Crowdsourcing websites like Kickstarter and Quirky are providing a new solution for turning ideas into marketable products. But, uploading an idea to either site raises questions about how much of an idea a founder must part with in exchange for these services. Choosing to part with portions of an intellectual property portfolio is similar to deciding whether to give up equity in the business. However, the conversation is often cluttered with various types of licensing agreements, sales agreements, or outright whole portfolio assignments.
Take Kickstarter for example. Founders are attracted to the notion of uploading their ideas in hopes that the general public will donate startup capital that can then be used to advance the ideas from mental images to products on a shelf. A closer examination of the terms and conditions posted on Kickstarter reveal that a founder must grant a non-exclusive license of all trademarks and copyrights to Kickstarter in order to upload anything. Practically speaking, this should not be viewed as a threat by the founder because the only thing given to Kickstarter is the right to reproduce logos, product names, written descriptions, and videos that may be uploaded. The legal ownership of this intellectual property never switches hands. Instead, the founder maintains ownership and can still license intellectual property to other parties, sell portions thereof, or even assign it in total down the road. In essence, Kickstarter is leasing the property for as long as they need it in order to present the idea to the public via its website. The only property exchanged is a certain percentage of the monies raised by the idea if the entire fundraising goal is achieved. Thus, crowdsourcing options like Kickstarter provide the advantage of possibly raising startup capital without the disadvantage of forking over a chunk of the business.
Now, consider crowdsourcing websites like Quirky. Such websites are geared less towards creative works and more towards innovation. Rather than simply providing founders with a platform for raising funds, Quirky skips fundraising and offers an in-house “monetization” team. That is, Quirky will take a founder’s idea, give it to a team of designers and engineers, actually produce tangible versions of the idea, and then put the product into the marketplace. To say that Quirky will take a founder’s idea is to say that Quirky will take the idea. Unlike Kickstarter’s favorable licensing agreement, Quirky requires founders to assign their entire portfolio of intellectual property over to it. The assignment does not leave the founder out in the cold entirely because Quirky promises to pay a small royalty back to the founder for their contribution of the idea.
Let’s look at the nuts and bolts of these terms and conditions, because there is a built-in check point for the assignment. When a user uploads an idea to Quirky, he or she initially retains rights in the intellectual property, while simultaneously granting the same type of license that Kickstarter requires. So, if the idea is never accepted by Quirky, a founder is free to take his or her idea elsewhere for development. But, the moment the idea is accepted by Quirky for development within its community, the user must then assign the entire portfolio of intellectual property over to Quirky. If Quirky does not actually follow through with production of the product within nine months of acceptance, the user has one week to decide if they would like to reacquire the intellectual property that was originally assigned. Even if user decides to reacquire the portfolio, they must still grant Quirky a full license to use the product in its business. But, it doesn’t stop there because the user must also pay Quirky a royalty of 10% of all revenues ever generated by the product. Thus, regardless of what happens to an idea once it is accepted by Quirky, the founder loses some portion, if not all, of their interest in the intellectually property related to the original idea.
When a founder is considering which type of crowdsourcing site to team up with, honest self-assessment if critical. The founder must look internally and ask, “Even if I raise enough capital, can I really take this idea and turn it into a viable business?” The answer to this question depends on how capable the founder is at organizing vendors in the supply chain, hiring the right talent to run the business, and generating sales. If the founder is equipped to handle the challenge, then sites like Kickstarter will work. If the founder is completely new to the field of monetizing ideas, then leaving the heavy lifting to sites like Quirky make more sense. Otherwise, the idea may never make it from the napkin to the shelf. And for these services, handing over all ownership rights in whatever intellectual property that may come from the idea may be worth it. After all, one piece of a large pie is more filling than every piece of no pie.