|October 24, 2013|
Previously published on October 23, 2013
"Crowdfunding" is the concept of leveraging the broad reach of the Internet to secure funding for a new project via a large number of small contributions from many individuals. In 2012, there were more than 450 crowdfunding platforms. Kickstarter, launched in 2009, is one of the higher-profile crowdfunding platforms. New projects are proposed via a video and written description with a deadline and minimum funding amount. These projects include, among other things, new products, films, music and books. Kickstarter requires a funded project to provide some form of tangible reward in exchange for the money, ruling out the ability to merely invest. However, there are no guarantees that any given project will be successfully completed or that the completed projects will meet the funders' expectations.
In 2012, there were 18,109 projects successfully funded via Kickstarter, with more than $319 million pledged. The most-funded project in Kickstarter history is the Pebble E-paper wristwatch, which raised more than $10 million. Several of the film projects funded by Kickstarter have gone on to receive Academy Award nominations, and well-known artists, actors and musicians are turning to crowdfunding for their releases.
Despite the opportunities that successful fundraising outfits such as Kickstarter offer, crowdfunding raises some new intellectual property challenges for project creators, and thus careful consideration should be given to whether crowdfunding is right (at this time) for your project. All too often, business development outpaces the development of appropriate intellectual property considerations -- many times this delay in intellectual property development is a function of insufficient time, a lack of money, and/or a misunderstanding of the law. Moreover, the Kickstarter site provides no protection or legal guidance for users seeking project funding. Kickstarter is clear in its Terms of Service that it has no ownership rights over the projects' intellectual property, and it relies on the project creators to ensure that no infringing material is being pursued. Kickstarter also has detailed and strict policies for responding to claimed trademark or copyright infringements from third parties. Thus, there is a significant risk a funded project may run afoul of intellectual property laws before it even gets off the ground, which could result in termination of the funding or banning of the project promoter.
To avoid these pitfalls, before publicly launching, a trademark clearance search is always recommended to determine whether the proposed brand name is available for use and registration. The search results should then be reviewed to determine whether use of the proposed mark is likely to cause confusion when compared with prior trademark filings or unregistered prior users. Because U.S. rights are established by use, conducting a trademark clearance search is important to avoid infringement of unregistered marks, whose owners may assert their prior rights to halt sales of the infringing goods.
While there is no affirmative duty to conduct a trademark clearance search before adopting a trademark, searching does support a trademark owner's good-faith adoption of a mark. In addition, the cost associated with clearing the mark is quite low in comparison to the cost associated with moving forward with a mark that is mired by prior use and/or not protectable in the United States. By searching before commercialization in the United States, trademark owners not only can determine their ability to use and register the mark, but they also can assess the mark's strength, scope of protection and competitive landscape. Because the Internet is global in reach, and most countries grant trademark rights based on first to file rather than first to use, project creators should consider whether trademark rights should be secured in important foreign jurisdictions.
For new inventions, certain patent rights in the United States may be lost if an application is not submitted within one year of the first public offering. Thus, consideration of patentability and the timing of same may be an important component in successfully launching a new product. Finally, once an idea is posted, you may not protect the mere "idea" or concept; it can be copied. Copyright protects only the unique expression of the artwork, movie or music. Thus, some creators may be reluctant to announce the details of a project before production, due to concerns about idea theft and to protect their intellectual property from plagiarism.
Kickstarter and other crowdfunding platforms have opened many new channels of funding and opportunity for creators, inventors and artists. However, as with any endeavor, don't put the cart (too far) before the horse or you may find your project going nowhere.