Crowdfunding and IP in Health and Biotech Start-ups : Potential Dangers

The JOBS Act requires the SEC to issue detailed rules before crowdfunding can occur, including:

• Extensive company disclosures.

• Explanation of how offered securities are valued.

• Ongoing annual financial reports after a successful campaign.

Entrepreneurs may be hesitant to disclose internal operations, risking competitive exposure.

Intellectual property concerns arise:

• Disclosures may create prior art bars under U.S. and foreign patent laws.

• Crowdfunding disclosures could prevent future patenting of inventions.

Crowdfunding platform terms can be expansive, potentially granting rights over IP content submitted (e.g., Kickstarter).

Companies must carefully manage agreements with investors and platforms regarding patent licenses.

Crowdfunding dilutes ownership and creates numerous investors with potential input expectations.

Entrepreneurs must understand SEC rules, platform terms, and investor rights before running campaigns.

Despite risks, crowdfunding provides a powerful tool to raise capital and enter markets quickly, but careful planning is essential.