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3 Lessons You Can Learn about Copyright & IP from a Startup Founder Who Got Screwed Over by Innovation Exchange (IX) & The Clorox Company in a $45K Open Innovation Challenge

Innovation Exchange Logo FinalClorox FinalYou might think the founder of a startup that helps creatives, freelancers and their clients transfer copyright and intellectual property ownership online would have no problem when it comes to transferring IP rights to his own work to someone else, but you would be wrong.

As Kunvay’s founder, I know exactly what it’s like to run into problems transferring ownership of my work to someone else while getting paid fairly for my contributions.

Transferring and acquiring ownership rights to knowledge work is complex and can be frustrating to administrate.

In this post, you’ll learn three important lessons I learned from a recent experience that could be of benefit to you as well.

So let’s begin . . .

I’ve always been a fan of open innovation and crowdsourcing ever since reading Dan Tapscott’s book, Wikinomics.

No matter how big your organization is (whether you’re a boutique creative studio or Procter & Gamble), there are more smart people outside your organization than inside your organization so why not benefit from ideas and perspectives from the outside?

Today many companies routinely acquire solutions to business problems created by people outside their organization giving rise to intermediary companies like Innocentive and Innovation Exchange (IX) that provide a platform to outsource business challenges to the proverbial crowd.

These intermediaries consult with companies on business problems and then present those business problems in the form of sponsored challenges to solvers like you and me to solve. If a company likes your solution they award you a prize, and you transfer IP rights to your solution to the company.

Inspired by stories of everyday people successfully participating in open innovation challenges hosted by major companies, I decided to give it a try myself and submitted solutions to challenges hosted by Innovation Exchange. Innovation Exchange has a really great selection of challenges that are easy to access and fun to work on:

Below are a few challenges to which I submitted solutions:

  • Medication Reminder for Seniors – What if you had a new idea for a package for pills that could help seniors know whether they had taken their medication or not? (Prize: $60,000)
  • Elevate the At-Home Coffee Experience in an Instant – What if you could add more fun to preparing or drinking your coffee at-home? (Prize: $60,000)
  • Create the Advertising Campaign for a Small Sized Car – What if you could use someone’s love for music to persuade them to buy a car? (Prize: $65,000)

C’mon, don’t these challenges seem really interesting?

Well, I submitted a solution to the Innovation Exchange challenge below on July 22, 2011:

  • Design a New Cleaning Product for Electronic Devices – What if you could come up with a design for a new cleaning product for electronic devices that made cleaning the device safe AND made it a compelling and addictive experience for consumers? (Prize: $45,000)

Innovation Exchange ChallengeAdmittedly, the chances of submitting a winning solution are miniscule and few and far between (of course everyone knows that), but it’s still exciting to work on challenges outside the rhythm of one’s regular work experience. So why else spend two to three weeks developing entries to submit to challenges when the likelihood of success is so small?

Yes, I’d love to win the prize money, but that’s not all of it. I also wanted the recognition and external validation that my ideas and work have value (to someone else besides me).

So you can imagine when I saw an email from the COO and Co-Founder of Innovation Exchange, Brynly Hawkins, in my inbox on May 23, 2012 informing me a challenge sponsor wanted to acquire my solution, I was quite elated!

That elation would be short lived.

While the challenge sponsor liked my solution they chose to award the $45,000 prize to another solver whose solution they liked more. However, the challenge sponsor was also interested in acquiring my solution as well and offered me $1,000 to acquire it.

Why would a Fortune 500 company wanting to acquire product solutions for a multi-million dollar market not want to hedge their bets and buy up multiple solutions to potentially choose from and execute on in the future. I’d do the same if I were in their position, but for only $1,000?

Not having my solution chosen would have been what I expected as the default outcome of participating in a challenge. If my solution wasn’t valuable – why offer prize money at all?

Provisional Innovation Exchange Winner

I emailed Brynly and asked if he could go back to the client and negotiate an award of $10,000 for my solution instead. Being a winner-up wouldn’t feel so bad if my earnings were closer to that of an actual “winner.”

Soon after I was told that the $1,000 prize offered was final, and that I could take it or leave it.

Ultimately, I relented.

I’m an optimistic guy but also a realist. At the end of the day $1,000 is better than $0.

I signed the contract assigning intellectual property rights to my solution over to the challenge sponsor and returned it via email to Innovation Exchange on May 31, 2012. According to the contract I would be paid $1,000 within two weeks of Innovation Exchange receiving the prize money from the challenge sponsor. Time to celebrate – Woo-Hoo!

When submitting a solution to a challenge you never know the identity of the company sponsoring the challenge, but the contract I signed revealed this detail.

The company sponsoring the Innovation Exchange challenge was The Clorox Company.

Boy, did this whole experience not leave me feeling Clorox clean.

Curiosity now piqued, I wanted to learn more about Innovation Exchange’s business model given the caliber of client to whom they catered.

I learned from a case study outlining their business model that in addition to consulting fees charged to companies sponsoring challenges, Innovation Exchange also receives a success fee representing 75% of an overall challenge award (see video at 1:17 point). So in the case of this $45,000 challenge Innovation Exchange would also receive a success fee of $33,750.

My $1,000 prize award was suddenly beginning to look and feel quite small.

I convinced myself that after depositing $1,000 in winnings I would feel better; this was early confirmation of being on the right track. This experience would motivate me to submit solutions to future challenges and one day win the big prize.

But then something completely unanticipated and utterly unexpected happened.

I never received the $1,000 prize award.

Having submitted all the required paperwork, I followed up with Brynly 16 weeks later on September 25, 2012 to find out where everything was in process. I was told that the summer had slowed things down, but that everything should be wrapped up in a “few weeks.” (See full history my email exchanges here).

Perfectly understandable, I told myself at the time. I’m patient.

And then another 16 weeks went by . . .

I reached out to Brynly again via email on January 16, 2013 since I hadn’t heard anything and hadn’t received my prize award. Two weeks later

on February 2, 2013 he wrote back and apologized for having been out due to illness. He explained that the last he’d heard The Clorox Company was waiting on their 2013 budget to make the award payout.

Ok, not ideal but understandable. I’m patient.

Then another 16 weeks went by . . .

This time I reached out via email to Innovation’s Exchange’s CEO and other Co-Founder, Stephen Benson, on May 4, 2013 not knowing the state of Brynly’s health or possible sick leave, and asked if he could be of assistance.

I was encouraged when he wrote back almost immediately and apologized for the delay in dealing with my situation, noting that sometimes there are delays in award payouts since Innovation Exchange acts as an intermediary between the companies that sponsor challenges and the winning solvers.

Stephen also shared that Brynly, the COO, was the client contact and that he himself had little knowledge of the status of the project, but that he’d bring himself up to speed on my situation and provide whatever assistance he could as CEO.

Whew, OK.

The CEO and other Co-Founder is on it now; finally things are going to get moving in the right direction. I’m patient.

And then 14 weeks went by . . .

I emailed Stephen to check in and find out if there was any update on August 14, 2013.

No response.

Email-to-Stephen-Benson

Two weeks later I emailed Brynly on September 2, 2013 to find out if there was any update – perhaps something had happened to Stephen – maybe Stephen was no longer CEO.

No response.

One week later on September 11, 2013 I emailed Stephen again.

No response.

Finally, one day later I emailed Brynly and Stephen together on September 12, 2013 and asked if either of them could give me a status update as I was beginning to worry.

After all, as of that day it had been over a year since I submitted all my required paperwork, and over two years since I’d submitted my original entry for consideration by the challenge sponsor, The Clorox Company.

Given my repeated attempts to get an update, and hearing absolutely nothing back in return, I can only conclude one thing.

I’ve been screwed over by Innovation Exchange and The Clorox Company.

No response = No trust.

At the end of the day, I still own the intellectual property to my submission since I was never paid, but the whole situation made me think about larger issues related to intellectual property ownership transfer and fairness.

Below are 3 important lessons I learned through my experience that could be of benefit to you as well.

Lesson 1: Copyright & intellectual property intake management is difficult for companies both large and small to handle. Size doesn’t matter; it’s just hard.

Companies both large and small have trouble managing the intake and acquisition of intellectual property, even when intellectual property is the key asset on which they make their profits.

Especially as more and more people within organizations have routine responsibility for acquiring IP assets from the outside, the IP intake management needs of many organizations often exceeds their ability to effectively address this need.

If The Clorox Company and Innovation Exchange have trouble managing the transfer of IP assets, through their organizations, woes-be to the small business trying to acquire ownership rights to simple assets one often outsources the creation of such as design work, photography or written content.

Do I think someone at The Clorox Company headquarters has it in for me personally?

No. But I do think my situation illustrates how difficult it is for organizations to manage the intake of intellectual property assets in general.

Do I think someone at Innovation Exchange has it in for me personally?

No. But I think it’s clear that someone somewhere dropped the ball and that going back to The Clorox Company to try to remedy the situation is not something Innovation Exchange is interested in doing.

Copyright Symbol FinishedLesson 2: Connecting copyright & IP ownership transfer to payment helps keep everyone honest (particularly if you don’t know each other very well)

Connecting IP rights ownership transfer to payment helps clarify who owns what and when. In my particular case IP rights transfer was directly connected to payment.

Since no payment was ever made, there has been no official delivery and transfer of IP ownership.

I still own my work, and own my future because I’m still control of when and under what circumstances I transfer ownership of my work to someone else.

While a contract does not guarantee one will get paid (as my experience illustrates) it certainly increases the likelihood that one will be, and it’s certainly better than having no contract to fall back on at all.

At the least a contract captures a mutual understanding between two parties at one moment in time. And we all know the weakest ink is superior to the most vivid of memories.

Plus, connecting copyright ownership transfer and payment helps level the playing field when the financial and legal resources available to parties is uneven and David and Goliath both take to the same playing field.

Lesson 3: Crowdsourcing & open innovation require the trust of its ecosystem’s members to be successful.

Crowdsourcing and open innovation have the potential to benefit society in many positive and meaningful ways, but this potential can only be realized successfully when it is built on a foundation of trust.

Members of an ecosystem will not volunteer their contributions if there is not an atmosphere of trust, transparency and fairness with how members’ contributions are treated.

People will be open and honest with you, if you are open and honest with them regardless of the news you have to share.

Non-communication is a communication within itself, and certainly not a healthy one for a platform that relies on the contributions of its ecosystem’s members to succeed.

While it pains me to say it, I don’t trust Innovation Exchange anymore (and I wanted to believe in them); they have lost my trust.

Part of me wonders why I was so trusting in the first place. Was it the stature of the challenge sponsors? Was it the prize award? Was it my need for external validation? The answer probably involves a combination of all three.

But I’m not giving up on open innovation, and I hope you won’t either.

Let’s make the world safe for creativity and open innovation.

If you’ve participated in an open innovation challenge, I’d love to know more about your experience. Your comments welcome below.

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About the Author: Reggie Solomon is the Founder of Kunvay which helps creatives, freelancers and their clients transfer copyright and intellectual property online with documented assurance so you can own your work and own your future. Reggie holds a BA in Political Science and Sociology from Yale University and a Master in Public Policy with a specialization in Business-Government policy from the Harvard Kennedy School.