Mark Cuban is the owner of the NBA’s Dallas Mavericks. He’s also one of the many voices that have entered the political fray over the supposed need to push broad patent reforms through Congress. In November 2013, Mark Cuban’s name was one of 39 found on a letter submitted to Congress on behalf of a coalition of tech investors to support patent reform that suppresses the “troubling growth and success of the patent troll business model.” In order to protect the interests of small, innovative start-ups, this group argued the need for higher levels of specification in demand letters, more avenues for patent review and better protections for technology end users.
Those familiar with the patent debate will also recall that the Electronic Frontier Foundation (EFF) has a position known as the Mark Cuban Chair to Eliminate Stupid Patents. Mark Cuban and Minecraft creator Markus Persson collectively donated $500,000 to the EFF to endow the Mark Cuban Chair to Eliminate Stupid Patents. The purpose of this position has been to hunt down and destroy “crappy patents that have been recklessly granted by the US Patent and Trademark Office to unscrupulous ‘inventors’ who claim to have invented things that were obvious and/or already extant; and to pay for activists to fight for substantive patent reform.”
The EFF has been pretty clear in its support of the Innovation Act (H.R. 9), a piece of patent reform legislation that has languished thus far in Congress because of fears surrounding certain aspects of the new regulations, which could prove to be disastrous to the overall system. Previous posts on IPWatchdog have pointed out some of the negative aspects of that bill.
Digging a little deeper, it’s not hard to see that Mark Cuban is bringing a lot of his trademark flamboyant bravado to his anti-patent stance and it’s gotten his voice heard, to be sure. Mark Cuban has called for extreme measures such as the elimination of software patents, even going so far as to say that “patent law right now holds us back in every which way, shape and form.” In at least one episode of TV’s Shark Tank, he has taken the chance to berate a patent owner who wanted to license his technology as patent trolls; in that particular case, there are reports that Cuban took to Twitter and offered to pay the legal fees for the makers of products infringing on an invention presented on Shark Tank. Cuban has argued in the past that patents that aren’t used in five years should become public domain after that period of non-use.
With so much brash bluster, it was inevitable that Cuban would argue himself into a corner eventually. It finally looks like Cuban’s shoot from the mouth first approach is exposing him as something of a patent hypocrite. More specifically, Mark Cuban recently made what multiple news outlets reported were threatening comments toward Wal-Mart Stores Inc. (NYSE:WMT), threatening the retail giant with a patent infringement lawsuit of his own. It would seem that Cuban, like so many others who so loudly want patent reform, have an exceptionally dim view of your patents, but his patents are rock solid and deserve to be respected. Such hypocrisy is not new in the patent reform debate, but it is extremely telling.
EDITORIAL NOTE: After this article published Mark Cuban took to our comments section to say that the did not threaten Wal-Mart, but was merely telling them that if they moved forward with their plans that some patent owner might give them a nightmare. He claims now that he was warning Wal-Mart about the possibility of patent trolls.
Walmart is looking to capitalize on the recent popularity in hoverboards, motorized personal transportation units also known as self-balancing scooters, by offering a self-balancing scooter product in time for the holidays. Thanks to patents covering the invention Cuban seems poised to take aim at Walmart, threatening a patent infringement lawsuit if the retail chain sells the units this holiday season. I guess when it comes to patents Cuban’s philosophy is do as I say not as I do.
So why is Walmart “in for a nightmare,” to use Cuban’s words? It’s been speculated that one of the hoverboard products that Walmart will market is IO Hawk, which offers an upscale hoverboard model for about $1,800 USD. IO Hawk, however, is currently facing a lawsuit for patent infringement from Shane Chen, an inventor of a similar product known as the Hovertrax. Cuban is involved because he invested in licensing Chen’s technology when Chen presented the Hovertrax on Shark Tank. While it’s unclear what product Walmart will eventually sell, BuzzFeed has reported that Chen was in talks with Walmart for licensing his patented version.
Cuban has been very quick in the past to decry the millions of dollars wasted in patent infringement lawsuits and the costs that are supposedly passed on to the consumer. Interestingly, however, is that when corporations are hit with patent damages for infringement the costs of the goods and services provided never rise. This clearly suggests that those who are in the business of selling, or infringing for profit if you prefer, have baked into their price point a certain amount to cover necessary licensing fees and patent damages. This obviously calls into question whether consumers are at all injured by patent infringement lawsuits. Indeed, it tends to suggest that retailers who are in the business of infringing are pocketing rent payments on the back of innovators. That is not what the patent system is supposed to allow. The innovator, not the infringer, is the one who is supposed to be rewarded for inventing and the associated risk taking involved.
So why does Mark Cuban want to start patent litigation against one of the largest retailers in the world? Such a threat is curious given that in an August 2011 post on his personal blog Cuban argued that litigation adds millions of dollars to the costs of commercializing technology and kills jobs? Why won’t he just live and let live, as it were? After all patents are the root of all evil and do nothing more than harm consumers, at least according to Cuban. Of course, the reason Cuban is pounding his chest and threatening Walmart is simple. In this case Cuban has locked into what he believes to be an exciting innovation and he controls the patent rights. In a way that can only be achieved by the truly petulant, Cuban has undermined a great deal of his own patent reform position without even seemingly realizing what he has done.
An even more delightful part of this farcical situation is the fact that the very patent reforms for which Cuban has already invested hundreds of thousands of dollars in pursuing would prevent him from going after Walmart, at least initially. The EFF, that organization which received such a generous gift from Cuban, supports the Innovation Act. Customer stay provisions in pending patent reform in Congress contains mechanisms through which Walmart could possibly request a stay, claiming itself as a covered end-user and shifting the lawsuit’s focus to the manufacturer of the IO Hawk. We’ve already pointed out other negative aspects of customer stay provisions in patent reform legislation in other posts on IPWatchdog. How ironic would it be that patent reform supported by Cuban and the EFF could entitle alleged infringement to continue indefinitely as he, the patent owner, is forced to chase the maker rather than the seller. Perhaps Cuban will learn why going after the seller is frequently a preferred pain point in an infringement battle when an innovator can’t seem to get anywhere with a manufacturer who simply ignores all business inquiries.
Much of this legal situation has its foundation in the somewhat murky story of the hoverboard’s development in China. The IO Hawk started getting a good deal of notice after premiering at the 2015 Consumer Electronics Show in Las Vegas. However, a very similar product was released last August by Chic Robotics and after that company unveiled its Smart S1 at a Chinese trade fair, sales of the hoverboard were quickly followed by an explosion in the number of hoverboard brands on the market, which suggests some pretty excessive copying of the original product. Conveniently, the trademark for the IO is simply Chic’s logo, a circle below a straight line, rotated 90 degrees. IO is importing the units from China and it’s not clear that there is any patent protecting the self-balancing scooters that it’s marketing.
Chen, however, has been issued U.S. Patent No. 8738278, entitled Two-Wheel, Self-Balancing Vehicle with Independently Movable Foot Placement Sections. It claims a two-wheel, self-balancing vehicle having two foot placement sections coupled to each other and independently movable, two wheels in parallel spaced apart from each other and associated with either foot placement section, and then control logic that drives each wheel toward self-balancing their respective foot placement sections in response to sensor data. Diagrams attached to the patent show a hoverboard that is remarkably similar to the other products that are being attached to such recognizable celebrity names as Justin Bieber or Wiz Khalifa.
It looks like Mark Cuban has a point in this case: he’s licensed patented technology and in order to keep cheap derivatives out of the market, he wants to enforce Chen’s patent rights. That is a reasonable position and it is supposed to be exactly what the patent system is intended to allow. Of course, Cuban’s use of the patent system in this legitimate way shines a spotlight on his hypocritical views on the subject.
If we can make one more point about Cuban’s cluelessness on patents and innovation, we have to go back to that public appearance where he made his impassioned plea to end software patents. To support his claim that patents aren’t necessary for technology innovation, he makes a pretty bold statement: “I read somewhere that in 1989, Apple had one patent. One. I mean, back in the early days of computers, no one talked about patents.” Well, Cuban read wrong. Such a careless, inaccurate and provably incorrect statement shows just to what length Cuban will go to bolster his arguments even when the truth is the first casualty.
A quick online search of patents issued to Apple between 1976 and 1989 shows that the company held 63 U.S. patents, earning 11 in 1989 alone. And to provide some proof to our readers, just check out: U.S. Patent No. 4870357, titled LCD Error Detection System; U.S. Patent No. 4786893, titled Method and Apparatus for Generating RGB Color Signals from Composite Digital Video Signal; U.S. Patent No. 4742448, which is titled Integrated Floppy Disk Drive Controller; or U.S. Patent No. 4852830, titled Computer Monitor Stand. Wozniak’s name is listed in four other patents issued to Apple during this time period, showing that an inventor pioneering technology in a new field does not need many patents to maintain a leading position in that sector.
Unlike Apple, which held many patents, Chen only holds the one hoverboard patent. If Cuban’s positions were consistent you might imagine that he would conclude that patents aren’t very necessary because if you only have one patent they can’t be very necessary. Of course, when it is his “only one patent” Cuban probably views things very differently.