Jessica Karmasek Jul. 8, 2015, 12:52pm


NEW YORK (Legal Newsline) - A New York federal judge last week sided with popular crowdfunding website Kickstarter in a patent infringement lawsuit filed against competitor ArtistShare.

In September 2011, Kickstarter Inc. sued both ArtistShare Inc. and Fan Funded LLC over U.S. Patent No. 7,885,887. Kickstarter sued for declaratory judgment of both patent invalidity and non-infringement.

The ‘877 patent, titled “Method and Apparatuses for Financing and Marketing a Creative Work,” was assigned to ArtistShare, which later assigned the patent to Fan Funded.

The patent claims “a system and method for raising financing and/or revenue by [an] artist for a project, where the project may be a creative work of the artist.”

Kickstarter argued that the patent’s claims fall outside Section 101 of the Patent Act because they teach the “abstract idea of crowd-based funding,” of “raising money from fans to support an artistic work” or of “raising money from patronage.”

Section 101, only a sentence or two long, describes the four categories of inventions that it declares eligible to be considered to be patented. They include: machines, compositions of matter (i.e. pharmaceuticals), articles of manufacturing (i.e. tools) and processes or methods.

Kickstarter argued that the addition of a computer does not render the material patentable, inasmuch as the patent only recites “generic steps and tools” for implementing the abstract idea on a computer.

ArtistShare and Fan Funded asserted the patent is not directed towards an abstract idea. They also argued because Kickstarter failed to provide any definition for crowd-based funding that there was “no way for the court to assess whether the claims are directed to that undefined concept.”

Judge Katherine Polk Failla, for the U.S. District Court for the Southern District of New York, agreed with Kickstarter that the ‘877 patent claims a patent-ineligible abstract idea.

“A careful read of that patent, and of recent decisions on patent eligibility from the Supreme Court and the United States Court of Appeals for the Federal Circuit, makes plain that the ‘887 Patent claims only the abstract and time-honored concept of patronage, and even the addition of an element of computer use is insufficient to render it valid under Section 101 of the Patent Act,” she wrote in the 31-page opinion.

Failla said the concept of incentive-based funding is “incontestably similar” to other fundamental economic concepts and to other types of “organizing human activity,” both of which have been found to be abstract ideas by the Supreme Court and Federal Circuit.

Nothing about the ‘887 patent, she added, transforms the concept of crowdfunding into patent-eligible subject matter.

“The process of posting a project online, providing different levels of incentives for different levels of funds, storing the information of individuals who accept offers for incentives in a database, and providing software tools to contact the individuals through the database ‘all describe an abstract idea, devoid of a concrete or tangible application,’” Failla wrote.

The judge noted that the defendants’ repetition of certain words -- like “particular” and “specific” -- in bold italics when referring to the claims in the patent does not make them so.

“And while limitations like ‘operable from a remote site’ and the construction of ‘entitlement’ to include ‘at least one product and at least one service and at least one patronage,’ might add some degree of particularity, the concept embodied by the majority of the limitations describes only the abstract idea of incentive-based funding or patronage implemented online,” she wrote.

Failla said, at best, the claims of the ‘887 patent describe the use of the Internet or a computer network to make identifying and soliciting funds from potential patrons easier and more efficient.

“But relying on a computer to perform routine tasks more quickly or more accurately is insufficient to render a claim patent eligible,” she wrote, citing previous court decisions.

“We’re pleased the court agreed that this patent is invalid, and we’re happy to see this case reach its conclusion,” Kickstarter Deputy General Counsel Michal Rosenn said in a statement. “This is a win for artists, ideas, and creative freedom."

ArtistShare CEO Brian Camelio said in a recent blog post that his company is currently reviewing the judge’s opinion and its options moving forward.

“We are still very proud to have provided the blueprint for the crowdfunding industry by conceiving and launching the Internet’s first ‘crowdfunding’ website in 2003 and we look forward to continuing to innovate and help even more creative artists achieve their artistic dreams through both ArtistShare and our latest endeavor, FanFunded.com,” Camelio wrote.

Kickstarter was sued earlier this year by non-practicing entity AlphaCap Ventures, according to a search of PACER, an online service that provides access to federal court documents.

However, the lawsuit, filed against the company and other crowdsharing platforms in the plaintiff-friendly U.S. District Court for the Eastern District of Texas, was settled in May.

From Legal Newsline: Reach Jessica Karmasek by email at patents@legalnewsline.com.

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