The Crowdfunding Process for Creators and Startups

In the modern entrepreneurial landscape, crowdfunding has emerged as a way to fund projects that larger companies may not. The more success crowdfunded projects find, the more they stand to reshape how startups and creative projects launch and grow.

But with every opportunity comes its share of challenges, particularly when it intersects with intellectual property (IP). For creative professionals and entrepreneurial startups, understanding this intersection is vital to maintaining control over your IP.

Crowdfunding, while a powerful tool for raising capital and building a fan base, can inadvertently expose creators to significant risks regarding their intellectual property. The intellectual property attorneys at Emerson Thomson Bennett will explore how crowdfunding impacts IP and offer strategies to protect your innovations.

What is Crowdfunding?

Crowdfunding, in its essence, is a method of raising funds by appealing to a large number of people, typically via the Internet. Platforms like Kickstarter, Indiegogo, and GoFundMe have democratized funding, enabling anyone with an innovative idea to reach potential backers worldwide. Currently, the success companies find gaining crowdfunding stands at about 50%. Crowdfunding campaigns can range from launching tech gadgets to publishing art books and video games.

On the other hand, intellectual property refers to creations of the mind, such as:

  • Innovations
  • Designs
  • Brand names
  • Artistic works

All of these warrant protection under the law. Protecting IP is crucial for creators and inventors as it ensures they retain the rights to their creations and can financially benefit from them. However, the public nature of crowdfunding can sometimes put these protections at risk.

How Crowdfunding Influences Intellectual Property Rights

When launching a crowdfunding campaign, creators must publicly disclose details about their project to attract backers. This necessary transparency, however, can pose significant risks to IP ownership.

In many jurisdictions, sharing an invention’s details during a campaign is considered public disclosure, potentially jeopardizing patentability. The United States offers a 1-year grace period, while other countries vary by how long they offer. Missing them can result in forfeiting patent rights for your work abroad.

Furthermore, the open nature of crowdfunding campaigns can expose creators to competitors who might replicate their innovations. Without proper IP protection, these competitors can exploit the product, undermining its unique value and future profitability. Therefore, securing IP rights before launching a campaign is not just advisable—it’s essential.

How Can You Safeguard Your Intellectual Property During Crowdfunding?

To effectively protect intellectual property while leveraging crowdfunding, creators should undertake specific steps both before and after launching their campaigns.

Pre-Campaign Preparations

Before unveiling a project to the public, it’s crucial to ensure comprehensive IP protections are already in place. Begin by conducting a thorough IP audit to identify all aspects of your project that are eligible for protection—be it patents, trademarks, or copyrights. Our experienced IP attorneys can help identify the best protection strategies.

File necessary patent applications before publicly disclosing details about your invention. This step is crucial for maintaining patent rights, especially in countries without a grace period. Similarly, trademark any brand names or logos associated with your project to prevent unauthorized use by others.

Post-Campaign Actions

After a successful campaign, continue to monitor and enforce your IP rights. This may involve issuing cease and desist letters to infringers or pursuing legal action against those who violate your protections. Regularly review your IP portfolio to ensure all elements remain protected as your project evolves and even after it’s released to the wider public.

Additionally, maintain clear communication with your backers regarding your IP rights. Educate them on the importance of respecting these rights and encourage their support in safeguarding your innovations. If you share your profits with your crowdfunders, that doesn’t mean you share IP rights.

5 Different Crowdfunding Types and Their Impact on IP

Crowdfunding encompasses various models, each with unique interactions with intellectual property. Understanding these distinctions can guide creators toward strategies that best align with their IP goals.

1. Rewards-Based Crowdfunding

This popular model offers backers tangible rewards, like pre-orders of products, exclusive merchandise, and sometimes a share of the profits in exchange for their support. While effective for generating buzz, rewards-based campaigns require careful IP management to avoid premature product disclosure. Securing IP rights before revealing product details is essential to protecting inventions from replication.

2. Equity Crowdfunding

Equity crowdfunding allows backers to invest in a company in exchange for shares. This model can attract serious investors but necessitates comprehensive due diligence for your IP. Potential investors will scrutinize a company’s IP portfolio to assess its value and potential risks. Ensuring robust IP protections can boost investor confidence.

3. Debt Crowdfunding

In this model, backers lend money to a project with the expectation of repayment with interest. While less common than other models, debt crowdfunding requires paying attention to contractual IP clauses to prevent disputes over ownership rights. Clear agreements can avert future conflicts.

4. Donation Crowdfunding

Donation-based campaigns appeal to altruistic backers who contribute without expecting returns. While IP concerns may be less pronounced here, creators should still consider protecting branding and proprietary content to maintain the project’s integrity.

5. Peer-to-Peer Lending and Real Estate Crowdfunding

For projects involving financial transactions, such as peer-to-peer lending or real estate ventures, IP concerns may extend to contractual agreements and proprietary technologies. Legal counsel can ensure agreements align with IP objectives.

Contact Emerson Thomson Bennett For Help Protecting Your Crowdfunded IP

By following best practices and seeking experienced legal guidance, creators and startups can leverage crowdfunding’s power without compromising their intellectual property. For personalized assistance, contact Emerson Thomson Bennett’s skilled IP team. We’re ready to help you protect your innovations and achieve success.

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PRACTICE AREAS WE CAN HELP WITH

We provide complete intellectual property representation to business owners, inventors and artists in all matters related to the establishment and protection of domestic and international patents, trademarks and copyrights. Attorneys at our firm also serve as in-house IP counsel for companies whose needs do not call for a full-time internal position.

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