Billionaire entrepreneur Mark Cuban is blasting a new Trump administration proposal that could overhaul how patents are taxed in the United States.
The outspoken investor took to X to criticize the idea, calling it “one of the dumbest ideas in the history of business.”
The Wall Street Journal recently reported that the Commerce Department is considering a move to charge patent holders between 1% and 5% of a patent’s value.
That money would go toward reducing the $37 trillion national deficit. The idea is still in early stages, with financial models and draft proposals under review.
But the potential fallout has already sparked backlash from inventors, business leaders, and economists.
A Tax on Unrealized Gains?
Cuban compared the Trump administration’s idea to an unpopular proposal floated by President Biden: a tax on unrealized capital gains.
“Let’s call a tax on patent value what it is — A Tax on Unrealized Capital Gains,” Cuban wrote.
“It was dumb when Biden proposed it. It is just as dumb to tax the estimated value of a patent.”
Currently, U.S. utility patent holders pay maintenance fees three times over a patent’s 20-year lifespan, totaling a few thousand dollars.
The proposed shift would peg fees to a patent’s estimated market value, a figure that’s often highly speculative and hard to define.
Critics say the move could discourage innovation. Companies like Apple and Amazon, which file thousands of patents annually, mostly for defensive purposes, could face massive new costs.
Even smaller inventors could be hit hard.
Cuban Offers an Alternative
While Cuban agrees that something should be done about so-called “patent trolls” entities that hold patents solely to sue others, he says this isn’t the way to do it.
“I’m all for taking on patent trolls. But this is the worst possible approach,” he wrote.
“Make the trolls actually use the patent in some commercial manner, and pay taxes on operations before they can sue. Problem solved.”
When one person commented that “patent trolls should have consequences,” Cuban replied, “Then make the trolls operate a business and pay taxes before they can sue. This idea is stupid.”
Unclear Impact, Big Concerns
No other country charges patent holders a percentage of their patent’s value. Assigning such values would be a new task for the U.S. Patent and Trademark Office (USPTO), which has never done so and would likely need years to develop a fair system.
Meanwhile, the USPTO is already under pressure. It’s been subject to staffing cuts and halted hiring plans following a review by the Department of Government Efficiency.
Commissioner for Patents Vaishali Udupa resigned in February, and the agency reportedly faces longer wait times for patent applications.
Last year, the USPTO took in nearly $4 billion in patent fees and about $583 million in trademark fees. It funds itself and maintains reserves for financial stability.
Any drastic change could ripple through the system, possibly resulting in fewer filings and more unpublished innovations, which can’t be patented later.
Startup Founders Could Suffer
Cuban also pointed out that taxing patent value would hit startup founders the hardest. In response to another X user who said the idea would “destroy the founders of many startups,” Cuban replied, “Agree.”
The timing also raises concerns. With generative AI tools like large language models (LLMs) making it easier to duplicate ideas, some inventors are already wary of filing patents.
Adding high fees on top of that could result in even fewer protections for new inventions.
For now, the proposal is not finalized, and the Commerce Department has yet to publicly comment.
But if Cuban’s reaction is any sign, the business community isn’t likely to support the change.
As Cuban put it: “This idea is stupid.”
IMAGE CREDIT: “Mark Cuban” by Gage Skidmore, via Flickr. Licensed under CC BY-SA 2.0. Image adjusted for layout.