Costs Award Overturned in Crowdsourcing Patent Case

As reported by Electronic Frontier Foundation, the Federal Circuit’s recent decision in Gust, Inc. v AlphaCap Ventures, LLC, overturned a costs award in a crowdfunding patent case.

AlphaCap Ventures, a non-practicing entity, claimed that its patent covered several forms of online equity financing. After filing a suit against ten crowdfunding platforms, they settled with all of them except one – Gust. After two years of litigation, AlphaCap Ventures dismissed its claim against Gust. A court later held that the attorneys for AlphaCap had litigated unreasonably and ordered a fee award in favour of Gust. AlphaCap’s lawyers appealed.

AlphaCap’s attorneys argued that a fee award in the circumstances was inappropriate because the law on abstract ideas and the eligibility of those ideas for patent protection is uncertain. Over the course of the appeal proceedings, the Federal Circuit issued a decision in Inventor Holdings v Bed Bath & Beyond in which they declined to overturn a fee award on the basis of uncertainty in the law – an argument very similar to that advanced by AlphaCap Ventures’ lawyers.

In the Alpha Ventures decision, the Federal Circuit overturned the fee award. It stated that “abstract idea law was unsettled” and found that fees were unwarranted in the circumstances. Notably, the Alpha Ventures decision does not refer to the Inventor Holdings decision at all. It is unclear why the Federal Circuit opted to leave Inventor Holdings out of its decision in Alpha Ventures, but it may be considered in future cases.

Author: Alexandra Murray