Crowdfunding: Public Funding of Innovations and Artistic Expression

IP STRATEGY

     Launched in 2009, Kickstarter has been soaring into headlines lately for helping individuals bring their dreams to reality by giving various inventors, designers, and artists a forum to get financing for their projects. Kickstarter’s platform has recently helped raise over $8.5 million for a new video game console concept and more than $10 million for a new e-paper watch design. According to its website, Kickstarter has helped fund more than 28,000 projects including documentaries, technological advancements, and artistic creations. As of August 24, 2012, Kickstarter had raised upwards of $275 million.

     The unique feature of Kickstarter and similar “crowdfunding” platforms is that all the money raised is provided by private individuals in amounts as small as $1 or as large as several thousand dollars. Although there are incentives to pledging money, the underlying support comes from the public’s recognition of the value of an idea. Thus, not only does the platform provide a means to raise funds, but it also provides a quick market analysis without undertaking an expensive market survey.

     With an inevitable surge in this type of funding, it is important for future users to understand how their intellectual property rights might be affected. First and foremost, users should look at the Terms of Use provided by the website. After reviewing Kickstarter’s Terms of Use agreement, there are a few things that should be noted regarding the intellectual property rights of users. First, Kickstarter requires that a non-exclusive, perpetual, royalty-free license be given allowing Kickstarter to “fully exploit” a user’s trademarks, service marks, slogans, logos, etc. in connection with the services of Kickstarter or in promotion of its services.

     Second, Kickstarter allows other users of the website to use, edit, or modify the same identifying features of a user’s submission so long as it is for personal non-commercial use. Thus, although a license must be granted to use the services, it is not an overly burdensome license and does not appear to restrict or usurp intellectual property rights other than allowing Kickstarter to use the product/company/person’s likeness for advertising or promotion.  However, the Terms of Use agreement contains a clause stating that it can be modified or replaced “at any time for any reason.”[1] Users should take caution to check the most recent version of the Terms of Use prior to consenting to the user agreement to insure that the license agreement has not changed.

     Kickstarter also requires design and technology products to “include detailed information about the creator’s background and experience, a manufacturing plan (for hardware projects), and a functional prototype.”[2] This requirement is significant in light of the impending first-to-file system to be implemented by the America Invents Act on March 16, 2013. Inventors should take precaution as to how much detail they provide on these websites prior to filing a patent application. Additionally, all users should make sure that their pictures, trademarks, etc., do not infringe on the copyrights and trademarks of others when uploading their bios and designs onto the website.

     As more service providers begin to offer these types of crowdfunding platforms, we may start to see a rise in lawsuits between providers. For example, a lawsuit was recently filed by Kickstarter against ArtistShare, Inc., and Fan Funded, LLC, seeking a declaratory judgment that Kickstarter is not infringing on U.S. Patent No. 7,885,887 issued to ArtistShare, Inc. and owned by Fan Funded, LLC.[3]

     With all that said, I am excited about this new consumer-controlled format for inventors to get funding for their projects so long as users take precautions to protect their intellectual property rights and avoid infringing on the rights of others.

[1] http://www.kickstarter.com/terms-of-use?ref=footer

[2]http://www.kickstarter.com/help/guidelines?ref=footer

[3]http://betabeat.com/2012/05/kickstarter-artistshare-fan-funded-patent-lawsuit/

Image derived from image by mandiberg on Flickr Creative Commons – some rights reserved.

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