Developments in technology and social media platforms have changed the way that businesses engage with consumer markets. Customer bases are now more accessible to business owners and as such there has been an increase in:
- the interactions between businesses and their customers during the research and development of new products;
- after-service care; and
- the retention of customers.
An example of these interactions is the sourcing of ideas from an external customer base – so-called 'crowdsourcing'. Although an effective way of getting instant and substantive feedback, there are IP law implications to crowdsourcing ideas that business owners must consider.
'Ideas crowdsourcing' is defined as the "use of sources outside of the entity or group to generate, develop and implement ideas".(1) This means that businesses can use sharing platforms to serve a purpose or solve a problem.
This is a cost-effective way to:
- develop new ideas;
- open access to new markets; and
- drive business efficiency.
The boundaries between businesses and their customer bases have become more permeable, granting businesses direct access to their customers' preferences and creating more confidence in their products' success because customers are actively involved in their development. A good example of this is Doritos' use of consumer polls in the development of new crisp flavours.
By exploring the possibilities of ideas crowdsourcing, businesses open themselves up to a wide range of fresh talent and concepts in their efforts to stimulate innovation. No one knows a product and its inner workings and failings better than a customer. Therefore, businesses can use the public to source ideas on the creation and improvement of new and existing products (eg, Samsung started a Strategy and Innovation Centre in Palo Alto, California for this reason).
Notably, however, where improvements are made on existing, registered patentable products or designs or new patents and designs are created, such improvements or innovations must usually be registered. As the copyright in an applicable work (eg, the design of a trademark or composition of a photograph) will automatically vest in the author of the work, businesses must ensure that copyrights are assigned to the business by the author.
Benefits aside, ideas crowdsourcing may expose businesses to IP risks. An idea or concept that is not properly managed may cause more harm than good to product and services R&D efforts.
One of the fundamental principles to be given due consideration throughout the crowdsourcing process is that of ownership. It is paramount to determine who owns the idea or concept to ascertain whether the rights vest in the submitter. It is also critical to ascertain whether the idea or concept can be used (ie, it cannot derive from an existing idea or concept as this would amount to an infringement). Where ownership is unlikely, measures must be put in place to ensure that access to the idea or concept may be achieved via a licence.
When using third-party platforms to collect, process and present feedback obtained from crowdsourcing, businesses must consider who owns the rights to the feedback. It is imperative to ensure that the business owns the information and that any information disclosed by the business to a third party remains theirs.
However, there are instruments that can be used to protect a business' intellectual property (eg, agreements that include terms and conditions), which will dictate and regulate how intellectual property is dealt with as well as the relationships between businesses and crowdsourced consumers. Where businesses use social media platforms to engage with their customer bases, policies must be drafted and implemented to ensure safe interactions between:
- users of the platform;
- users and the business; and
- the business and the platform.
Website terms and conditions are also required when businesses have created a website as a platform for ideas crowdsourcing.
In a competitive world where a customer's memory is often short and businesses are only as good as their last success, ideas crowdsourcing can be an exciting yet cost-effective way for businesses not only to keep up with their customers latest trends and preferences, but also to keep a competitive edge in their existing market and beyond. However, it is crucial to have proper IP protection in place before undertaking crowdsourcing activities. Therefore, it is highly advisable to consult with a suitably skilled attorney from the beginning to ensure that the business and all of its intellectual property is protected.
This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.