Kickstarter | Crowdfunding: Patent & Trademark Issues

By: Elias Borges, patent & trademark lawyer.
Crowdfunding is rapidly becoming the premier method for funding new business ventures. Sites like indiegogo, kickstarter, appbackr and rockethub (to name a few) have already launched hundreds of new products thanks to crowdfunding campaigns raising millions of dollars in funding. While exciting, crowdfunding does pose serious risks to the intellectual property rights of any startup venture, regardless of the nature of the startup. Lets look at both the patent and trademark issues arising from crowdfunding campaigns.


Patent Issues for Kickstarter | Crowdfunding:

It should come as no surprise to anyone that announcing your new tech product on a crowdfunding website (indiegogo, kickstarter, appbackr, rockethub, etc) before securing patent protection for the product is a bad idea. Ironically, securing patent protection is often one of the goals of a crowdfunding campaign! It takes funding to file for patent protection, and crowdfunding can provide the dauntless entrepreneur with the means to raise that funding. So how can you launch a crowdfunding campaign without simultaneously sinking your venture's patent rights? Well, the patent laws of various countries, such as the United States and Canada does grant a 12 month “grace period” within which to file for patent protection after a public disclosure or offer to sale. Since most crowdfunding campaigns last for 60 days or less, there is still plenty of time to file for patent protection after the end of a successful campaign. Also, the actual 12 month “grace period” may not even be triggered at all if the campaign fails to either offer the product for sale and/or mention what the inventive details of the product are. However, it's hard to imagine how successful a crowdfunding campaign can be if the campaign fails to provide details of what is new and exciting (i.e. inventive) about the product being crowdfunded. It's also difficult to imagine how anyone could have faith in a crowdfunded product which is not even being offered for sale. Therefore, in practical terms, any crowdfunding campaign which is likely to be successful is almost certainly likely to trigger the 12 month “grace period” under the various patent acts.

Relying on the one year “grace period” is, at best, a desperate measure, and should be avoided by any means. Firstly, the campaign might not be successful (they usually aren't). Secondly, knocking on your patent lawyer's door two weeks before the “grace period” expires is very likely result in a rushed patent application or a missed filing window. But there are fundamentally more important reasons for not relying on the 12 month “grace period”. Firstly, that grace period does not apply to huge segments of the world economy (i.e. just about every country other than the US and Canada). More importantly, the crowdfunding campaign might prompt a rival tech startup (or established tech player) to file a defensive patent application in response. Under this scenario, the tech rival files a patent application for their own product which, coincidentally, discloses many of the features of the crowdfunded invention. When the crowdfunding campaign succeeds and a patent application is later filed before the end of the “grace period”, the prior patent application may effectively block the latter patent application.

The only way to safely launch a crowdfunding campaign while preserving patent rights would be file at least a provisional patent application before launching the campaign. While this approach may still utilize the limited protection offered by the publication “grace period”, the added benefit of a provisional filing date helps guard against intervening patent applications. Ideally, a carefully drafted non-provisional applications should be filed before launch of the crowdfunding campaign, but if funding is scarce (obviously it would be), a provisional application may be a suitable alternative.

Patent Infringement

Now that we understand how to protect patent rights from being lost by a crowdfunding campaign, consider for a moment the possible threat the campaign might pose in attracting unwanted patent litigation. Probably the quickest way to slam the breaks on a new venture would be to receive a cease and desist letter from a patent lawyer informing the campaign’s principle that the product in question infringes a rival's patent. The obvious way to avoid this scenario would be to undertake rigorous patent searching before launching the campaign. Indeed, while the product/venture is still in the preliminary planning stages, rigorous searches of Google's patent tool as well as the USPTO's patent searching facilities needs to be conducted. From both a marketing and engineering point of view, it's a lot easier to avoid a patent if you know about it early on in the development stage.


Trademark Issues

I bet you never even though that there could be possible trademark pitfalls to launching a crowdfunding campaign. Well, prepare to have your bubble burst. What ever your crowdfunding campaign is. What ever product or venture it may be – it's going to have a name. That name, hopefully, will become the trademark by which people will recognize that product. The last thing you'll want to do is wait until after the campaign succeeds to take steps to protect that trademark. If the campaign is successful – especially if it is very successful – it is quite possible that someone (say a competitor or rival) might feel the urge to file a trademark application for the exact name you keystoned in your campaign. If that happens (and it does happen regularity), then your subsequent trademark application is almost certainly doomed to failure, forcing you to change branding directions and lose the market momentum your campaign may have created. You cannot rely on your campaign to secure trademark rights because, technically speaking, you haven't made any actual sales via the campaign (remember, the product hasn't actually been produced yet). The only way to protect yourself against this scenario is to file a trademark application based on proposed use of the mark before the campaign is launched. The processing of the initial trademark application can be extended to up to three years, so even if multiple campaigns are required, the initial trademark application can still provide a measure of trademark protection. Trademark applications are relatively inexpensive so there really is no excuse for not filing one.

And how about conducting a trademark search before launching the campaign? Absolutely. Both the United States and Canadian trademark offices provide free easy to use trademark searching tools to make the task easily accessible. But even before conducting a trademark search, put some time and effort into carefully selecting a trademark. Not all names make good trademarks. Many names, particularly names with descriptive elements, cannot even be registered as trademarks. The mark should be memorable and, more importantly, distinctive. The mark should stand out and be as distinct from the competition as possible.

Crowdfunding has an exciting future ahead of itself. Crowdfunding sites like kickstarter, indiegogo, rockethub, and appbackr are growing by leaps and bounds and filling a void that has long gone empty. In my humble opinion, it's potentially the greatest thing to happen to small business in the past 200 years. By following a few simple rules, crowdfunding can provide a bold new venture with the startup funding to succeed without sacrificing any of the venture's intellectual property assets.