Invention promotion firm
An invention promotion firm or invention submission corporation provides services to inventors to help them develop or market their inventions. 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.
Many inventors have been dissatisfied with the services they have received from invention promotion firms.
- 1 Performance
- 2 Sources of revenue
- 3 US legal protections for inventors
- 4 Legal actions against invention promotion firms
- 5 Public posting of complaints against invention promotion firms
- 6 Defense of invention promotion firms
- 7 Guidelines for identifying unscrupulous firms
- 8 See also
- 9 References
- 10 External links
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.
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%.
US legal protections for inventors
After a massive fraud was being launched by a significant amount of invention promotion companies the 1999 American Inventors Protection Act (AIPA) established disclosure requirements for invention promotion firms. These disclosure requirements include:
- the total number of inventions evaluated by the invention promoter for commercial potential in the past 5 years, as well as the number of those inventions that received positive evaluations, and the number of those inventions that received negative evaluations;
- the total number of customers who have contracted with the invention promoter in the past 5 years, not including customers who have purchased trade show services, research, advertising, or other nonmarketing services from the invention promoter, or who have defaulted in their payment to the invention promoter;
- the total number of customers known by the invention promoter to have received a net financial profit as a direct result of the invention promotion services provided by such invention promoter;
- the total number of customers known by the invention promoter to have received license agreements for their inventions as a direct result of the invention promotion services provided by such invention promoter; and
- the names and addresses of all previous invention promotion companies with which the invention promoter or its officers have collectively or individually been affiliated in the previous 10 years.
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".
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
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 then defined as a massive fraud by a significant amount of invention promotion firms, and defined by the FTC as an 'invention scam' Actions were brought against:
- International Product Design, Inc., The Innovation Center, Inc., and the National Idea Center, Inc., all of which were headquartered in Washington, D.C. and preceded the following four firms: American Invention Associates, Inc. headquartered in Miami, Florida; Invention Consultants, USA, Inc. of Philadelphia, Pennsylvania; New Products of America, Inc., of Atlanta, Georgia; International Licensing Corporation, Inc. of Reston, Virginia; and Azure Communications, Inc., of Reston, Virginia, doing business as London Communications, Inc. and which is the corporate headquarters of the four successor firms; and officers of one or more of the companies.
- National Idea Network, Inc., doing business as The Concept Network out of Indiana and Wexford, Pennsylvania; CEO and President, Executive Vice President, and Senior Marketing Representative.
- Davison & Associates, Inc., of Oakmont and Indianola, Pennsylvania; President and CEO, and sales associate. Davison Associates now operates under the name "Davison Design and Development".
- National Invention Services, Inc. (New Jersey Corporation) ("NISI"). NISI was ordered to pay $745,000 in damages.
- Eureka Solutions International, Inc. and OEM Communications, both doing business out of the West Pittsburgh Expo Mart in Monroeville, Pennsylvania; President and founder, and sales representative.
In 2006, judgment was rendered against Davison & Associates. They were fined $US 26 million to be used to compensate defrauded clients. Davison appealed the judgment, and then settled with the FTC for $10.7 million in cash, real estate and investment assets. but the FTC warnings and rule of action from 2006 remain online.
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.
Defense of invention promotion firms
Many invention promotion firms vigorously oppose their characterization as being dishonest or unethical. They allege that most of their criticism comes from a small number of vocal opponents and further allege that overall they have a high customer satisfaction rate.
Guidelines for identifying unscrupulous firms
Both the USPTO and the US Federal Trade Commission 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:
- Exaggerated claims about the market potential of the invention
- Refusal to offer advice in writing
- Request for money immediately and upfront.
- Intellectual property brokering
- Scams in intellectual property
- Service Corps of Retired Executives (SCORE)
- 35 USC 297(c) Definitions of invention promoter
- Contact the USPTO before you get burned! Advice from the USPTO concerning Invention promoters
- Invention Submission Companies
- 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. page 8
- 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. page 6
- FTC on Operation MouseTrap
- Court halts bogus invention promotion firm claims
- ‘’ FTC/STATE "PROJECT MOUSETRAP" SNARES INVENTION PROMOTION INDUSTRY, US Federal Trade Commission, Press Release July 1997
- FTC Charges Invention Promotion Swindlers with Contempt
- National Idea Network, Inc
- Ftc V. Davison & Associates, Inc
- FTC v. National Invention Services, Inc
- New Jersey Invention Promotion Firm Settles FTC Charges
- Eureka Solutions International, Inc
- Global Patent Research Services, Inc
- Federal Trade Commission v. Global Patent Research Services, Inc., doing business as Global Development Services, Inc., and Kenneth A. Rogers
- Order of Final Judgment, Fed. Trade Comm’n v. Davison & Assocs., No. CV 97-1278-GLL (W.D. Pa. Mar. 17, 2006) (Lancaster, J.).
- FTC vs. Davison & Associates (Davison Design and Development) Decided, The Invent Blog, March 17, 2006
- FTC v. Davison & Assocs., No. 06-2907 (3rd Cir. June 5, 2006) (appeal pending)
- http://www.pittsburghlive.com/x/pittsburghtrib/business/s_577525.html O'Hara invention promoter, FTC settle case for $10.7 million - Pittsburgh Tribune-Review
- The USPTO public forum for invention promoters/promotion firm complaints and responses
- "Fear on the Net" by Invent-Tech
- Consumer Alert: Spotting Sweet-Sounding Promises of Fraudulent Invention Promotion Firms
- FTC Facts for Consumers: Invention Promotion Firms