FTC charges various invention promotion companies with contempt
March 21, 2007
The Federal Trade Commission (FTC) has filed contempt charges against several companies and individuals who had been found to be swindling inventors under the guise of providing so-called "invention promotion services." In 1998, the U.S. District Court for the Eastern District of Virginia entered an order preventing these individuals and companies from fraudulenty promoting:
  • the likelihood that their invention promotion services will result in financial gain for any customer;
  • the defendants' past success in assisting their customers to market their inventions;
  • that the defendants assess or evaluate the market potential, patentability, technical feasibility, or merit of ideas submitted by customers;
  • that the defendants make money from royalties generated by defendants' customers; and
  • the amount of royalties received by defendants' customers.
In addition, they had to pay $250,000 to a restitution fund to reimburse those swindled by their schemes. This was part of the FTC's "Project Mousetrap," a coordinated sting between both federal and state agencies to clamp down on fraudulent invention promotion schemes. The court order apparently did not deter these scammers, however. In 2000, using a new company, "Patent and Trademark Institute of America" (PTI), these individuals apparently once again resumed their fraudulent behavior. They would charge between $895 and $1,295 for an "evaluation" of marketability and patentability of an idea, and another $5,000 to $45,000 for legal services including licenses of the invention, as well as help finding licensees and earning royalties. Unfortunately, the scammers never actually found any licensees, and never did many of the other things they promised to do. The court placed the scammers' assets in receivership, and according to the receiver, PTI collected over $60 million in fees from over 17,000 inventors between 2000 and 2006, but could not identify a single successful inventor. The contempt proceedings against these scammers before the Eastern District of Virginia have been sealed, but the case number is 1:97-cv-01114-GBL-TCB. The parties will be appearing in court on April 30 for a three-day hearing on the contempt charges. Click below for a list of various resources available to inventors and disclosure requirements of invention promotion firms.Both the USPTO and the FTC have resources available to help identify and avoid invention promotion scams. The USPTO has a brochure about such scams here, as well as a list of complaints it has received about invention promotion companies (as well as the companies' responses, if submitted) here. Both of these can be reached via the USPTO's Inventor Resources page. The FTC also has a list of tips to spot these fraudulent schemes here. In addition, the American Inventors Protection Act of 1999 requires invention promotion firms to make certain disclosures to inventors before entering into a contract with an inventor. These include:
  • how many inventions it has evaluated,
  • how many of those inventions got positive or negative evaluations,
  • its total number of customers,
  • how many of those customers received a net profit from the promoter's services,
  • how many of those customers have licensed their inventions due to the promoter's services, and
  • the names and addresses of all invention promotion companies they have been affiliated with over the past 10 years.
With this information, you can consult the USPTO complaint website to determine whether complaints have been filed against the company in the past, even if they formerly used another name. You can also determine how successful the promotion company has been to determine whether you want to deal with that company. Above all, knowing your rights will help scare off scammers, because an informed consumer is their enemy.
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