Patents as Signals of Quality in Crowdfunding

Patents and crowdfunding both attempt to foster early stage innova-tions. In theory, patents signal quality and value to attract investment and buyers and ultimately facilitate commercialization. Crowdfunding allows multiple individuals to make small contributions to finance start-up ven-tures. This Article reports on two related studies investigating the interac-tion between these two innovation tools by determining the impact of a crowdfunding campaign’s patent status on the campaign’s success and de-livery. The first study examines 9,184 Kickstarter campaigns in patent-eli-gible categories to determine whether patented or patent-pending labeled projects are more likely to reach their funding goal and in turn achieve actual, on-time delivery when compared to non-patented projects. This studyfinds, perhaps surprisingly, that patented projects are not more likely to obtain funding compared to non-patented ones. In contrast, patent-pend-ing projects are more successful in getting funded. The second study con-firms this preference for patent-pending projects but not patented ones through a series of laboratory experiments on Amazon Mechanical Turk (“MTurk”). The MTurk results also indicate that patent-pending status, as compared to patented status, is more likely to be noticed by potential back-ers and an identified reason for such backers to invest and buy crowdfunded products. These results provide insight into whether patents (1) act as sig-nals to attract funding and buyers,and (2) assist in commercialization in the crowdfunding context. These results also inform the proper focus of pa-tent marking statutes