Crowdsourcing - a great concept but are you aware of the legal risks?

13 May 2013

Crowdsourcing is, as its name suggests, outsourcing work to a crowd. Crowdsourcing is not to be confused with crowdfunding, which is raising capital from a crowd. 

The most famous example of crowdsourcing is Wikipedia which, unless you have been living in a cave, you will have heard of.  Wikipedia relies on the public populating the online encyclopaedia and has proven incredibly effective.  In the world of work, the possibilities are endless.  Crowdsourcing is often used by graphic designers although Walmart (owners of Asda), is reportedly considering encouraging store customers to deliver goods to those who have ordered online who live on their route home in exchange for a discount on their food shop, instead of outsourcing delivery to a single third party such as Ocado.

The advantages of crowdsourcing are the level of choice and the talent and the creativity to which it gives you access. It can also be a lot faster and lead to higher quality work as people are competing against each other (as humans, we all want to win after all).  The disadvantages include the amount of responses through which you may have to wade and the potential legal pitfalls of the process, as discussed below.  A word of caution, make sure your work spec is crystal clear before you attempt to crowdsource as it can be incredibly frustrating for all those involved in the process if it is not.

The main legal pitfall in crowdsourcing relates to the ownership of the intellectual property (IP) rights in the sourced work.  How do you know that all the work product proffered is original and not stolen from a third party?  This is important because if you end up sourcing a product, some of the IP rights in which belong to a third party that has not consented to their use, you may end up facing an injunction and/or a  claim for damages.  Fines and prison sentences are also on the agenda.  You will need to include appropriate warranties and indemnities in your contracts with the contributors. However, in reality, these may not provide you with effective protection if a disgruntled third party IP Rights owner decides to take action against you.

Beware the ides of open source.  Generally speaking, open source is the friend of developers, cutting development effort and time but the enemy of those who commission the work as they will end up with parts of their product being subject to open source governing licences many of which contain adverse provisions regarding IP rights ownership which may affect not just those parts of the development which incorporate open source code.

Even if there are no third party ownership issues, you need to ensure that your contract with your contributors assign the relevant IP rights to you.  This is  because when working with contractors, it will be the contractor who owns the IP rights unless the contract provides to the contrary.  This can be further complicated if the contributors are not based in the UK and foreign legal provisions come into play.

There is also the danger that a disgruntled, unsuccessful crowdsourcing entrant brings a claim for copyright infringement against a company who ran a crowdsourcing exercise claiming that the company is using his or her response without permission.  This may be because the winning entry was similar (there was a job spec after all) or because the company has developed a similar idea independently.

So, how do you protect yourself as a business? Well first of all, if you like a response and want to use it, buy it and the IP rights that go with it.  Once you have done that, you should be able to use it freely.  But, in any event, beware the open source and third  party demons mentioned above.

Also, you should maintain a clear record of your own development process so as to be able to fend of any claims of copyright infringement.  You also need to ensure that the staff involved in the crowdsourcing exercise all understand the legal issues surrounding it.  They should understand the consequences of misusing crowdsourced designs and ideas and all the IP Rights issues which crowdsourcing entails.

So, in summary, use crowdsourcing (is it not after all, capitalism at its best?) but make sure you understand the IP issues involved before you do so.  Now you’d expect me to say this but do get appropriate legal advice!

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