For the half-year to 31 December 2014, the IPKat's regular team is supplemented by contributions from guest bloggers Rebecca Gulbul, Lucas Michels and Marie-Andrée Weiss.

Regular round-ups of the previous week's blogposts are kindly compiled by Alberto Bellan.

Tuesday, 4 December 2012

Kickstarter: in need of protection?

The IPKat receives links to hundreds of items on other folk's websites, most of which are more interesting to their writers than to their prospective readers. Fortunately this is by no means always the case and every so often the IPKat finds something that is literally crying out "publicise me!"  One such piece, which emanates from Maxine Horn (CEO, Creative Barcode), concerns an enterprise which, surprisingly, this Kat only came across for the first time last month -- Kickstarter, founded three and a half years ago as an ingenious way of financing new, creative and probably risky ventures through crowd-sourcing the necessary funds.   Maxine's cri de coeur runs like this, in relevant part [though the other parts are worth reading too ...]:
"Crowd-Funding portal Kickstarter dragged into Patent Law suit – why?

Following major PR about one of Kickstarters’ most successful fundraising successes involving Form Labs , a rival 3D Printing company 3D Systems has launched a law suit for patent infringement not only against Form Labs but against Kickstarter as well. ... In my humble opinion, dragging in Kickstarter could merely have been a strategy to ride off of the PR interest such an action would attract.

Kickstarter is not a sales agent and does not profess to be. It is a Crowd-Fund business and earns its income not from a % of sales of products or equity stake but purely from 5% retention of the total funds raised. The success of this ‘one’ project may have in this instance equated to around $150,000 gain for Kickstarter but the majority of projects raise between $5,000 to $30,000 dollars where 5% retention is marginal.

However, Kickstarters financial gain is a red herring. The real issue is why should a crowd-fund platform be accountable for the patent infringement when responsibility for due diligence lies with project creators and their professional advisors? If Kickstarter is held accountable, would it follow that any portal owner including trade associations, ideation sites, product sales sites and so forth could be held accountable for anything promoted on their sites that later became subject to an IP infringement suit? ...

Kickstarter, along with all other such portals and corporate brands and others running open innovation activities, should make authenticity of works and IP usage terms a fundamental part of their submission rules and make it clear to creators that due diligence is their responsibility, no-one else’s ...".
This Kat is entirely sympathetic to the notion that enterprises such as Kickstarter should not have to face patent infringement claims unless they can actually be said to be infringing anyone's patents. He hopes that, in England and Wales at least, the idea of even attempting to proceed against a crowd-sourced funder which takes no part in the funded operation and retains no share of its profits, should be firmly shaken from the patent owning claimant's mind.  He wonders what might in other jurisdictions and hopes that readers will respond.  Merpel, following her first visit to Kickstarter's website, has already fallen in love with the Kickstarter concept and truly wishes she had enough original ideas in her head to make it worth following its money-raising instructions.

Further reading on this topic can be found in the Crowdsourcing.org editorials here and here.

6 comments:

Arthur said...

Agreed. I can think of few precedents more dangerous than the idea that the medium conveying an offer to sell is liable for the offer to sell. Had the defendant placed an advert seeking funding for the product in a newspaper, would it make any sense at all for the newspaper to be sued?

Anonymous said...

Great ideas - being used for lots of book ideas (like the old works of Dickens) ...

How long til we have an IP conference funded by a kickstarter?

Hastings said...

Kickstarter is a brilliant thing and a great way of giving start-ups and creators an opportunity to try things they otherwise could not or would not. One of this year's best and most innovative computer games - FTL - got it's start on Kickstarter and there are several other potentially brilliant games on the horizon.

It would be really disappointing to see the platform hobbled by infringement fears (whether patent, copyright, whatever) and due diligence requirements for the platform holder.

These costs will simply filter down onto to those setting up projects and create a barrier to entry for those who might benefit the most -- and who might benefit us the most with their work.

James Wagner said...

While I agree with the commentators above that simply providing an advertising opportunity to an alleged infringer should not incur any liability is there not some point where liability might rightfully be considered?

When an 'advertiser' moves from providing advertising real estate to actively promoting the formation or expansion of a company specifically to participate in the manufacture and sale of an allegedly infringing product, and the 'advertiser' is then compensated on a performance basis, the issue seems less cut and dry.

In the case of some of the promotion companies using variants of this model many of the 'funds raised' appear to be actually sales orders labeled as fundraising. i.e. if we get 1000 people to each commit to buy 1 product at 100$ each we will start manufacturing and give each of the 1000 contributors one of the first 1000 units. In other cases the contributor receives an option to purchase a unit or purchase a unit at a given price estimated or guaranteed to be lower than the price for the general public.

The promotion company receivers a percentage of that 'funds raised', which scales directly with the number of contributors. That is to say, in some cases the promotion company seems to receive a commission for every allegedly infringing product sold. The more contributors the promotion company can attract to the cause through promoting themselves and the company the more allegedly infringing devices get manufactured and sold, and the more profits the promotion company makes.

I think a strong argument could be made that such activity constitutes use of the patent (at least under Canadian law where "The question in determining whether a defendant has “used” a patented invention is whether the defendant’s activity deprived the inventor in whole or in part, directly or indirectly, of full enjoyment of the monopoly conferred by law." (Monsanto Canada Inc. v. Schmeiser, [2004] 1 S.C.R. 902, 2004 SCC 34) Whether that use is, or should be, liable under an infringement issue is another matter, but as I stated, not one that seems so clear to myself. (As much as I like the possibilities offered by these models for low cost and risk promotion of new ideas).

Nick Blogfolio said...

I know in my intro to business class, we looked at Kickstarter in class to learn about creating your own new ideas, and possible ways to get funding for these ideas, and how this website poses as a great resource in doing so, and you can also get a good general feeling as if your product is going to be successful or not, and wether or not to pursue it. I also could see how this is a great website for other people with a little deeper pockets to go on a just take other people's ideas, or just make minor adjustments and call them their own, without facing any patent law suits. Although this is unfair to the original creator of the idea, I don't know if you should be able to sue over it, as you are the one who put it online for everyone to see knowing that this is a possibility you may have to face. Isn't that basically what Steve Jobs and Bill Gates did to get their ideas too? If anything, they should be sued as they actually went into other companies to steal their ideas and make them their own, while these people put them online for all the world to see.

Anonymous said...

It appears Kickstarter are keeping an eye on third party IP rights - http://kotaku.com/5974904/gamesticks-200000-kickstarter-taken-down-in-intellectual-property-dispute

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