Kickstarter Wins Small Victory in Patent Lawsuit With 2000-Era Crowdfunding Site

Kickstarter has asked a judge to invalidate a patent owned by another crowdfunding site.

Mr. Camelio. (Wikimedia Commons)

Kickstarter just had a small victory in a lawsuit filed to shake loose what it considers an attempted patent troll. ArtistShare, a site that was founded in 2000 in order to let fans fund creative projects, had been hoping to get some compensation out of Kickstarter. Instead, the three-year-old Kickstarter took them to court—not what ArtistShare wanted. And last month in a New York court, a judge denied a motion to dismiss filed by ArtistShare.

In the denial of the motion to dismiss, a judge wrote that “there is a sufficient controversy between the parties that is both immediate and real.” That means the court will consider Kickstarter’s request for a definitive judgment on the validity of a crowdfunding patent owned by ArtistShare.

As we reported back in October, Kickstarter sued ArtistShare (also litigating as Fan Funded, LLC, the vehicle created to own the patent in question) after that site was granted a vague patent for “methods and apparatuses for financing and marketing a creative work.” Brian Camelio, a producer, musician and founder of ArtistShare, was hoping to get licensing fees or a revenue-sharing arrangement out of Kickstarter. The Austin American-Statesman says Mr. Camelio is “considered one of the fathers of crowdfunding.”

Although Kickstarter offered to buy the patent in order to put the issue to rest, it’s not interested in any other arrangement. “Kickstarter believes it will be sued for patent infringement by the defendants,” Kickstarter wrote in its complaint.

As a preemptive strike, the crowdfunding startup took ArtistShare and Mr. Camelio to court, where it hopes a judge will see the error of the patent office’s ways and rule that Kickstarter is not infringing on the patent and that the patent is invalid.

The patent summary:

The present invention is directed to a system and method for raising financing and/or revenue by artist for a project, where the project may be a creative work of the artist. The method including registering, by at least one artist, with a centralized database, at least one or more projects, offering, by the at least one artist, an entitlement related to the artist in exchange for capital for the project of the artist. The method and system may also include searching, by an interested party, the centralized database, for the least one artist, registering, by the interested party, with the centralized database and accepting the offer by the interested party for the entitlement related to the project. The capital may then be forwarded to the artist and the entitlement provided to the interested party.

While we’re sure someone like patent enthusiast Jay Walker would endorse this as a valid business innovation, Kickstarter believes it’s bunk. The case will now proceed to discovery and and further litigation to determine if infringement exists.

We’ve reached out to Mr. Camelio and the respective legal teams.

Back in October, Mr. Camelio told Betabeat’s Ben Popper that he was “stunned and disappointed that Kickstarterhas decided to sue our company.”

We offered KickStarter a license to the software that powers our business. It is software that we have worked to develop for over 8 years, and empowers artists to build their own powerful fan bases. Contrary to their allegations, we contacted Kickstarter long before the patent ever was granted, and the reality is that they refused to acknowledge us until after the patent issued; only then, apparently, they decided to respond to us. Most importantly KickStarter did not discolse that they offered to buy the patent from us, and it is only after we told them the patent was not for sale that they then sued us. This lawsuit came completely out of left field and I feel betrayed that they have left out these important facts. I am proud of all that ArtistShare has accomplished. I have worked hard to build a new business and to prove a new business model. I have empowered many artists and helped [them] to build robust fan bases that are their own. Over the past 9 years our clients’ fan-funded projects have received many major awards including 5 Grammy awards and 17 Grammy nominations. Like most successful startup companies, I have worked hard to receive protection for my software and system that is the backbone of ArtistShare’s success. In this era as companies grow they tend lose sight of their original purpose and forget that we are all in this together. We should be collaborating rather than litigating. It is a shame that KickStarter is acting like this. I’m quite disappointed.

Based on the recent ruling, it appears this lawsuit, now a more than 18 months old, still has a ways to go: ArtistShare has filed a counterclaim alleging that Kickstarter is infringing on its patent.

Kickstarter Wins Small Victory in Patent Lawsuit With 2000-Era Crowdfunding Site