Things are picking up in the case between Kickstarter, Inc. and ArtistShare, Inc. and Fan Funded, LLC which should determine whether Kickstarter is infringing on ArtistShare and Fan Funded’s crowdfunding software patent, or if ArtistShare and Fan Funded LLC are just being over-aggressive strong-armed salesmen.
Kickstarter, Inc. recently filed suit against ArtistShare, Inc. and Fan Funded, LLC, seeking a declaratory judgment that U.S. Patent No. 7,885,887 issued to ArtistShare, Inc. and owned by Fan Funded, LLC is invalid, and that Kickstarter does not infringe the patent through its website or other means.
For those unfamiliar with both companies, ArtistShare was founded around 2003-2004 by Brian Camelio as an online platform for artists to seek funding from anyone interested in a project, which is referred to as a “crowdfunding” platform. In 2009, Kickstarter launched its own online crowdfunding platform, for those looking to raise money for creative projects. Kickstarter has since become the largest (or one of the largest) crowdfunding platforms in the world.
In 2010, ArtistShare filed for a patent regarding software relating to funding projects, titled “Methods and Apparatuses for Financing and Marketing a Creative Work.” Once filed, Artistshare sent Kickstarter a letter informing them that they might be interested in securing licensing rights to ArtistShare’s new patented software platform. Kickstarter did not respond.
In March 2012, Artistshare again sent a letter to Kickstarter executives attaching a copy of their patent and stating that they will be contacting them in the immediate future to discuss ArtistShare’s patent and software licensing terms for Kickstarter. On March 23, 2011, Brian Camelio, the founder of Artitshare, sent another letter to Kickstarter, to discuss software licensing opportunities. On April 13, 2011, Camelio personally visited Kickstarter’s corporate headquarters unannounced and uninvited. He attempted, unsuccessfully, to meet with a co-founder of Kickstarter.
On May 2, 2011, Kickstarter’s outside counsel sent Camelio a letter asking whether ArtistShare believes Kickstarter should license the patent as a potential business opportunity or whether ArtistShare contends that Kickstarter is infringing the patent. On May 11, 2011, Camelio responded that “[y]es[,] ArtistShare has a patent which may or may not be relevant to your future business plans” and that “[a]s far as the patent infringement claims go, that I leave up to the attorneys.” (Kickstarter, Inc. v. Artistshare, Inc., 11 Civ. 6909 (PAC), NYLJ 1202549725813, at 1 [SDNY, Decided April 10, 2012]) Camelio then stated that he “suggest[s] we look first to collaborate together before we get distracted by getting pulled into an analysis about patent infringement.” (Id.)
On June 9, 2011, Kickstarter’s General Counsel, Jared Cohen (“Cohen”), met with Camelio. Camelio and Cohen’s accounts of their conversation at this meeting and in subsequent conversations vary dramatically. Based on the meeting and what Cohen perceived Camelio said, Cohen believed that Camelio “was going to use the patent to force Kickstarter to pay him for a license or other protection from suit.” (Id.)
On August 5, 2011, Cohen and Camelio met again. Cohen claims that Camelio told him that he and his lawyer believed that Kickstarter is infringing his patent and that he must enforce his patent. Camelio then presented three options: (1) Kickstarter could reach a business deal with ArtistShare and license the patent; (2) Kickstarter could license the patent for a royalty payment of 10 percent of Kickstarter’s revenues; or (3) the parties could litigate the issue. Camelio disputes only the allegations that he claimed Kickstarter was infringing the patent and threatened litigation; he agrees that he offered a business deal and license for the patent, and alternatively offered a license for the patent with a royalty payment of 10 percent of the Kickstarter’s revenue. On August 8, 2011, Camelio formed and founded a new business and website named Fan Funded, which now owns the patent in dispute.
Cohen claims that, on September 12, 2011, he told Camelio that Kickstarter was not interested in a business deal; that it does not believe it is infringing the patent; and that it does not believe that the patent is valid. On September 23, 2011, Kickstarter offered to buy the patent in order to permanently remove the threat of litigation. Kickstarter’s offer was rejected. Cohen claims that Camelio then indicated that if the parties did not reach an agreement by October 1, 2011, that “the other plan or action would be executed,” and “Kickstarter’s situation would get much worse.” (Id.)
Shortly thereafter, Kickstarter filed suit in the United States District Court, Southern District of New York, seeking a declaratory judgment to determine that Kickstarter is not infringing on Artistshare or Fan Funded’s patent.
When businesses or owners of intellectual property are facing a situation involving possible infringement, the potentially-infringing party has the option to file a request for a “declaratory judgment”, which is essentially a decision from a judge determining the rights, duties, or obligations of one or more parties, typically with respect to intellectual property rights, which would relieve the uncertainty of whether a suit for infringement could be filed in the future.
In this case, Artistshare’s motion to dismiss was just denied, as the Court found that a sufficient controversy exists between the parties, and that controversy is both immediate and real. The matter must now be litigated (or quietly settled).