The Legalities & Ethics Behind Crowdsourcing

With the internet reaching new levels of ubiquity around the globe, companies are increasingly embracing the opportunities that a massive, interconnected audience can offer. But while technology evolves rapidly, it far outpaces the evolution of applicable law, creating uncertainty and potentially exposing individuals and companies they never anticipated would exist. One particular area which may create problems for businesses is crowdsourcing.

Crowdsourcing — a method of gathering content, services, or ideas from third parties rather than creating them in-house — is a practice that has grown exponentially over the course of a few short years, and offers much promise for businesses. But it can also create legal and ethical problems where intellectual property is concerned.

Legal Issues

The most significant area of legal concern with respect to crowdsourcing is copyright law. In the United States, unless an agreement states otherwise, copyright in creative material belongs to those who create it. But those who contribute to crowdsourcing may not know that, and the company soliciting the content may act as though it is the sole copyright holder, exercising rights that legally belong to the creator. This could expose the company to liability for copyright infringement.

Liability also may arise from the use of crowdsourced material if the company does not check to make sure the material submitted is not copied from another source. If an eager crowdsourcing participant appropriates already-existing, copyrighted content, the company who uses it second-hand will be exposed to infringement liability. This can be very costly, especially if multiple pieces of crowdsourced work are already copyrighted.

Ethical Issues

In addition to concrete legal issues, more nebulous ethical issues can also arise. These are often the result of companies who fail to take into account the perspective of the participants in crowdsourcing, who may not view the activity as a profit-driven effort but rather a way to interact with fans of a brand and give them a chance to influence the company.

Where the audience sees a kind-hearted, good-faith effort at interaction and give-and-take, and the company simply sees a source of very inexpensive or free labor, the mismatch can lead to ethical problems. Chief among them is the risk that a business is willingly exploiting its most dedicated fans, who may not even realize that they are simply being used for their efforts. These fans might not understand that they are not only working without pay, but allowing the crowdsourcing company to produce a significant profit as a result.

Additionally, ethical issues may be particularly thorny where companies do not make clear the connection between the crowdsourcing effort and the company’s end goal. If a business tries to conceal the fact that it is going to be using crowdsourced material for profit, that deception reflects very poorly on the company’s sense of ethics. And once this deception is exposed — and in the internet era, that is typically a certainty — the shady, unethical behavior can create a public relations disaster. That, in turn, can lead not only to short term reductions in profits but a long term, negative impact on the company’s reputation with customers.

While crowdsourcing can seem like a blessing, it is important for companies to operate above-board and be diligent to prevent potential problems.

Charles Butler is a retired lawyer with a strong passion for blogging in his spare time. He enjoys sharing tips on finance, law, and entrepreneurship, and enjoys reading articles from to stay informed.

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