How to Protect Your Intellectual Property When Crowdfunding: 5 Tips

By: Christina DesMarais

Whether you're using a pre-order platform such as Kickstarter or one in which you give away actual equity in your company to investors, crowdfunding can be a good way to get traction and deliver your new product into the hands of customers. But how do you do it without divulging too much information about your intellectual property? Chris Tsai, founder and CEO of Celery, a Y Combinator alum that helps companies take pre-orders for new and out-of-stock products and conduct crowdfunding campaigns on their own websites, has some ideas. Here are a handful of ways he says you can keep your trade secrets safe when crowdfunding.

1. Understand the window of time involved with an enabling public disclosure.

If you haven't filed a patent application you have one year to do so after publicly announcing your product or offering it for sale in the U.S. After the 12-month window has closed, patent protection is unavailable and you lose the right to file a patent and be the exclusive producer of your invention.

2. Make sure you have your legal ducks in a row.

In other words, if IP matters to your business-whether in the form of patents, trademarks or trade secrets-you need to talk to a lawyer. "Work with a lawyer to know what altitude you need to fly at, as far as how aggressive you want to be," he says.

3. Choose a crowdfunding platform carefully.

When you use site like Kickstarter you'll need to use the platform's standard format, including showing a video, offering perks to backers and explaining product development. With a private crowdfunding site you have more control over how much information you share. "If you pick a private crowd funding or pre-order platform like Celery you have a lot more control over whether you show a video, how much you disclose about your sales and how much you share," he says.

4. Nail your product offering before launching publicly.

This applies if your IP is something that others will immediately copy. "For example, the startup Coin delayed its public disclosure for as long as it could, because they knew that no manner of IP strategy would prevent copy-cats, which has in fact has been the case," he says.

5. Take more than money from your crowdfunding backers.

Often these kinds of supporters have technology expertise that can be mined if you're early in the product development stage and smart backers can lend advice if you run into a hitch involving something such as manufacturing. "Just be aware that there's potential for IP leakage when you're doing that," he says, "but I think the benefits tend to outweigh the costs of leaning into your backers for help."

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