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Are You Considering Crowdfunding to Raise Funds?

Crowdfunding is a new way to help turn ideas into reality. Instead of going the traditional route of using your own money, borrowing from family or friends, taking out a bank or small business loan, or seeking investors through venture capital groups, an entrepreneur can create a page on one of the many popular crowdfunding platforms and bring interested potential investors to him/her.

One of the perks of going the crowdfunding route is that your "investors" (the businesses and/or individuals who donate to your campaign) are not considered shareholders in your business venture. Contributors are merely people that want to see the product brought to market and are not entitled to nor do they expect to be repaid. For example, the Veronica Mars movie was funded through a Kickstarter campaign that raised $5.7 million dollars.

If shareholders are something you are looking for, some sites do allow for more traditional online investment via investment crowdfunding. Increased regulation exists with these sites, so it is important to seek appropriate legal advice to ensure that you do not run afoul of securities laws.

If you are a business wanting to go the crowdfunding route, it is important to not give to much of your idea away; i.e. be careful on how detailed you are with the description of your idea or business model. Often, one's gut instinct is to address each of the amazing aspects of your project to entice people to contribute. However, if you disclose too much, you run the risk of your idea being stolen or even blowing your own intellectual property rights. This is true even if you have protected your intellectual property (i.e trade secrets, patents). Remember, protecting your intellectual property does not guarantee someone will not infringe on your ownership rights, but rather it puts safeguards in place should this happen to you.Consider working with an experienced Orange County IP attorney to make sure you're providing enough information to get crowdsourcing investors interested, but not too much information that you could be risking the very nature of your business.

Not surprisingly, it's important to secure as much of your IP as possible prior to disclosure through the crowdfunding site. For example, make sure your brand name or logo is trademarkable and is not infringing on anyone else's mark(s). Switching your name midstream is potentially costly and may slow down the momentum you have generated. If you can apply for patent protection for your method or process, make sure you have at least filed a provisional patent application which you can use as the basis for a non-provisional application. When it comes to patentable IP, it is especially important to not discuss your idea(s) with parties who are not patent attorneys and/or whom are not subject to a non-disclosure agreement (NDA). Under U.S. law, you only have one (1) year from public disclosure to seek patent protection and if you don't, have lost the ability to protect the invention. Many foreign jurisdictions are even more strict, requiring that you seek patent protection prior to disclosure or you lose your rights.

Also be certain that any trade secrets are being properly protected, and if they must be discussed do so with the fewest amount of possible parties, all of whom should be under a NDA. Under no circumstance should you disclose trade secrets in a crowdfunding campaign.

For more information on how to raise funds via crowdfunding, and doing so without losing your business to a potential competitor or losing intellectual property rights, contact the Orange County IP attorneys at MYBE Law today.

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