If a series of patent lawsuits filed last week against Kickstarter and the makers of a number of haptic sex toys prevails, it could have a chilling effect on entrepreneurs using crowdfunding services.
TZU Technologies filed suit in U.S. federal district court alleging that Kickstarter and seven makers of sex toys with haptic features–which offer some form of tactile feedback along the lines of the well-known “rumble” of a game controller–had infringed on one of its patents, known by some as the “teledildonics patent.”
Teledildonics, according to Wikipedia, are “electronic sex toys that can be controlled by a computer to enable the human user to reach orgasm.” The patent was originally held by a company called HasSex, but was transferred just months ago to TZU, according to Kyle Machulis, an expert on teledildonics.
In addition to Kickstarter, the defendants are Comingle, Holland Haptics, Vibease, Winzz, Frixion, Internet Services, and WMM Holdings, all makers of different teledildonics products.
In a blog post about the lawsuits, Machulis wrote that there’s finally a “test case for” the teledildonics patent, which was first filed in 1998. Much of his post focuses on the potential impact of the suit on the seven sex-toy companies. But Machulis told Fast Company that, in fact, the bigger impact might be if a company like TZU–nominally a patent troll, given that just about the only search results for the company relate to its lawsuit–is able to prevail against Kickstarter.
In its suits, TZU claimed that both Kickstarter and the sex-toy makers willfully infringed on the patent by proceeding with the manufacture and sale of products, or the funding of them, after being aware of the patent. In theory, at least, willful infringement can result in treble damages, although courts have recently made it more difficult for successful plaintiffs to collect the full three times the damages.
TZU’s attorney, Dan Cotman, told Fast Company that each of the defendants in the case “have either made or offered to sell the patented technology.” Cotman also explained the timing for the suits, even as he rejected the notion that TZU is a patent troll.
“Recently a number of startups have developed haptics/remote touch-based technologies covered by the patent,” he said. “Since most have exhibited a total disregard for the patent even when approached, the inventor Warren Sandvick felt it was time to act. Our take on things is that inventors ought to be rewarded for their innovation rather than kicked out or called names like ‘troll,’ as such is mostly an attempt by large companies to take other people’s intellectual property without attribution.”
Kickstarter is just as liable as the sex toy manufacturers, Cotman argued, and said that because “it is an advocate and promoter of innovative products . . . we think it is important they have a mechanism for handling intellectual property rights on their website, and this lawsuit will bring how they do that to the forefront.”
Kickstarter declined to comment on TZU’s lawsuit.
TZU’s position is that Kickstarter shouldn’t be a platform for entrepreneurs raising money “based on the patented ideas of others,” Cotman said.
If the outcome of this case goes against Kickstarter, Machulis believes, it could be very bad for crowdfunding, in particular because of the burdens it would place upon those who operate companies like Kickstarter and Indiegogo.
“The implications for crowdfunding are similar to places that host user-created [or] provided content, like YouTube or Second Life, and how they deal with [Digital Millennium Copyright Act] requests,” Machulis said. “Requiring proof of patent research to start a crowdfunding campaign would greatly curtail the speed and openness of crowdfunding systems, as most people don’t really even know how that process works in the first place, and it’s neither cheap nor fast. Requiring the crowdfunding company itself to do the research legwork before approving would take a vast amount of resources, so it’s pretty disastrous from either side if something like this goes through.”
Fortunately, legal experts seem to believe that Kickstarter is on safe ground when it comes to being sued over intellectual property battles involving the people who use its service to raise money.
In large part, that’s because Kickstarter doesn’t really make or offer to sell products, said Mark Lemley, a patent law professor at Stanford Law School.
“They simply provide funding for the products,” Lemley told Fast Company. So unless they are somehow directly involved in delivering products to customers, a claim for direct infringement against Kickstarter seems implausible.”
Lemley said he has an inkling of what TZU may really be trying to do by including Kickstarter as a defendant, noting that by giving manufacturers a way to raise funds to sell allegedly infringing products, Kickstarter may have induced that infringement.
“But a defendant is liable for inducement only if they deliberately intended to encourage infringement, something that requires knowledge of both the patent and the fact that the product maker was infringing it,” Lemley said. “So the plaintiff would have to prove advance knowledge by Kickstarter of this patent, or at least ‘willful blindness’ about the patent. That’s a tough burden.”
To be sure, many patent cases are filed in the hope that a defendant will settle out of court in order to save money. Kickstarter, though, may well “have an incentive to establish precedent that it is not liable for devices funded on its site,” Lemley said.
TZU’s suit against Kickstarter is not the first time the crowdfunding site has been sued for patent infringement.
In late 2012, 3-D printing giant 3D Systems sued Kickstarter as part of an infringement suit against Formlabs, which had raised nearly $3 million using the site.
Rick Frenkel, a partner at Latham & Watkins who has a background in IP strategy and patent litigation, told Wired in 2013 that Kickstarter was “an unusual target” for an infringement suit.
In the end, 3D Systems dropped its suit against Kickstarter.
“Patent laws are not meant to stop companies from raising funds,” Frenkel said. “If you can sue Kickstarter, can you go sue the bank?”