Crowdsourcing is essentially a form of mass outsourcing. Instead of engaging a specific third party to undertake a task, however, the task is made available for anyone in the “crowd” to complete. In seeking a solution to a problem, a business could crowdsource tens, possibly hundreds, of responses, then select the best one.

The process is akin to a competition in that only the preferred response, and perhaps two runners up, will receive any remuneration for their efforts. Whatever the task, it is almost inevitable that it will involve the creation of intellectual property (IP) rights that the business will want to exploit.

The benefit of crowdsourcing is that a business can, at a relatively low cost, access a wide range of talent. The crowd consists typically of up-and-coming freelancers in the relevant field, who gain the chance of working for a business that would normally be beyond their reach.

There are, however, potential commercial and legal risks. For example, the use of crowdsourcing may give a business’ competitors insight into future product development, or could even prevent the novelty of a future patent application. There are also potential risks for the company’s reputation, such as the business being seen to be running out of its own ideas. One of the most significant and tangible risks, however, is the risk of claims of IP infringement arising from crowdsourcing.

Ownership of Crowdsourced IP

Concerns over IP infringement claims flow from the question of who is the owner of the IP in the responses received to a crowdsourced task. If a task is given to employees of the business, then any resulting IP generally will vest in the business. Equally, if the task is given to a third party contracted by the business for that purpose, the IP rights can vest in the business by virtue of the terms of the contract. In contrast, the starting point for crowdsourcing is that participants retain their rights until they are transferred to the business.

When a business selects its preferred response(s) to a crowdsourced task, payment to the winner(s) should be structured as consideration for an assignment of all the IP rights in the winning response. In this respect, crowdsourcing is effectively the same as outsourcing, except that the relationship is formalised after the work is completed.

The problems arise mainly from the members of the crowd who were unsuccessful. There is a parallel to be drawn between unsuccessful crowdsourced responses and the age old problem of what to do with unsolicited ideas and suggestions that a business may receive. Businesses have long been advised not to review unsolicited ideas for fear of being accused at a later date of having copied them. In the case of crowdsourcing, the unwanted ideas, by definition, have to be reviewed.

Because the crowd members have all responded to the same task, it is likely that there will be a degree of overlap between the themes and content of the unsuccessful responses and the responses purchased by the business. This could lead to accusations that a response is being used by the business without payment, owing to similarities between the winning response (or elements thereof) and an unsuccessful response, or owing to similarities between an unsuccessful response and something the business developed itself independently.

Where the claim in question is for copyright infringement in the United Kingdom, for example, the crowd member needs to show that the two works were substantially similar and that the infringing work was derived from the original response. Because it is easy for the crowd member to prove the response was received and reviewed, crowdsourcing inherently establishes a causal connection. Under English law, a causal connection between two works and a substantial similarity between the two can shift the burden of proof on to the alleged infringer. It is then, of course, rather difficult to prove conclusively that the work was not copied.

Protecting the Business

In considering how to eliminate, or at least minimise, these risks, it is important to strike a balance between the interests of the crowdsourcing business and the crowd so the solution implemented is not too onerous on the crowd. If the rules for providing a response are draconian or favour the business heavily, the crowd may simply choose not to respond to the task.

An example of a heavy handed solution is where the business requires each member of the crowd who provides a response to grant a non-exclusive (or even exclusive) perpetual licence to use any IP included in the response, without further payment. This would certainly eliminate the risk of infringement claims from the crowd, but, aside from the issue of whether this licence would even be enforceable, it raises the question of where is the incentive for the crowd to expend the effort in preparing a response? If the crowd gives up the value of its responses, why would the business ever need to reward the preferred response? The other risk associated with seeking a licence from the entire crowd is that if one licence is found to be invalid, then it is likely that the rest will also be invalid. The attempt to eliminate the risk could then result in an avalanche of claims from opportunists subject to these licences.

Businesses can instead focus on breaking the chain of causation by creating barriers between their IP and the crowdsourced responses. This can be done by putting in place procedures that ensure only limited individuals have access to crowdsourced submissions. If a third party is being used to supply the crowdsourcing environment, it may be appropriate to have all the responses remain on the third-party server. Only a limited number of staff should have access to all the responses for the initial review; that way, a significant portion of the responses will be reviewed and discarded by a small group of people. By retaining a record of who was involved at each stage, future claims can be met with a clear statement of which submissions were reviewed by which staff.

A strict policy should also be put in place so that staff understand the importance of limiting the number of individuals who have access to crowdsourced material. Staff training is essential to ensure employees understand the potential consequences of misusing crowdsourced designs and ideas. Those responsible for reviewing responses should be aware of the risks involved and that submissions remain the property of third parties until purchased by the business. Equally, the crowd should be asked to acknowledge, as part of submitting their responses, that the business has its own development pipeline and may have developed independently (or may in the future develop independently) something similar to their work.

Crowdsourcing creates a number of IP-related issues because it goes against conventional wisdom: it actively encourages third parties to participate in a business’ creative process without first ensuring the business is protected adequately. However, by taking a considered and well-documented approach to the use of crowdsourcing, a business can reap its benefits without exposure to unnecessary risk. When the use of crowdsourcing is proposed, it is therefore essential that the business anticipates and prepares itself fully for the IP risks involved.