Invention promotion firm

An invention promotion firm or invention submission corporation provides services to inventors to help them develop or market their inventions.[1] These firms may offer to evaluate the patentability of inventions, file patent applications and license them to manufacturers, build prototypes, and market inventions. They are distinguished from more conventional consulting firms and law firms offering the same or similar services in that they market their services primarily to amateur inventors through the mass media.[2]

The US government estimates that there are hundreds of companies offer invention-promotion services and that "virtually all of them are either ineffective or outright fraudulent." An official at the U.S. Patent and Trademark Office "says he believes there are fewer than a half-dozen legitimate invention promoters in the country." [3]

Performance

Accurate statistics of the success rate of invention promotion firms is difficult to come by. Nonetheless, as a result of certain legal actions taken against some of these firms, overall success rates have come to light. One such firm, Davison Associates, disclosed that of 900 ideas where a client had a prototype built of their invention at an average cost of $11,000, only 30 of those inventions were licensed within 6 months. Of the inventions licensed, only 10 made more in license fees than the cost of the invention promotion services.[4]

Sources of revenue

Invention promotion firms generally make their money from fees charged to clients for services. These fees normally must be paid up front and a customer may be told that they may have very little time, such as three days or less, in order to make a decision. Invention promotion firms may also receive a portion of their fees as a share of the royalty that an inventor earns on his or her invention. The total fraction of an invention promotion firm’s revenue obtained from royalties, however, may be less than 1%.[4]

US legal protections for inventors

After a massive fraud was being launched by a significant amount of invention promotion companies[5] the 1999 American Inventors Protection Act (AIPA) established disclosure requirements for invention promotion firms. These disclosure requirements include:

The American Inventors Protection Act also provides civil penalties that can be assessed against invention promotion firms engaged in fraudulent or deceptive practices, defined by the FTC as "invention promotion scams".[6]

The USPTO and the FTC both provide guidelines for finding legitimate invention development, prototyping and promotion firms, that comply with the AIPA.

Legal actions against invention promotion firms

Project Mousetrap

In 1997, the United States Federal Trade Commission launched “Project Mousetrap” to identify, prosecute and fine firms engaged in fraudulent or deceptive practices, in what was alleged as a massive fraud by a significant amount of invention promotion firms.[5]

Aftermath

In 1998 all of the accused parties except one settled with the FTC and a $250,000 redress fund was set up for inventors taken in by the firms.[3] In 2006, judgment was rendered against Davison & Associates.[7] They were fined $US 26 million to be used to compensate defrauded clients.[8] Davison appealed the judgment,and then settled with the FTC for $10.7 million in 2008.[9]

Public posting of complaints against invention promotion firms

The United States Patent and Trademark Office (USPTO) posts complaints online from dissatisfied clients of invention promotion firms and provides an opportunity for invention promotion firms to respond to the complaints. The USPTO, however, does not investigate the validity of any of the complaints or responses.[10]

Guidelines for identifying unscrupulous firms

Both the USPTO and the US Federal Trade Commission[11][12] publish guidelines on how inventors can better determine if an invention promotion firm is scrupulous or not. Signs of an unscrupulous invention promotion firm include:

See also

References

  1. ↑ 35 USC 297(c) Definitions of invention promoter
  2. ↑ Contact the USPTO before you get burned! Advice from the USPTO concerning Invention promoters
  3. 1 2 Stout, Hilary "Redress Readies for Victims Of Invention-Promotion Scam", Wall Street Journal, 1 December 1998
  4. 1 2 FEDERAL TRADE COMM v. DAVISON & ASSOCIATES, et al., FINDINGS OF FACT AND CONCLUSIONS OF LAW. Signed by Judge Gary L. Lancaster on 3/17/06. pages 6 & 8
  5. 1 2 "FTC/STATE 'PROJECT MOUSETRAP' SNARES INVENTION PROMOTION INDUSTRY", US Federal Trade Commission, Press Release July 1997
  6. ↑ "Court halts bogus invention promotion firm claims" FTC press release 19 April 2006
  7. ↑ Order of Final Judgment, Fed. Trade Comm’n v. Davison & Assocs., No. CV 97-1278-GLL (W.D. Pa. Mar. 17, 2006) (Lancaster, J.).
  8. ↑ Kim Leonard, "Firm to pay $26 Million", Tribune-Review, 26 March 2006
  9. ↑ Kim Leonard, "O'Hara invention promoter, FTC settle case for $10.7 million" - Pittsburgh Tribune-Review, 14 July 2008.
  10. ↑ The USPTO public forum for invention promoters/promotion firm complaints and responses
  11. ↑ FTC Consumer Alert: Spotting Sweet-Sounding Promises of Fraudulent Invention Promotion Firms, FTC publication, October 2003.
  12. ↑ FTC Facts for Consumers: Invention Promotion Firms
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