Scam Warning for Inventors
How Invention Scams work
First, understand the difference between a patent attorney and an invention promotion company.
A patent attorney is a lawyer who specializes in filing patent applications for inventors. They are bound by many laws governing their legal and ethical practices.
Invention promotion companies are commercial organizations that profess to be able to take your idea and submit it to industry (presumably, so that you will make money). But they hire patent attorneys to file your patent application - marking it up thousands of dollars.
Here's how the invention scam companies work:
They advertise on TV, hoping to strike a cord with a would be inventor by asking if you have an idea - and whether you want to become rich by presenting your idea to industry.
They will tell you that you have the best idea in the world (just what you want to hear), and they will methodically take UPWARDS OF $12,000 from you before the process is all over - and you could easily end up with a useless patent! A seasoned, respected patent attorney will charge about 1/2 that or less to file your patent.
But they are shrewd - they start out with a "free inventor's kit", then they charge $500 for an idea review. Then they "discover" that your idea is "original" and could be a big seller. Many times, this is not true - it's just to make you feel good. But you get excited and ready to pay the next "installment" of upwards of $4,000 for the next phase. This process goes on until they end up with all your money - you end up holding a worthless patent (most times).
The fact is, according to the US Patent and Trademark Office, less than 3% of all patents ever make more money for the inventor than it cost. The other fact is that the invention promotion companies have a track record that's MUCH worse - with less than 1/10 of 1% of their inventors ever making a profit.
Scam companies charge LOTS of money. They even offer financing - charging you interest on already outrageous prices! DON'T EVER finance your invention costs - it's money totally wasted in most every case.
AMERICAN INVENTOR PROTECTION ACT of 1999 (AIPA)
The AIPA legislation was passed to protect the American Inventor from fraudulent invention promotion companies. Invention scams are a BIG PROBLEM, so Congress stepped in to help the inventor.
American Inventors Protection Act of 1999 provides a new level of protection for inventors from fraudulent invention promotion companies. The Act requires invention promoters to disclose to you in writing the number of positive and negative evaluations of inventions they have given over a five-year period and their customers' success in receiving net financial profit and license agreements as a direct result of the invention promotion services. Customers injured by failure to disclose the required information or by any material false or fraudulent representation by the invention promoter can bring a civil action to recover statutory damages up to $5,000 or actual damages. Damages of up to three times the amount awarded are available for intentional or willful violations.
One of the provisions of this law is that the invention promotion company must disclose information about the percentage of inventors who make money from their patents, along with other information. You should read the AIPA information regarding invention promotion companies, Subtitle A - Inventors Rights/Invention Promotion Services. Ask the invention promotion company for an ORIGINAL copy of this law - not their reworded version that may leave out information that would tip you off to them being a fraudulent invention promotion company.
See the US Patent & Trademark Office's Web page on the: AIPA HERE.
10 FRAUD WARNING SIGNS (AVOID BEING SCAMMED)
[Edited Patent Cafe's Ironman Inventing Workbook.]
1. Nobody has more interest in your product idea than you do, so if you smell a rat - or even Think you smell a rat, there probably is one. Terminate contact - no explanation, no easy let down - get their name, phone number, and office address, then slam the phone down on high pressure salesmen.
2. If you can't deal directly with a PATENT ATTORNEY, don't deal. You should work directly with a patent attorney or agent - not their salesman or secretary. Verify with the US Patent & Trademark Office that the patent attorney you are working with is registered to practice before the Patent Office.
3. If references, professional certifications, registrations, or representations don't check out - even a single one - don't deal. Watch out for the standard scam line "we don't give out client references because of privacy". Face it - if YOU had happy customers, you would tell the world. Make sure you check out 6 happy inventors. (Caution - many scam companies have set up people who are not customers, but who will lie for the company, making you think they are inventors. Get their patent numbers and names in case you need to report them).
4. If there is a single rumor of wrongdoing by the firm that you can verify, don't deal with them - it's not worth the risk, and there are too many legitimate resources that can help you for nearly free.
5. If they want money up front for undefined or unmonitored services, or if they won't sign my contract which includes specific performance clauses, don't deal (Most won't even touch a contract written by an inventor's attorney - does that tell you something?). Understand the WHOLE contract and the TOTAL costs before you sign. NEVER AGREE TO A FINANCING CONTRACT FROM AN INVENTION PROMOTION COMPANY.
6. Get their FULL DISCLOSURE statement that shows how many inventors they have worked for, and how many have made more money then it cost the inventor. KEEP THIS PAPER - the Federal Trade Commission will want a copy if you ever file a fraud complaint against the company.
7. If they want significantly more payment than two week's services, regardless of the reasons or justification, don't deal.
8. Never pay for these services with a credit card number unless you can verify EVERYTHING you need to know about the company - and only if YOU initiate the call.
9. Never, ever deal with a salesman who is selling professional services. Deal ONLY with the person doing your work. (Some salesmen might try to get you to sign up before assigning an "account representative" to you: don't deal).
10. Only use specialists, and don't deal with supermarket "we can do everything" service providers.
OTHER FRAUD-INTOLERANT WEBSITES:
- NATIONAL INVENTOR FRAUD CENTER
- INVENTORS DIGEST
- INVENTNET INVENTOR RESOURCE
- UNITED INVENTORS ASSOCIATION OF THE USA
- Business Week Magazine
- FEDERAL TRADE COMMISSION CONSUMER WARNING!
Review this H U G E list of Invention Promotion Firms before ever entering into a contract with them!
HOW TO REPORT IF YOU'VE BEEN SCAMMED
DON'T JUST STAND BY - UNITE AND PUT THEM OUT OF BUSINESS
Fraud is one of the most underreported crimes since it is basically an "admission" by the victim of having been outsmarted, bilked. Everyone likes to think they are smarter than the average bear, but these companies are not the average bear! They are slick, sophisticated, high pressure. Believe me when I say that when $90 million is bilked from inventors by these Very Slick Scam Companies, you're in "fine company". Sometimes, as has happened with some promotion firms, the victimized inventors end up getting some of their money back through a consent decree, although a consent decree does not constitute an admission of guilt. So please, report it if you have been a victim, or think you are being victimized. These agencies understand, and are here to help.
If You Feel That You Have Been Victim of an invention promotion firm, contact: Atty. Pamela J. Wood, Federal Trade Commission, Boston Regional Office, 101 Merrimac St., Suite 810, Boston, MA 02114-4719, Tel: 617-424-5960 ,
AND CONTACT ALL OF THE FOLLOWING ORGANIZATIONS:
- FEDERAL TRADE COMMISSION; National Consumer Complaint
- FEDERAL TRADE COMMISSION; Your Regional Office
- Your STATE ATTORNEY GENERAL
- NATIONAL FRAUD INFORMATION CENTER • ONLINE & @ 1-800-876-7060
- Report The Fraudulent Patent Attorney to: U.S. Patent & Trademark Office •
- Office of Enrollment & Discipline, Box OED, Washington, D.C. 20231 • Telephone: 1-703-306-4097 ext:12 - Attorneys can loose their registration to practice in front of the US Patent Office.
The American Inventors Protection Act of 1999 gives you certain rights when dealing with invention promoters. Before an invention promoter can enter into a contract with you, it must disclose the following information about its business practices during the past five years:
- 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, and
- how many of those customers have licensed their inventions due to the promoter's services.
This information can help you determine how selective the promoter has been in deciding which inventions it promotes and how successful the promoter has been.
Invention promoters also must give you the names and addresses of all invention promotion companies they have been affiliated with over the past 10 years. Use this information to determine whether the company you're considering doing business with has been subject to complaints or legal action. Call the U.S. Patent and Trademark Office (USPTO) at 1-866-767-3848 , and the Better Business Bureau, the consumer protection agency, and the Attorney General in your state or city, and in the state or city where the company is headquartered.
If a promoter causes you financial injury by failing to make the required disclosures, by making any false or fraudulent statements or representations, or by omitting any fact, you have the right to sue the promoter and recover the amount of your injury plus costs and attorneys' fees.
In addition, although the USPTO has no civil authority to bring law enforcement actions against invention promoters, it will accept your complaint and post it online if you complete the form, Complaint Regarding Invention Promoter, at www.uspto.gov/web/forms/2048.pdf.
The USPTO also will forward your complaint to the promoter, and publish its response online. To read complaints and responses, visit Inventor Resources at www.uspto.gov/web/offices/com/iip/index.htm.
To order a copy of the American Inventors Protection Act, call the USPTO toll-free at 1-800-PTO-9199 , or visit www.uspto.gov/web/offices/com/speeches/s1948gb1.pdf.
Produced in cooperation with the U.S. Patent and Trademark Office
The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP ( 1-877-382-4357 ); TTY: 1-866-653-4261 . The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.