Protect Your Intellectual Property Before Launching Your Crowdfunding Campaign
September 10, 2015
By George Likourezos, Esq., Carter, DeLuca, Farrell & Schmidt, LLP
Before launching your crowdfunding campaign, you must consider the legal protections available for your intellectual property. Intellectual property or IP is typically protected by patent, trademark, and copyright laws, as well as by the most traditional form of IP protection -- keeping your IP a secret (commonly referred to as a trade secret).
Patent laws protect the functionality and utilitarian aspects of a product (utility patent), as well as the ornamental features of the product (design patent). Trademark laws protect logos, word marks, and other identifying elements of a product or company. Trademark laws can also protect a product's packaging, referred to as trade dress (e.g., the shape of the Coca-Cola bottle). Copyright laws protect artistic and original works of authorship.
If your IP can be kept hidden from public view and virtually impossible from being reverse engineered, then keeping your IP as a trade secret is a viable form of IP protection. The following can be kept as trade secrets: chemical formulations, source codes, and manufacturing processes. Courts acknowledge and protect trade secrets in which the owner undertook efforts in guarding against the dissemination or disclosure of the trade secret.
As with most entrepreneurial ventures, there is a need to protect your IP prior to launching a crowdfunding campaign. If your goal is to raise funds to bring a unique product or service to market, which may have a catchy name and logo (think of Uber or Twitter), it is highly recommended to consult with an IP attorney to discuss your particular product or service and whether IP protection is feasible before launching your crowdfunding campaign.
Here are five IP-related questions you may be thinking of prior to launching your crowdfunding campaign.
1. Should I wait until after I reach my crowdfunding goal before I file my patent application?
NO. By describing your unique product/service on a crowdfunding website or other publicly accessible platform you are publicly disclosing your product. The public disclosure of a new product prior to the filing of a patent application can have severe consequences for an inventor or entrepreneur, including being precluded from filing a patent application. In the United States you are granted one year from the time you first publicly disclose your invention to file your U.S. patent application. However, the rest of the world precludes the filing of a patent application once an invention is publicly disclosed.
Additionally, the patent systems of all countries and jurisdictions award the patent to the person who filed his patent application first (with some exceptions). Therefore, if you launch a crowdfunding campaign before filing a patent application, an onlooker may steal your idea by filing a patent application naming himself as the inventor and thereby, be considered the first inventor (even though this is an act of fraud on the U.S. Patent and Trademark Office (“USPTO”), it is often difficult to prove). To forego any claims of fraud, if the scrupulous onlooker is creative, he can make improvements to your idea and then file his patent application; thereby potentially exculpating himself from accusations of fraud and IP theft.
2. Should I wait to file my trademark application until after I reach my crowdfunding goal?
NO. If you have a unique product name, logo, slogan, etc. that you want to use to identify your unique product/service, you are best served by filing one or more intent-to-use trademark applications to begin the federal trademark registration process. One caveat is that you have to have a "bona fide intent to use" a trademark before filing your intent-to-use trademark application. The Court of Appeals for the Federal Circuit for the first time held on June 4, 2015 that lacking proof of a bona fide intent to use a mark can prevent a trademark from being registered if it is challenged. Once your trademark is registered (after having shown use of the trademark), you are granted trademark rights from the filing date of the intent-to-use trademark application -- not the date of the trademark registration.
If you have developed your product and are selling it in interstate commerce, it is still recommended that you file your trademark application as quickly as possible, and definitely prior to launching your crowdfunding campaign. As with patents, trademarks are typically awarded to the person who filed the trademark application first. If a third party usurps your trademark prior to your application filing, you may be able to oppose the third party's filing by petitioning the USPTO that you were the first user of the trademark (if you have evidence to prove this). However, a trademark opposition proceeding is expensive. Therefore, when you think of that catchy name for your product or service, file an intent-to-use application; if you are currently using a trademark to promote and sell goods interstate, file a use application, or, at the very least, add a "TM" on the right side of your mark or logo.
You should also consider filing trademark applications in foreign countries, prior to launching your crowdfunding campaign, where you are considering exporting your product in order to prevent others from "locking up" your name, logo, slogan, etc. in these countries.
3. Do I need to describe my product’s "secret sauce" on the crowdfunding platform?
NO. A crowdfunding campaign is not a patent application. Unlike when filing a patent application with the USPTO, there is no requirement in a crowdfunding campaign to disclose and describe your invention in order to enable someone to read, understand, and practice your invention. Therefore, there is no need in the case of products which have "hidden" features (electronic circuits, secret ingredients, unique methods of manufacture, etc.), to describe the details or particularities of these features. If you filed a patent application, the rest of the world will eventually find out the details of these features (if you authorized the Patent Office to publish your application or when your patent is issued). However, you should not volunteer this information to potential onlookers of a crowdfunding website who may decide to copycat your IP.
4. After I file my provisional patent application, can I describe my product/service on the crowdfunding campaign as "patent pending"?
YES. You are permitted to describe your invention as patent pending after you file a provisional patent application (or a utility or design patent application). In brief, you can begin the patent process by first filing a provisional patent application and then filing a utility patent application. A provisional patent application is inexpensive and gets you first in line at the USPTO (remember, the U.S. has a first-to-file patent system). One caveat here is not to say more about your product or service on the crowdfunding platform than you have set forth in your provisional patent application. The provisional application won't afford you any future IP protection for features mentioned on the crowdfunding platform that are not described in your provisional patent application.
If you choose to begin the patent protection process by filing a provisional patent application, rather than a utility patent application, you will have up to one year to convert the provisional application to a utility patent application. If your crowdfunding campaign is a success, you will have the financial resources to have your IP attorney prepare and file the utility patent application.
5. Should I do a patentability search prior to launching my crowdfunding campaign?
YES. The euphoria that comes with achieving your crowdfunding goal will quickly evaporate if you find out that your "new" product or service has been patented by someone else and the patent is non-expired. It is prudent to engage an IP attorney to perform a patentability search prior to launching your crowdfunding campaign. Your IP attorney will determine from the search whether there is a "blocking," non-expired patent. If there is, that may not be the end of your venture; the patent owner may be interested in licensing or selling the patent to you, or partnering with you.
If the patentability search uncovers an expired patent, you can proceed with the crowdfunding campaign, but you won't be able to file a patent application for your product or service (unless you think of a patentable improvement).
George Likourezos, Esq. is a partner at Melville-based Carter, DeLuca, Farrell & Schmidt, LLP. He can be reached at firstname.lastname@example.org or 631-501-5706.