Crowdfunding Counterfeiters – Be Aware of the Risks

Posted by on Thursday, February 5th, 2015
in Commercial Law & Incorporations, IP & Branding Law, Litigation

According to this 2013 study the crowdfunding market will soon surpass $1 Billion and suggests a ceiling on the investment levels may be hundreds times that amount. Already thousands of small companies, entreprneurs, artists, writers, musicians, gamers and others are using crowdfunding as an alternative (or often in addition) to the traditional friends and family approach to bootstrapping. The attraction is clear, a simple process, a ready audience of pre-approved customers and of course that initial influx of cash.

As the Crowdfunding markets grow it also becomes more likely that entrepreneurs will be targeted by those with nefarious intent. Nothing beats choosing a crowdfunding site based on a clear understanding of the terms and conditions of use but there are also significant risk areas where would be entrepreneurs can leave themselves exposed.

The nature of Crowdfunding means that, aside from the occasional potato salad anomaly, most Crowdfunding projects include a large intellectual property component. Any Crowdfunding project, like all good business plans, requires sufficient disclosure for potential investors to gather a clear picture of the project’s potential. It is this disclosure requirement that often leaves projects open to intellectual property breach.

When applying for a patents for example, there is a requirement to either not publicize the patentable technology or apply for a patent within a set time frame depending on in which country you intend to apply. Any country with a first to file system, including Canada, leaves a wonderful product’s improvements open to others to file for a patent protection if not protected.

Similarly, the use of a great branding adds to successful Crowdfunding projects in many ways and is now a key element in most successful projects. However, if trade-mark protection is not in place there is a real risk that others could file for protection and a successful project is left with limited or no ability to leverage the awareness of a successful Crowdfunding launch.

Combined, these 2 risks can mean experienced knock-off marketers are in a fabulous position to jump into the market ahead of small Crowdfunders and reap the larger benefits of creative products and marketing concepts launched by well-intentioned but legally unsophisticated entrepreneurs. If you are getting ready to launch your product to the world via a crowdfunding site, you might be best of to have your plan vetted a few weeks before you start uploading videos.