Crowdfunding has become a popular process for matching up entrepreneurs seeking capital with the masses of people who would like to participate in a project or venture, but are not venture capitalists. Online donors commonly get something in exchange for their small donation like a prop from a movie they helped fund or one of the products developed from the funding. Donations may be as little as $5 and the largeness is only bounded by what a donor is willing to contribute. One of the biggest players on the crowdfunding arena is Kickstarter. According to its website, since its launch on April 28, 2009, over $636 million has been pledged by more than 4.2 million people, funding more than 42,000 creative projects. It’s pretty amazing that something that didn’t even exist 4 years ago can come into being and help generate over a half a billion dollars in funding in such a short period of time. So, does Kickstarter have any patents on crowdfunding? Probably not.
But Kickstarter is now up against something they probably didn’t anticipate when they began their matchmaking adventure. Kickstarter has recently been sued for patent infringement by 3D Systems. 3D Systems is a company that has developed 3D printing technology and is the owner of several patents in the 3D printing space. So if Kickstarter is a website that solely matches up entrepreneurs with people willing to fund projects, how could they have been guilty of infringing on 3D Systems 3D printing patents? Well, 3D Systems main target on this lawsuit is actually FormLabs, a company that used Kickstarter to raise nearly $3 million in funding to help develop its high definition 3D printer. 3D Systems alleges that FormLab’s Form 1 printer infringes on its patent and that Kickstarter helped to contribute to the infringement by allowing fundraising for the development of the printers to occur on its site. 3D Systems’ complaint filed in Federal District Court alleges that “Kickstarter knowingly or with willful blindness induced and continues to induce infringement and possessed specific intent to encourage another’s infringement by, or was willfully blind as to the ‘520 Patent.” The ‘520 patent is 3D Systems’ patent covering “improved methods of stereolithographically forming a three-dimensional object by forming cross-sectional layers of an object from a material capable of physical transformation upon exposure to synergistic stimulation.”
Whether or not Kickstarter knew about the possibility of FormLabs printer infringing 3D Systems patent will likely come up in litigation. Kickstarter may not have known much about the patent. But this case could still impact the behavior of crowdfunding sites in the future. Will there be a chilling effect on funding for projects that have patent infringement potential? Will crowdfunding sites require some sort of freedom to operate analysis before allowing projects on their site for fundraising? If crowdfunding sites are exposed to liability on suits like this one, it’s a good bet that patent infringement risk will be accounted for in some way.
Patents play a large role in entrepreneurship and business development in the United States and globally. If you have an invention that you would like to protect or you think that someone else is infringing on your patent rights, please contact the patent attorneys at Clegg Law.
Vernon Bowman, a 75 year old Indiana farmer, thought he had found a loophole in Monsanto’s patent covering Roundup® resistant soybeans. But the United States Supreme Court recently extinguished any hope Bowman had of getting around Monsanto’s patent rights. The Supreme Court rejected the Bowman’s argument that Monsanto’s patent protection was “exhausted” upon their initial sale of the seeds. If Bowman wants Roundup® resistant soybean plants in the future, he will be required to purchase his annual supply of soybeans from Monsanto just like every other soybean farmer.
You may not recognize the name Monsanto, but you probably recognize their product. Monsanto is the company that produces the popular weed killing spray Roundup®. Because of their familiarity with the weed killing mixture, they also developed and patented a type of soybean that is resistant to Roundup®. However, one problem exists when trying to enforce a patent covering a seed. If you sell a person one seed, she can plant that seed and produce more of the seed naturally, thus eliminating motivation to return to the patent holder for more seeds. The self-replicating nature of seeds would allow a farmer to buy the seeds one season and then obtain a whole new set of seeds from his crop for the next season, thus defeating the patent monopoly to which Monsanto is entitled. If every farmer did this, Monsanto would be limited to a few short years of exclusivity, after farmers would just produce their own seed.
Bowman thought he had found a loophole by purchasing a mix of soybean seeds from a grain elevator that was typically used for animal feed. This mix was much less expensive than purchasing from Monsanto. Bowman banked on the fact that most of the seeds were likely to be Roundup® resistant. He then planted the animal stock mix and proved his bet was correct. Most of the subsequent soybean crop was Roundup® resistant just like the patented seeds from Monsanto. Bowman thought his clever trick would allow him to circumvent Monsanto’s patent protection requiring farmers to annually purchase their patented seeds. Bowman figured he had games the system and would be able to use his secondary seed source.
Unfortunately for Bowman, Monsanto found about it and sued Bowman for patent infringement. In court, Bowman’s attorney attempted to raise a counter argument using the “patent exhaustion” doctrine. The patent exhaustion doctrine says that once an unrestricted, authorized sale of a patented article occurs, the patent holder’s exclusive rights to control the use and sale of that article are exhausted, and the purchaser is free to use or resell that article without further restraint. The U.S. Supreme Court rejected this application of the exhaustion doctrine stating, “The exhaustion doctrine does not enable Bowman to make additional patented soybeans without Monsanto’s permission (either express or implied).”
Part of the policy behind the patent system is to encourage research and development that might not otherwise occur. The period of exclusivity provided by a patent is the reward for undertaking such expense. If farmers like Bowman could just buy the patented seeds once and then reproduce their own, Monsanto would not be able to recover the millions of dollars they invested in developing these special soybeans. The Court took this policy into consideration in determining the outcome of this case.
Whether you are a farmer looking for freedom to operate without fear of patent infringement or you have invented the next super soybean, please contact the experienced patent attorneys at Clegg Law.