Sean M. O'Connor, Crowdfunding's Impact on Start-Up IP Strategy, 21 Geo. Mason L. Rev. 895 (2014), https://digitalcommons.law.uw.edu/faculty-articles/199
George Mason Law Review
This Paper proceeds in Part I by reviewing the crowdfunding landscape and its potential benefits for start-ups, especially with regard to IP strategies. Part II examines the provisions of the JOBS Act and argues that the disclosure requirements of the CROWDFUND Act title will make the latter less attractive than other start-up financing options and may negatively affect start-ups’ IP strategies, in part by risking the disclosure of enabling aspects of patentable inventions.
Part III explores issues arising from the widespread involvement of many potentially unsophisticated investors who have no connection to the start-up. This contrasts with current unsophisticated investors in start-ups who are usually limited to friends and family of the founders. The lack of a direct connection means that unsophisticated crowdfunding investors may neither understand the realities and risks of start-ups’ IP portfolios nor have the inside access to information and management that traditional friend and family investors enjoy.
The Paper concludes with suggestions for how start-ups should manage these issues, as the popular appeal of crowdfunding virtually ensures that start-ups will use it once the SEC promulgates the final rules implementing the CROWDFUND Act.