KickStarter Seeks To Protect Fan-Funding Model From Patent Threat (Exclusive)
The upstart alternative financing website, which has raised $75 million for more than 10,000 films, songs, books, and other creative projects, is going to court to protect itself from a competitor making threats.
Kickstarter, the burgeoning online forum that allows filmmakers, musicians, and other artists to raise independent financing for projects, is being threatened by competitors who claim to have patented the "fan-funding" approach. The company is seeking to save itself by asking a New York federal court for declaratory relief from claims of patent infringement.
Started in 2009 by Perry Chen, Yancey Strickler, and Charles Adler, Kickstarter has been hailed as an innovative way to raise capital for micro-projects. Instead of going to Hollywood studios, big record labels, or large publishing houses, artists go to the Kickstarter website, describe their project, and ask fans for money.
Kickstarter has raised more than $75 million in two years for 10,626 “creative projects" based on the donations of 813,205 “backers," according to a glowing review in August by The New York Times Magazine. The website has grown in popularity because it takes no ownership percentage of projects, instead taking a small percentage of total funding if a project is successfully funded.
But in the six months, according to legal documents filed by Kickstarter, the company has been repeatedly threatened by other companies who are also in the fan-funded arena.
In February, ArtistShare CEO Brian Camelio registered a patent that was titled, "Methods and Apparatuses for Financing and Marketing a Creative Work."
The patent describes a process by which artists register works into a centralized database and offer entitlements in exchange for capital.
The following month, Camello is said to have written two senior executives at Kickstarter "to discuss ArtistShare's patent and software licensing terms for Kickstarter."
After hearing no response, he sent another letter in an attempt to "initiate amicable discussions" before showing up in person to Kickstarter's New York office unannounced in an unsuccessful effort to corner Strickler.
Over the next few months, conversations between Kickstarter's outside counsel and Camelio continued over the allegations of patent infringement.
In August, it's alleged that a company called Fan Funded was formed with money put up from ArtistShare. The following month, Fan Funded declared it "owns" the patent in question and sought to resolve the situation. But negotiations went nowhere, and now KickStarter says it believes it is under threat of a patent infringement lawsuit.
The registered patent appears to be an example of a relatively new class of patents known as "business method patents," which allow enterprises the exclusive rights to conduct business in a certain way, and have been controversial among those who question whether these method patents meet the patentable standard of non-obviousness. These types of patents became subject to an important Supreme Court case in 2010 in Bilski v. Kappos, which didn't eradicate them and may have helped pushed Congress into enacting significant patent reform earlier this year.
Ironically, one of the latest projects seeking funding on KickStarter is from a patent agent looking to score money for a book that celebrates the art contained in published U.S. patent applications and granted U.S. patents. It's doubtful the patent now in question will make it into that book.