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Pankaj Tyagi
| Updated: 26 Aug, 2021 | Category: Startup India Registration

Crowdfunding for Inventor: A Boon or Bane?

Crowdfunding for Inventor

Once your idea takes a form of an invention, the next step is to introduce your invention in the public domain and then let it perform its core function. To serve such a purpose, the inventor seeks ample capital and expert assistance. This is where a third-party investors come into play. An investor could approach several avenues such as venture capitalists, angel investors, Crowdfunding, public listing to serve fundraising purposes. In this article, we will reveal some facts regarding Crowdfunding for Inventors in a detailed manner.

What is Crowdfunding, and how does it work?

Crowdfunding refers to a method of procuring funds by accepting a small corpus of capital from various sources/investors. It is commonly done through online mode where it is convenient to garner to massive response & secure as much attention as possible.

There are three pivotal pillars involved in the process- 

  • The individual with a breakthrough idea who seeks funding
  • The people who are keen to fund that idea 
  • The mediator platform that brings inventors and investors together

The campaign might be reward-oriented, equity-based, donation-oriented, or debt-based. 

Crowdfunding is deemed as one of the low-risk forms of fundraising option as the corpus being invested by a person is small, and therefore the payback they anticipate is not significant. 

But, whatever be the quantum of investment, the person pouring in the capital will ask about the invention’s details. Therefore, Crowdfunding for inventors is more likely to pose an increased risk than other projects where public intervention is not a concern. 

Read our article:Benefits of Startup India Registration in India

Probable Benefits of Crowdfunding for Inventors

Probable Benefits of Crowdfunding for Inventors

Safeguarding Intellectual Property

Your invention is your IP. Therefore, it is recommended to wisely disclose it to a third party while taking adequate confidentiality protection into account, if possible. Filing patents, design applications, trademarks are the most viable forms of safeguarding IP & ensuring that others do not counterfeit your IP. Ensuring IP protection should be the priority of every inventor who seeks to gain monetary gain in future. Investors who signalled to fund your project also expected to avail some benefit out of the same. 

Most Investors have great admiration for an invention that proposed to offer breakthrough functionality. Undoubtedly, they will fund such an idea , but at the cost of knowing the basic concept that drive the same. Securing an IP is one of the most daunting undertakings for an inventor in the funding phase. However, some measures can help an investor to overcome such threats. 

Intellectual Property in Crowdfunding 

Although the crowdfunding landscape is conducive for credit seekers, some inventors might have a different thought on that. Most crowdfunding platforms are less detrimental to IP rights as they never ask the inventor to share the same. But they never dispense the desired funding until the inventor share the invention’s detail in exchange. Now even though IP rights are intact, sharing such information could jeopardize the patentability of the invention. However, it does not imply that Crowdfunding for inventors is futile or risky. There are some viable ways to stay secured in such an event & maintain the protection of your invention. Let’s discuss them individually. 

Patent Protection 

Filing a provisional or complete patent application ensures some degree of protection in the funding campaign. Provisional applications let you safeguard your valuable idea with a priority date & also spare you additional time to later file the complete application in due course. 

The ultimate goal of Crowdfunding[1] is to avail little corpus of funding from various investors, so getting a provisional application before that convinces you that you’re safeguarding the idea & also not spending much on it. Moreover, the fund procured via the crowdfunding campaign can be used in supporting the patenting process later on. 

After patent filing, it would not be detrimental to reveal the detail of the same with prospective investors. However, it is essential to remember that no public disclosure should be made before filing the application. Any prior disclosure could hamper your chances of securing patent protection in the future.

Choosing apt jurisdiction

While opting for a platform for Crowdfunding, make sure to determine the region where it operates. If you have filed the application in that region, you should opt for it as your funding medium. Even if the platform functions in your region, it does not imply it is run by that nation, and therefore you might end up disclosing your patent in another nation where no patent protection is obtained. 

Thus, it is advisable to dig down the target markets beforehand & then conduct an extensive background search on the desired platforms before selecting any. 

IP Protection for the Platform 

Some crowdfunding avenues do facilitate some degree of IP protection to the inventor, apart from the Non-Disclosure Agreement they possess for any campaign. In such scenarios, there is a limitation on the messages posted on the forum, along with any intentional or accidental infringement of your invention on the platform. If an infringement came to effect, the platform must have stringent guidelines in place to resolve the issue or halt the campaign to secure the rights. Therefore, it would be wise to make a preliminary check to determine possible constraints on each platform. 

Trademark

Trademark protection helps you secure and incentivize your brand. If there is some enticing name that you have thought of, it is recommended to get it trademarked & utilize it in your crowdfunding campaign to lure more investors. 

Creating a brand in the initial phase will let your invention cementsits place in the public domain and boost your marketing efforts. 

Modifications / Suggestions by Investors

The norms for inclusion of any modifications advised by the prospective investors may differ region-wise. Such complex standards must be examined carefully to avert any problem cropping up later.

After revealing your invention on the forum, you will encounter numerous suggestions regarding further improvements or changes. Do not let these suggestions cloud your concepts or ideas about your invention, and try to make informed decisions by taking relevant advice into account. 

Crowdfunding for Inventors: Key takeaways

  • Revealing your invention on a fundraising avenue is not the only possible way to compromise your patent rights. Even if you do not share enough detail to let a person possessing ordinary skill in the art, you can still end up losing your patent rights via an on-sale bar. When the invention is sold or offered for sale for a year prior to the patent filing, on-sale bars came into play. The on-sale bar seeks that the concerned invention is fit for patenting, which implies either some tangible model of the invention exists or the inventor has adequate detail to create the invention. So even without adequate public disclosure to let someone with skill in the art create the invention, patent rights can still be compromised when the invention is fit for patenting & offered for sale. 
  • In general, once patent rights are compromised, there is no way to retrieve them. Therefore, inventors & start-ups must take the relevant measures & precautions to ensure that novelty defeating events do not come to light. But, it may not be possible to keep invention-related details isolated for long. Thus, the key step in securing any patent rights would be to file a patent application before involving with the said activities. 
  • Novelty Defeating events provide the invention no longer stick to originality. An invention is no longer deemed new when it is already available in the public domain. What does this imply? An invention is considered known in the public where there are pre-existing inventions that already reveal the components of the known invention. Even if it was the creator who revealed the invention, it is deemed a novelty defeating event.

Bottomline 

Crowdfunding is a viable alternative to connect with potential investors and customers to commercialize an early phase invention. If done aptly, it can let you launch your product to key markets without encountering considerable debt and act as a viable marketing tool per se. Owing to its intricate nature, the inventor may fall into the trap of disclosing their invention without securing any benefits whatsoever. However, that scenario is only possible when the inventor doesn’t take utmost care during the platform selection process. 

By prudently reviewing your invention, filing inventions where required for all imperative forms of IPR beforehand, & comprehending the norms of engagement with the crowdfunding platform you select, you can maximize benefits from the crowdfunding process while ensuring uncompromised ownership of your invention. Crowdfunding for inventors is nothing short of a blessing, provided the creator opts to approach cautiously while dealing with investors on a crowdfunding platform.

Read our article:Startup India Seed Fund Scheme: Objectives, Guidelines, and Eligibility Criteria

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Pankaj Tyagi

Pankaj has a diverse experience of writing research papers, blog, and articles during his college time. Earlier, he was working as a tax consultant in a financial firm, but his interest in writing drives him to pursue a career in the writing field.

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