Crowdfunding IP

This is a good article about the taxability of crowdfunding.

But who owns the intellectual property in a crowdfunding situation? Does the inventor or author always get to keep the rights to the Big Idea they fund?

Well, as with whether a crowdfunding campaign is taxable or not, that depends.

Intellectual property is transferred by agreement between the owner of the rights (the originator of the work or an assignee) and the assignee of the rights. If the originator of the work assigns the work to another, then that other owns those rights. If s/he does not, then that other does not own those rights.

So what makes a valid transfer of rights?

A signed writing that transfers the rights. This need not be a contract; there need be no consideration.

That writing can be a “work made for hire” agreement, in which the originator of the work agrees that s/he has been hired by another to create, and the results of the creation belong to that other.

That writing can be an assignment of rights, in which the originator of the work assigns the rights to another. This assignment can take the form of a contract (offer, acceptance, consideration), or it can be a simple assignment without the trappings of contract.

Without that signed writing, though, the IP rights remain with the current owner, who may be the originator or an assignee.

If the crowd were to get rights to the intellectual property it funds, the owner of those rights must assign those rights to the crowd. That doesn’t happen very often; in fact, I know of no instance in which the crowdfunders have shared in the IP rights their funds help to develop. The crowd must generally settle for something else. Stock, for instance. Or a sample of the product. Or even just a T-shirt. But IP rights? Possible, but not likely.

Crowdfunding and venture capital are entirely different in this regard. Venture capitalists regularly take ownership interest in the company, including the IP rights, in exchange for funding.