Quirky Patent Deals Transfer Inventor’s Ownership of Ideas

Quirky Patent Policy

Quirky LogoWe recently learned about a company called Quirky.  In short, Quirky encourages inventors to disclose their ideas in exchange for a share of the profits arising from the commercial product.

According to Quirky’s mission, “we make invention accessible. We believe the best ideas in the world aren’t actually in the world… they’re locked inside people’s heads. We exist to solve that problem.”

For a startup or individual inventor, Quirky seems attractive for two reasons:

  1. First, an inventor doesn’t need to diligently pursue developing the idea. According to Quirky’s website, “[i]t doesn’t matter if it’s a little doodle, a crazy chemical formula, or a “wouldn’t it be cool if…”, sharing your idea is the first step toward bringing your idea to life.”
  2. Second, the entire experience is designed to be very nurturing—sort of like crowdsourcing product development.  The community helps develop the world’s next great idea.  Everyone who contributes to an idea is rewarded.  But no one really needs to do anything that they don’t want to do.

How it works: Share your idea with Quirky

Quirky actively encourages inventors to join it’s community and share ideas.  An inventor submits an idea to Quirky.  Then, the community decides which ideas should move forward through various stages of development.  For successfully developed commercial products, the royalties are shared with the community.  The end result?  According to Quirky, “the world prospers.”

Quirky paints a picture of communal idea development.

Quirky’s communal vision for crowdsourcing innovation: Raise your hand; Help; Influence; Make it real.

Does Quirky seem to good to be true?

At first glance, Quirky seems like a nurturing environment for inventors—an organization that selflessly fosters innovation. But, there is a catch.  A big catch.  The inventor gives away all rights to the intellectual property.  According to Forbes Magazine: “If you’re a serious inventor you’d have to be desperate to go for a deal like this.

Here is Quirky’s response to this seemingly one-sided deal: “99% of the people in the world don’t have the ability to develop and market a product idea…and those are really the people Quirky is for.  If you are part of the 1% with the ability to manufacture or license a product idea, then Quirky may not be the best option for you.”

You give your idea away to Quirky

Intellectual property is exactly as it sounds.  It is property, just like land, houses, cars, etc.  Accordingly, transferring ownership of intellectual property is akin to transferring title to tangible property.  Ownership changes hands.

In the United States the inventor starts off by owning 100% of his or her invention.  This natural right rewards creating the idea.  Accordingly, the inventor owns 100% of the patent—100% of the property.

Working with Quirky requires transferring 100% of this ownership to Quirky Inc.  In exchange, the inventor receives access to the community, which provides help developing the idea.  The inventor also receives a small percentage of future product revenue.  Returning to the land analogy (above), cutting a deal with Quirky is akin to giving your home away in exchange for help renovating it and a percentage of the future rental income.

Unlike this image, Quirky does not share ownership with the inventor - Quirky owns all of the invention

Unlike this image, Quirky does not share ownership with the inventor – they take all of the invention

Quirky owns your idea

According to Quirky’s intellectual property policy, “by submitting your idea to Quirky, you grant a license in all IP in the submission to Quirky…. you assign ownership in all IP in the submission to Quirky.”  Just to be clear, “In all cases the listed inventors assign ownership of all patent rights to Quirky.

Some critics have asked, “Why does Quirky need to own all IP in idea submissions accepted for further development? Is this negotiable?”  Quirky responds by repeating that it will take all of the intellectual property: “In order to successfully develop and commercialize a product, Quirky must devote significant resources and accept exposure to a multitude of legal risks. Quirky cannot sustain this level of investment and risk taking without having the ability to control the exploitation of IP embodied in its products.”

Not true.  There are virtually limitless ways to exercise control over assets without transferring ownership of the property.  For example, a contract.  For illustration, the managing partner of a multi-member company controls the company but probably does not own all of it.

Quirky reward the inventor with a piece of a piece of the pie

By giving all ownership of the invention away, what does the inventor stand to gain?

Quirky allocates the royalties that an inventor receives based on it's "influence engine."

Quirky allocates the royalties that an inventor receives based on it’s “influence engine.”

This question is also answered on Quirky’s webpage: “In return for ownership of IP in a commercialized product, Quirky pays the contributing user a perpetual royalty commensurate with the degree of contribution.” “We calculate royalties using our influence engine.”  This “influence engine” determines which users receive a portion of the royalties when Quirky shares net sales income with the community.  That income is shared at two rates:

• 30% of income from sales directly to consumers through the Quirky.com shop.
• 10% of income from wholesales to retailers.

Accordingly, an inventor gives Quirky 100% ownership of the invention.  Then, Quirky pays the inventor some share of 10-30% of the income, depending on the inventor’s “degree of contribution” as determined by the “influence engine.”

An Alternative to Giving Away Your Invention

Instead of giving all of an invention to Quirky, and Inventor could sell part of it

Instead of giving all of an invention to Quirky, and Inventor could sell part of it

In the United States, inventors are entitled to own 100% of their inventions.  The US government comes up with 100% ownership without an “influence engine” by recognizing that the invention would not exist but for the genius of the inventor.  An inventor can protect this 100% ownership of the invention by drafting a patent application and filing it with the United States Patent and Trademark Office.

After filing a patent application, the inventor can search for investors to help cover the costs of developing the invention.  Depending on the size of the investment, the inventor may have to sell some of the company.  These negotiations provide all of the material for ABC’s hit television show Shark Tank.  (Notably, investors will not entertain conversations with inventors who give away all of the rights to their invention).

5 Responses to “Quirky Patent Deals Transfer Inventor’s Ownership of Ideas”

  1. Mark Witinski says:

    Andrew,
    Great column. I’ve always wondered what sort of terms you get with a system like Quirky. (And it bears mentioning that there are several others, although I haven’t checked if they all work in the same way).
    But I think for SOME people this still might be an interesting idea. Picture the rural tinkerer or farmer who has a really valuable idea – like a better combine or something (Wow I know so little about farming…). What venues are available to this person? The ‘reputable’ VC firms are on the coasts or perhaps RTP or Austin. So even if this person DOES have the foresight and systems knowledge to follow what I assume would be your advise and they file a provisional, how to they get access to commercialization resources not that the provisional is filed? If they lollygag and wait a while until their Utility becomes public, someone big will surely screw them by boxing them in.
    So I’m interested in what you would advise this person?

    Also, what are your thoughts on how ‘first to file’ changes things for the everyday inventor. We coastal types got plenty of warning and transitioned all thinking accordingly. But if you were new to the game you might not KNOW that your prototype and notes are worth a damn!

    Again, great work and I always enjoy your column.

    Mark

  2. Andrew Chadeayne says:

    Hi Mark –
    Thanks for your great comments. These are hard questions because of the uncertainty surrounding whether the invention at issue will actually be valuable. Assuming that the invention IS valuable, I think it is fair to say that an inventor with a provisional patent application in hand should be able to connect with an equity partner. However, since the patent work is an up-front cost, that investment is at risk if the invention fails–either in practice or in the marketplace.

    In the hypothetical that you present (an inventor who’s published utility application is used by a later competitor), I think the inventor is in a much much better situation for having filed the application. Here, the invention is valuable–at least to that hypothetical competitor. Accordingly, the inventor should be able to monetize the IP right away, for example by selling or licensing it to that competitor. The competitor would have much more to gain from buying the rights to the invention rather than using it’s resources to “box in” the original inventor.

    Regarding the “first to file” issues that you raise, I think that one important thing to keep in mind is that that patent is awarded to the first INVENTOR to file. The rule certainly incentivizes rapid filing—to avoid another INVENTOR filing first. But, at least in theory, an inventor should not worry about someone stealing the invention, filing an application and claiming the inventor’s work as their own. Of course, there are often disputes over thought of the idea first– which is why, again, it is a good idea to file a provisional patent application immediately after conceiving of the invention.

  3. woes says:

    What benefit to the inventor WHEN quirky sells the IP from THEIR portfollio? contractually irrevocable?

  4. Andrea says:

    Hi Andrew- Glad to find your article.

    Quirky is working through another community-sharing type company to reel in naive would-be inventors. An online subscription “education” site (that seemed above board, until this) sent out a “New Class with Quirky on Industrial Design” promo email today. The instructor works for Quirky, the class objective is producing a detailed product design concept and sketch, and the final “lesson” step is to submit one’s sketch to Quirky. No upfront fyi or disclosure of Quirky’s approach to IP.

    Does this seem to violate anything enforceable, e.g. legally?

    Andrea

  5. Sow says:

    What I dont get is – once you disclose your idea to the public is automatically NOT patentable so if someone pushes the idea to quirky’s forum or as such then even Quirky can’t technically patent it, right?

    Or do you first give the idea to them directly (for which they apply a provisional) and then the community works on it further?

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