5 Reasons to Patent Before Pursuing Public Solicitation (Crowdfunding)

Before you launch your first crowdfunding campaign, there is a lot to think about and prepare. Thinking about a patent strategy should be on your list. Here are five reasons why you should protect your idea with a patent application before going public to raise capital.

1. First-mover Advantage

If you embark on a crowdfunding campaign without patent protection, there is a risk that you may get copied by a competitor, and you will have no legal recourse. That means someone with deeper pockets and bigger teams can take advantage of your research, development, and early testing and potentially squeeze you out of the market you created.

2. Protect Against Infringement

An important part of the patent process includes doing your own research to ensure no one else has an existing claim to the idea or design you thought was original. It doesn’t matter what type of crowdfunding exercise you’re contemplating (reward, equity, debt, etcetera), public release may infringe on someone else’s patent or trademark of a technology, product or visual design. Under U.S law, the owner of a patent may be eligible for reasonable royalty fees or damages equivalent to lost profits. Do your homework in advance, and save yourself the time and trouble of being the potential subject of an IP infringement lawsuit.

3. Better Crowdfunding Results

Investors tend to respond more positively to campaigns that can claim “patent pending” status. Most large companies and sophisticated investors will want to see that an inventor or entrepreneur has taken steps to protect the idea before they’ll agree to get involved.

4. Patent Rules Have Changed

Gone are the days when the U.S. patent system acknowledged the “first-to-invent”. Today, it is all about who is the “first-to-file”. Those changes were made to the America Invents Act back in March of 2013.

5. No More Racing the Clock

A less expensive route would be to file for a provisional or utility patent before you launch your campaign. However, this doesn’t provide you with as great a degree of protection, and as soon as you go “public” you start the countdown of the 1-year clock. Any public disclosure of your idea means you must file a full-fledged patent application within 12 months or lose your right to do so.

Investors participating in most equity crowdfunding are still required to be accredited. Contact the experts at VerifyInvestor.com for information on fast, reliable and confidential verification of accredited investor status.

Updated 8/5/2022

With so many new ways to increase your investor family, applying Rule 506(c) has never been more straightforward and is a great alternative to going fully public. Our third-party verification service makes it easy for investors to complete the process of ensuring they meet the requirements of an accredited investor. Our service reduces the time and effort it takes for companies to pay legal teams to conduct internal reviews. Using a third party also reduces the burden of bias. Using a service like VerifyInvestor.com is very simple and easy. Let us handle the validation aspect so you can focus on finding more investors.