New Zealand: Don't Let Your Crowdfunding Initiative Spoil Your IP Position

Last Updated: 8 November 2018
Article by Anton Blijlevens

Public funding for private ideas

Crowdfunding is on the rise. But so are the failures by entrepreneurs to take the right steps to protect their valuable innovations. With industry sources claiming that the new form of sourcing investments has already raised over NZ$50 billion worldwide, protecting the potential value of an innovation with the right forms of IP can be mission critical. An entrepreneur looking to crowdfund a new initiative must consider and secure their IP position prior to launching the funding campaign.

Many claim that crowdfunding has democratised business investment. By utilising the open and transparent nature of the internet, anyone can invest in a business idea, and the business can define what rewards are offered to backers depending on the funding level.

The most disruptive aspect of crowdfunding is how it has changed the way we determine success for a fledgling business. It's the 'people's choice' of business—allowing the most popular (or best presented) ideas to flourish. No longer is access to capital dependent entirely on geography and connections, but instead on high quality product videos and slick branding.

However, with the sharing of information about your venture to generate crowdfunding investment comes the risk of giving away your key ideas. So in a business that's exposing itself to raise money, it's even more important that the ideas you're putting out into the world are protected.

Intellectual property and the world of crowdfunding

The purpose of intellectual property law is to protect not just products, but also innovations and creativity that have gone into the creation of those products or services, and your brand and reputation in the market.

If you're going to be opening up information on your ideas, your product offering, or your proposed service to attract crowdfunding, you need to make sure you've taken stock of what intellectual property you have, and taken the appropriate steps to protect it. Once you've disclosed information, it may be too late to protect your IP—so we recommend getting advice early on.

Various forms of registered IP can protect different aspects of your business, and it's important to get the right forms protection depending on what you're doing in your business.

Trademarks

What they are

Trade marks protect your brand. Your brand can include the designs, symbols and wording you use to differentiate your product or service from that of others. Commonly, trade marks are used to protect logos, but trade marks can also be used to protect other less conventional aspects of your brand like a 3D shape, a sound, or a smell.

When you'd need them

A strong brand is essential in the modern marketplace in order to stand apart—especially on a platform like Kickstarter where you're competing against thousands of other ideas and inventions. But once you've established a strong brand, you don't want others riding off your success by branding their products similarly. And that's what a registered trade mark can help to prevent.

Copyright

What it is

Copyright gives creators of certain original works, such as written text, graphics, or video or audio recordings, the exclusive right to copy the work and to show it in public. You don't have to apply to register copyright, but it's important to be aware of where you may have copyright, and how to exploit it.

When you'd need it

There's likely to be written material that's part of your crowdfunding pitch, along with graphics and potentially video or audio content. If these are original, then copyright will exist for them, and this can help deter others from copying you or take down material they've copied.

Patents

What they are

Patents are for protecting technical inventions, such as a new part of your product, a new method of making your product, or something which solves a technological problem. You have to apply for a patent before disclosing your invention, so make sure you get advice on whether there's anything patentable in your idea before you launch your crowdfunding pitch. We have seen a lot of value taken away from innovations because patent applications were not filed before the funding campaign was launched. In such situations, others looking to invest may walk away from investing and potentially end up competing with similar product. There is potentially nothing to stop others coming out with a copy product and if they are well resourced, they will be on the market well before you are.

When you'd need them

Because patents give exclusive rights to make, sell and use the patented product, a patent can be very useful for maintaining exclusivity for your business or idea and gaining market share. Additional income can be generated from licensing patents, and investors for subsequent rounds of funding are often keen to see a patent as a tangible indication of your IP value. Large corporates have teams of people trawling crowdfunding platforms for the next big thing. Don't let them pass you by because to can't offer exclusivity by having the right forms of IP protection in place.

I think I might have some IP, what do I do next?

At AJ Park, we specialise in helping clients find where their IP lies and what steps are going to generate the most value for their businesses. As well as being experts on the law, our people have experience across many different technical fields. So whatever it is your idea relates to, we'll have people who can understand your business and technology.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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