vringo, and he really believed what he’s said about the evils of patent trolling and software patents in general, why not become an activist investor and advocate for Vringo to drop its suit entirely? The answer, which is blindingly obvious given Cuban’s business acumen, is that in the back of his head, in the bottom of his heart, he wanted Vringo to win its suit. Those are the very same actions and hopes of those he so vehemently criticizes, but when he is the one who is the patent troll somehow things are different.
So much of the patent debate is marked by a view that “my patents aren’t the problem, your patents are the problem,” but few episodes offer such a drastic and eye opening comparison. If patent trolls are ruining the economy, and patent trolls are those who own patent rights they did not invent, which is the definition offered by Cuban in comments on previous articles published on IPWatchdog.com, then Cuban is a patent troll who is ruining the economy. Why then would anyone take his self serving views of the patent system at all serious?
The one thing that is clear and needs to be at the center of any discussion involving Mark Cuban’s position on patent rights is that Mark Cuban does not care about you. It doesn’t matter if you are Google, a tech startup or the entire American system of innovation. In each case, Mark Cuban only cares about what you can do for Mark Cuban, and his focus is always on the companies he invests in. That is fine business policy, but given the fact that he is willing to become a patent troll himself it is hardly appropriate for Cuban to wrap himself in the flag and complain about the damage being done to the U.S. economy.
Cuban has an outsized influence in this patent debate, and is walking both sides of the aisle. He has personally invested hundreds of thousands of dollars into the fight to stop what he characterizes as stupid patents, and he has invested millions into a business that only has those same stupid patents as the main asset. He may want to characterize that as a hedge, but it seems penny wise and pound foolish, or at least a little bit schizophrenic.
What makes this schizophrenic view of patents even more confusing is that Cuban does, at least at times, seem to understand the value of patents and why they are critically important to innovators and entrepreneurs. As many readers have noted in comments in our previous about Cuban, he is a regular investor on the reality television show Shark Tank, where contestants are often told that they need patents for their business ideas to succeed. This aspect of Shark Tank is something that was pointed out in a segment on the popular news comedy show Last Week Tonight with John Oliver (a segment which has its own inaccuracies, as we’ve pointed out elsewhere on this site).
What’s good policy for Cuban is not good policy for everyone. But Cuban will continue to tell you that it’s good policy for everyone. Why? Easy. Because that’s good policy for Cuban. His behavior in both the business and political worlds is further proof of the fact that Mark Cuban’s greatest interest at all times is Mark Cuban and never the American innovator. There is nothing wrong with hold self serving views, but Cuban’s on again off again hatred of patents based on who owns them is extremely telling. Indeed, Cuban’s position on patents seems akin to the weather in New England. If you don’t like it just wait for 15 minutes, it is bound to change.