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Crowdsourcing – Everyone Doesn’t Always Win

As published by SBS News

Crowdsourcing is a form of outsourcing and it comes with indisputable benefits. But do those benefits stack up against the inevitable risks that accompany them?

Crowdsourcing is the simple act of sourcing from a group of people (crowd), rather than from a specific third party. It may relate to the sourcing of funds to kick-start a project (better known as crowdfunding), the submission of ideas, seeking a solution to a problem or perhaps, the development of a piece of software. What you read below relates to the crowdsourcing of creative works.

With little effort at all, crowdsourcing can be traced to 1901 when Australia’s first Prime Minister crowdsourced the design of the Australian Flag. More recently, Kevin Rudd crowdsourced his 2013 Election T-Shirt (resulting in the It’s Our Ruddy Future T-Shirt) and the Sydney Opera House crowdsourced the development of a software application.

Crowdsourcing typically involves a business assigning a task to a crowd and payment being made to an owner of a successful submission. Payment is usually made in exchange for the creator agreeing to assign (transfer) intellectual property rights associated with their submission.

But crowdsourcing is merely a term. What lies behind it is a complex model that, along with benefits, is loaded with legal issues. The benefits include access to a range of fresh ideas from people outside of the business assigning a task and the ability to access a large pool of talent at a relatively low cost.

Consider the risks

The risks include giving competitors an insight into future product development and potentially, giving the perception of being fresh out of innovative ideas. But the most common and complex issues associated with crowdsourcing relate to competing interests in the intellectual property connected with the crowdsourcing process.

To understand the intellectual property issues, it’s critical to understand that, subject to a few exceptions, the first owner of copyright in an original work will be its creator or author. Also, the Australian copyright law provides that an effective assignment of copyright must be in writing. Therefore, a participant will retain ownership rights until transferred in writing to the business.

While an owner of a winning submission may not hesitate to abandon (via assignment) intellectual property rights in exchange for payment, an owner of an unsuccessful submission may be less obliging. In fact, there is potential for an owner of an unsuccessful submission to claim that a winning submission is a substantial reproduction of their own unsuccessful submission and consequently, copyright infringement has taken place. This is a genuine issue, as the business assigning a task will have likely provided just one task brief to all participants. Undoubtedly, this will result result in similarities in works submitted by participants.

There is also a risk that a winning submission is not completely original, meaning that at least part of it has been stolen from a third party. Unauthorised use of another’s original work can result in an injunction being imposed (preventing use of that work) or an award for damages being granted.

Managing the legal risks
Legal risk can be managed by:

  • carefully planning your crowdsourcing project and having a well documented strategy;
  • having properly prepared legal contracts;
  • maintaining a clear record of your development process to assist to protect against claims of copyright infringement; and
  • limiting the number of staff who may access submissions belonging to participants.

Working with internal teams and legal advisors means the benefits of crowdsourcing can be fully realised. But, failure to do so can result in not just legal consequences, but irreparable damage to your brand.