It appears that Kickstarter backers will have the protection of the legal system if successfully crowd-funded projects go sour — at least if Washington State Attorney General Bob Ferguson has anything to do with it.
Ferguson has filed the first-ever US consumer-protection lawsuit regarding crowdfunding. The case has been filed against Edward Polchlepek and his company Altius Management, who raised over $25,000 for a playing card game called Asylum. The Nashville-based entertainment and artist management company allegedly failed to deliver any rewards and products to the 810 backers of their project — including 31 backers from Washington State.
Polchlepek and Altius Management were supposed to create a one-off printing of Asylum, a card game that — according to their promotional Kickstarter video — would teach players to “deceive the mind”, after hitting their $15,000 target. The delivery date of December 2012 came and went, and allegedly, none of the backers have received their rewards — be it the card decks themselves or any other items, such as custom pieces of Asylum art.
Washington State is looking to pursue Polchlepek for $2,000 per violation of the Consumer Protection Act in civil penalties. This could mean over $1.6 million if this holds Altius Management accountable for each of the 810 backers. You can read a copy of the full complaint over at the Washington State Attorney General website.
“Consumers need to be aware that crowdfunding is not without risk,” said the Attorney General. “This lawsuit sends a clear message to people seeking the public’s money: Washington State will not tolerate crowdfunding theft. The Attorney General’s Office will hold those accountable who don’t play by the rules.”
This isn’t the only example of a fully-backed Kickstarter that has ended in disappointment. Code Hero failed to deliver more than a Beta version after running out of funds, John Campbell burned copies of his book rather than sending them to backers, and a movie based on Slender Man was allegedly removed from online platforms over breach of copyright. But this is the first time that there have been legal ramifications for the project creators on behalf of their backers.
Kickstarter’s own Terms of Use could provide a defense for Polchlepek, stating that “the Estimated Delivery Date listed on each reward is not a promise to fulfill by that date, but is merely an estimate of when the Project Creator hopes to fulfill by,” and that the only obligation of creators is to “agree to make a good faith attempt to fulfill each reward by its Estimated Delivery Date.”
That said, the company’s FAQ page says that creators must “fulfill all rewards of their project or refund any backer whose reward they do not or cannot fulfill.” Creators are also warned that a failure to give rewards to backers “could result in damage to your reputation or even legal action on behalf of your backers” before they launch their Kickstarter project.
This case could be significant for Kickstarter and crowdfunding in general, and could help to define the roles — and rights — of the consumer and the creator when a project fails to come to fruition. With only a third of Kickstarter video game projects fully delivering, the outcome of this lawsuit could help decide what happens to those projects that fail to fulfill their promises.
Sources: Gamasutra, Washington State Office of the Attorney General