Caveat Inventor

Should you trust an invention promotion company with your next big idea?

Just because you have a great idea doesn't mean that you are ever going to make money from it. Each year the United States Patent and Trademark Office (PTO, Alexandria, Va.) receives 340 000 patent applications and issues about 150 000 patents. But only 2 percent of those patented inventions, or about 3000 per year, are ever successfully commercialized.

That's why many independent inventors, enticed by television commercials and Web sites promising the moon, turn to invention promotion companies to help them commercialize their ideas. These companies promise to patent your invention, determine its marketability, identify potential manufacturers, and negotiate licensing agreements, all for a fee.

But beware: making promises is one thing; delivering on them is another.

The big scam

Unscrupulous invention promotion companies have tainted the reputation of an industry that has a number of legitimate players, some of which are named on the Good Guys list on the Web site of the National Inventor Fraud Center Inc. [see table]. But complaints against the bad apples became so significant that in the United States federal legislation was enacted in 1999 to curb abuses. The American Inventors Protection Act of 1999 has several provisions intended to help inventors tell good invention promotion companies from bad.

Prompting the legislation was one of the most infamous cases of invention promotion fraud, settled only three years before the law was passed, and it offers a cautionary lesson.

In 1981 Ronald Boulerice created American Inventors Corp. (AIC) to assist inventors in patenting and marketing ideas. AIC offered a free assessment of whether an idea would make a marketable product. In 80 percent of the cases, AIC gave the inventor a favorable report and offered to prepare, for US $289, a "marketing report" assessing the size of the potential market for the product. All of the boilerplate marketing reports AIC issued concluded that the idea submitted was patentable. At that point, for a fee of between $4000 and $11 000, AIC promised to file and prosecute a patent application and shop the idea to potential manufacturers.

In fact, AIC never secured a single manufacturing contract for any of its clients. Nevertheless, AIC generated $58 million in revenue from 34 000 would-be inventors between 1981 and 1996, when federal authorities finally shut it down and sent Boulerice to prison for an eight-year term.

To stop this kind of fraud, the American Inventors Protection Act requires invention promotion companies to provide potential customers with information, in writing, that documents their past successes in promoting new inventions. Such companies must disclose:

The total number of inventions it evaluated during the preceding five years and the number of inventions it identified as patentable (legitimate companies tend to turn down more ideas than they accept).

The number of its customers who made a net profit, after paying invention promotion fees, from sales or royalties on their invention.

The number of customers who licensed their inventions to manufacturers as a result of the efforts of the invention promotion company.

Corporate names the promotion company or its affiliates have used in the previous 10 years (it may have changed its name to dodge complaints or lawsuits).

Under the act, inventors can sue for failure to disclose this information. The PTO is also required to make complaints it receives about invention promotion companies available to the public.

If you're thinking of hiring a promotion company, research the track record of companies you're considering by checking out the Web sites listed in the table. Perhaps equally important, you should have realistic expectations for the potential economic return you're likely to see from your great idea. They might keep you from pursuing a patent altogether.

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