Not all crowdfunding platforms have the expertise or resources to deeply engage with intellectual property (IP) issues, even under the European Crowdfunding Service Providers Regulation (ECSPR). While the regulation sets standards for transparency and investor protection, the practical implementation of IP-related safeguards remains inconsistent. Startups in innovative or technology-driven sectors, where IP is a significant asset, must be aware that platforms may not have the legal or technical capacity to thoroughly assess or advise on IP matters. Below, we explore the expectations for ECSPR-licensed platforms versus the current realities. EUROCROWD engaged with a large number of platform during 2023 on the topic of IP, while our insights does not fully represent the issue, the below overview should help platforms, investors and startups or project owners to better prepare for fundraising under ECSPR.
1. Project Submission Process
Expectation: ECSPR-licensed platforms are expected to collect comprehensive project details, including information about intellectual property, as part of their transparency obligations. This information is crucial for investors assessing a project’s viability and risk profile.
Reality: In practice, platforms may only perform basic checks on project submissions. Few platforms have the expertise or resources to analyze the validity of IP claims or assess potential IP disputes thoroughly.
2. Strict Project Guidelines
Expectation: Platforms should provide clear guidelines addressing intellectual property, ensuring project owners comply with IP laws and protect their own innovations before publicizing them.
Reality: While many platforms include general terms of service that mention IP, these often lack specific or enforceable guidance. The platforms largely rely on project owners to manage their own IP-related risks.
3. Educational Resources
Expectation: Platforms could play a significant role in educating project creators about IP-related risks, such as securing patents or trademarks and avoiding infringement.
Reality: Few platforms invest in creating detailed educational resources on intellectual property. Instead, project creators are often left to seek external advice or navigate these issues independently.
4. Project Verification
Expectation: As part of ECSPR’s emphasis on investor protection, platforms are expected to verify project details, including IP ownership or claims, to ensure transparency and compliance.
Reality: Most platforms focus verification efforts on financial and operational transparency rather than IP. The technical and legal expertise required to verify IP claims is often beyond their capabilities, meaning investors may be exposed to unverified IP risks.
5. Legal Compliance Oversight
Expectation: ECSPR-licensed platforms are required to adhere to EU legal standards, which should extend to ensuring projects meet IP-related legal requirements.
Reality: While platforms comply with broader regulatory requirements under ECSPR, specific oversight of IP compliance is rare. Legal teams are often focused on financial compliance, leaving IP issues underexplored.
6. Communication and Risk Mitigation
Expectation: Platforms should actively communicate with project creators about potential IP challenges and advise them to address these before launching campaigns. Risk mitigation strategies should include measures for managing IP-related disputes.
Reality: Communication on IP issues is typically limited. Platforms may highlight general risks but lack the capacity or processes to engage deeply with creators on IP matters, leaving significant gaps in risk mitigation.
7. Highlighting Best Practices
Expectation: ECSPR-licensed platforms could use case studies of successful projects to demonstrate how IP challenges were navigated effectively, providing guidance for future project creators.
Reality: While some platforms highlight successful campaigns, these examples rarely focus on IP. The absence of detailed IP-related success stories reflects a lack of expertise or prioritization in this area.
8. Contingency Planning and Investor Protection
Expectation: Platforms are expected to implement robust measures to protect investors from risks, including those related to IP. Projects with unresolved IP disputes or claims should not proceed until issues are addressed.
Reality: IP-related contingency planning is limited. Platforms often lack the mechanisms to detect or respond to IP disputes, leaving investors exposed to potential legal or financial risks stemming from unresolved IP issues.
9. Terms of Use for Investors and Backers
Expectation: Platforms should provide detailed terms of use outlining IP-related rights and responsibilities for investors and backers.
Reality: While terms of use are generally provided, they often lack specific references to intellectual property rights. This creates ambiguity for investors and backers regarding their protections and obligations.
Conclusion
Under ECSPR, licensed platforms are expected to address intellectual property as part of their broader commitment to transparency and investor protection. However, the reality is that most platforms lack the legal or technical expertise to meet these expectations comprehensively. Startups and investors must recognize these limitations and take additional steps to assess and mitigate IP risks. Platforms should view improving their IP-related processes as an opportunity to build trust and credibility with both project creators and investors.
Disclaimer: The content provided by EUROCROWD in this post is intended for general informational purposes only. This information is not intended to constitute legal advice or provide bespoke solutions to specific problems. EUROCROWD endeavours to offer guidance to help individuals and businesses protect their intellectual property (IP). However, readers are expressly advised that the information presented should not be considered a substitute for professional advice or legal counsel. While we strive to ensure the accuracy and timeliness of the information shared, laws and regulations may change, and the content may not reflect the most current legal standards or interpretations. Your first step might be to visit EUIPO – Ideas Powered for Business: The European Union Intellectual Property Office (EUIPO) offers a platform called Ideas Powered for Business. It provides tools and resources for businesses to manage and protect their IP https://business.ideaspowered.eu
