Kickstarter.com seems to be on the verge of winning its well-publicized declaratory judgment suit against ArtistShare, the crowdfunding website that claims its patent covers Kickstarter's social financing business model.
Kickstarter's lawyers at Steptoe & Johnson filed suit against ArtistShare and its patent-holding unit Fan Funded LLC back in October 2011, seeking a ruling that their client doesn't infringe Fan Funding's crowdfunding IP. In a Feb. 8 letter to U.S. District Judge Paul Crotty in Manhattan, ArtistShare essentially threw in the towel at least at the trial court level. Counsel for ArtistShare and Fan Funded acknowledged that, under a claim construction ruling that Crotty issued last month, there's no way they can show that Kickstarter infringes.
(The ArtistShare letter isn't public, but the details of it came to light on Friday, when Crotty mentioned it in a docketed order.)
Techies tend to adore Kickstarter. The for-profit website allows creative types and entrepreneurs to tout their projects and ask for contributions from the public. Since its founding in 2009, Kickstarter has been instrumental in launching many critically-acclaimed films, art installations, and technology startups.
Techies also tend to loathe software patents. So in 2011, when Fan Funded asked Kickstarter to license its newly issued patent, titled "Methods and Apparatuses for Financing and Marketing a Creative Work," the story quickly went viral. PaidContent chimed in first, followed by the The Hollywood Reporter and TechCrunch, among others.
In some corners of the internet, Fan Funded was painted as a patent troll. The characterization is misleading. Its parent, ArtistShare, is a crowdfunding site that predates Kickstarter by six years and has helped launch five grammy-winning albums. ArtistShare's CEO, Brian Camelio, filed for the Fan Funded patent in 2002, but it wasn't issued until 2011. Camelio told Patent Examiner that he never tried to shake down Kickstarter. He claims that he proposed a business partnership with Kickstarter, and it responded with litigation.
Whatever the backstory, Kickstarter and its lawyers at Steptoe & Johnson appear close to victory in the courtroom. After a hearing in December, Crotty adopted a claim construction on Jan. 18 that was proposed by Steptoe partners Michael Allan and Timothy Bickham. According to Friday's ruling, lawyers for ArtistShare and Fan Funded at the Cambridge, Mass.-based IP boutique Lando & Anastasti acknowledged in their Feb. 8 letter that their only hope for defeating the declaratory judgment suit is now a reversal by the U.S. Court of Appeals for the Federal Circuit.
With claim construction out of the way, Crotty is now slated to consider Kickstarter's arguments that Fan Funded's patent is invalid. In its letter, Fan Funded asked him to enter a final judgment in the case now, so that it can immediately appeal his claim construction order to the Federal Circuit without waiting for him to rule on invalidity. Crotty denied that proposed plan on Friday, calling it inefficient.
Lando & Anastasi partner Craig Smith declined to comment. So did Steptoe & Johnson's Allan.