[Feb/04] Caution before you crowdfund (Part Two)

Crowdfunding has only existed for about five years, but it has already proven itself to be a viable alternative to conventional fundraising methods. Unfortunately, crowdfunding's enormous online exposure also greatly increases the risk that one's intellectual property rights may be infringed. Inventors should therefore make sure that they understand the following prior to launching a crowdfunding campaign.

The America Invents Act has changed the U.S. patent system

Many inventors are not aware that the America Invents Act completely changed the U.S. patent system last year, switching it from a "first-to-invent" to a "first-inventor-to-file" system. Prior to March 16, 2013, inventors could wait until they were certain of sufficient funding before they filed a patent application because what mattered most was the invention date, not the filing date. This is no longer the case. Under the new system, it has become a race to the patent office, and the first inventor to file the patent application generally wins.

There is only a one-year grace period to file a patent

Inventors must remember that they have only one year to file for a patent after they make their first public disclosure about their invention. The failure to file a patent application before the end of this grace period will result in the inventor losing his or her patent rights forever because the invention will have lost its "novelty."

By posting a project online, one will almost certainly be considered to have made a public disclosure that will start the clock ticking. In fact, absent a non-disclosure agreement, just submitting one's idea to the Kickstarter staff during the screening process could be considered a public disclosure. This means that the countdown could begin long before the actual launch of the campaign, especially if it takes the inventor several attempts to get through the Kickstarter screening process.

Inventors should read 35 U.S.C. 102 for a full explanation of what constitutes a public disclosure.

There are benefits and drawbacks to the early filing of a formal, non-provisional patent

While filing a non-provisional (utility) patent application can be expensive (because the filing fees can be high and because one typically needs the assistance of an attorney), it is really the only way for inventors to protect their rights to their invention. Before inventors begin the costly application process, they would be wise to first make sure that their idea is even patentable (i.e. that the invention is novel, non-obvious and useful). Inventors can conduct a preliminary patent search on their own, but they may want to consider hiring a patent attorney to conduct a thorough "prior art" search that examines the body of knowledge relating to the patentability of one's invention, including previous patents, publications, articles, etc.

A provisional patent application may offer "stop-gap" patent protection during the crowdfunding campaign

A provisional patent application is faster to prepare and less expensive than a non-provisional application. One need not disclose prior art or file claims, and small entities even receive a filing fee discount. Investors must understand, however, that a provisional application is only a temporary measure that, on its own, will never provide true patent protection.

A provisional application merely sets a patent priority date that can be claimed as the "effective filing date" for the non-provisional application. In other words, the non-provisional application will be treated as if it was filed on the date the provisional application was filed. In this way, a provisional application can be an economical "stop-gap measure" that can protect one's patent while crowdfunding, effectively extending patent protection from 20 years to 21 years. Then, at the end of the campaign, if the funding goal is not reached, one can simply allow the provisional application to expire. But, if the campaign is a big success (and perhaps even goes viral), one can secure full patent protection by filing a non-provisional application within one year of filing the provisional application.

However, to be effective, the provisional application must be sufficiently thorough in content, and it must meet the statutory written description, enablement, and drawing requirements. If these requirements are not met, then the provisional application is ineffective and the non-provisional patent will not be treated as if it was filed on the earlier date. Thus, a hastily written, self-made provisional application that is ineffective may result in the total loss of one's patent rights. For this reason, inventors should seek the assistance of a patent attorney even when filing a provisional patent.