Fraudulent Patenting and
Invention Promotion Services
Every year, tens of thousands of people try to develop their ideas
and commercially market them.
Some people try to sell their idea or invention to a manufacturer
who would market it and pay them royalties. But finding a company
to do that can be overwhelming. As an alternative, others use the
services of an invention or patent promotion firm. Indeed, many inventors
pay thousands of dollars to firms that promise to evaluate, develop,
patent, and market inventions and then do little or nothing for their
As a result of the FTC’s Project Mousetrap it was discovered
that Eureka Solutions International, Inc. and OEM Communications,
of Pennsylvania, misrepresented the likelihood of financial gain
to consumers who purchased their invention promotion services. Few,
if any, of their clients realized any appreciable amount of money
from their inventions.
They ran one of five invention promotion schemes that together generated
in excess of $90 million for the schemers — but very little
for their clients. In addition to prohibiting unsubstantiated claims
they must now disclose in writing to potential clients:
total number of clients with whom they have signed agreements
in the past five years to research or promote the client’s
total number of clients whose ideas or inventions were licensed
by an unaffiliated third party;
total number of clients who received more in royalties or
sales from the licensing agreement than they paid to the
defendants for their services; and
total number of prototypes, market tests, or other pilot
programs the defendants funded for clients.
Such unscrupulous promoters take advantage of an inventor’s
enthusiasm for a new product or service. They not only urge inventors
to patent their ideas or invention, but they also make false and
exaggerated claims about the market potential of the invention.
The facts are:
inventions ever make it to the marketplace; and
a patent doesn’t necessarily increase your chance of
There’s great satisfaction in developing a new product or
service and in getting a patent. But when it comes to determining
market potential, inventors should proceed with caution as they
try to avoid falling for the sweet-sounding promises of a fraudulent
A Mousetrap for Money
Four years after coming to the attention of authorities, two indictments
from the federal district court now charge ten individuals for
their involvement in a $60 million mail fraud scheme that defrauded
over 34,000 victims while operating three invention promotion companies
in Westfield, Massachusetts, from 1982 through 1996.
The companies, such as American Inventors Corp., portrayed themselves
as invention promotion companies in the business of assisting inventors,
who paid between $200 and $10,000 in fees, in patenting and marketing
their ideas or inventions.
They spent millions on advertising, placing advertisements in
national publications such as USA Today, Reader's Digest, and TV
Guide, and mailing out millions of "deck cards" that
encouraged you to call a "1-800" number.
Callers were initially mailed a promotional brochure which encouraged
you to send in your ideas and obtain a free, professional assessment.
It stressed the company's experience, professionalism, integrity,
and track record in successfully bringing certain ideas to market.
In 1993 alone, they mailed over 100,000 such information packets
After you mailed in your idea, a salesperson phoned and delivered
a sales presentation. You were encouraged to pay an initial fee
that ranged from $169 to $289. You were told the fee was for a
registered patent attorney's opinion letter and a marketing analysis
Those who paid the initial fee would be contacted approximately
two months later and told that the opinion letter and the marketing
report had been favorable, and that they wanted to schedule a "personal
meeting" to discuss marketing and patenting services with
you. If you agreed, a salesperson would meet with you in one of
their leased offices throughout the country.
At this meeting you would be told that your idea had survived
two rigorous screening processes and that only 5 or 6 inventors
out of 100 ever made it as far as a personal meeting.
You were told that their services would include applying for a
patent and beginning the marketing program which was to involve
sending brochures to manufacturers and bringing your idea to trade
You would also be told that they had established that a manufacturer
would pay realistic minimum figures for a cash advance and a royalty
in the amounts of $30,000 and $60,000 respectively for your idea. They
would advise you for the first time about the company's fee plan
and to help ensure your project's ultimate success you would be
induced to buy the most comprehensive and expensive service plan.
The Indictment alleges that they defrauded inventors by making
material misrepresentations and omitting material facts throughout
their sales pitches and promotional brochure, such as that only
those ideas that were determined to have commercial potential were
accepted. In fact, positive patent opinion letters were generated
almost 100% of the time.
American Inventors were selective in the clients they accepted
and developed policies to avoid "potential problems." They
turned down inventors who asked too many pointed questions and
those whose drawings of the invention appeared sophisticated.
The marketing reports they gave to accepted inventors were "boilerplate",
containing no research unique or specific to your ideas and always
concluded that the ideas had market potential. The reports
took between one and two hours to assemble, but the inventors were
told researchers and engineers needed between four and eight weeks
to produce the documents.
The cash advance and royalty figures were the same for every
inventor's idea as well. In fact, the companies had never obtained
either cash advances or annual royalties from any manufacturer,
for any idea, that approached those figures.
The companies also misrepresented that they "shared the financial
risk" with inventors by claiming that they received most of
the profits from sharing in royalties or through agreements with
manufacturers, when in fact all of their profits came from the
up-front service fees.
The Indictment charges the defendants with conspiracy to commit
mail fraud, mail fraud, conspiracy to commit money laundering,
money laundering, conspiracy to defraud the U.S. Internal Revenue
Service, and filing false income tax returns.
The money laundering charge was as a result of their having used
the fraudulently obtained proceeds to promote their scheme through
increased advertising in order to attract more inventors.
The various tax evasion schemes attempted to hide about $490,000
over a two year period using kickbacks from the doubling of employees
salaries, fake employment income from sham organizations, inflated
invoices and claiming personal expenses as though they were from
Ronald Boulerice admitted in federal court that he cheated some 34,000
inventors out of $60 million dollars. The government gave an
eight-year sentence recommendation.
John Samson, 61 who was cooperative in the investigation,
was sentenced to three years in prison, one year of house
arrest and forfeiture of 50 percent of the value of his home.
He is credited with voicing the justification: "They
sell ballet lessons to fat kids and the kids never become
Touting Special Relationships
Some firms may claim to know or have special access to manufacturers
who are likely to be interested in licensing your invention.
In addition, they may claim to represent manufacturers on
the look-out for new product ideas. Ask for proof before
you sign a contract with any invention promotion firm that
claims special relationships with manufacturers.
Marketing and Licensing for a Fee
Reputable licensing agents usually don’t rely on large
advance fees. Rather, they depend on royalties from the successful
licensing of client inventions. How can they make money when
so few inventions achieve commercial success?
They’re choosy about which ideas or inventions they
pursue. If a firm is enthusiastic about the market potential
of your idea, but wants to charge you a fee in advance, take
your business elsewhere.
fraudulent invention promotion firms offer inventors services
in a two-step process: one involves a research report or
market evaluation of your idea that can cost you hundreds
of dollars. The other involves patenting or marketing and
licensing services, which can range from $5,000 to $10,000.
Reputable licensing agents rarely rely on large upfront fees.
Early in your discussion with a promotion firm, ask for the
total cost of its services, from the "research" about
your invention through the marketing and licensing. Walk
away if the salesperson hesitates to answer.
several states, disclosing the success rate is the law. Ask
for its rejection rate, the percentage of all ideas or inventions
that they find unacceptable. Legitimate firms generally have
high rejection rates.
invention promotion firms may promise to register your idea
with the U.S. Patent and Trademark Office’s Disclosure
Document Program. Many scam artists charge high fees to do
this. The cost of filing a disclosure document in the PTO is
$10. The disclosure is accepted as evidence of the date of
conception of the invention, but it doesn’t offer patent
firms often promise that they will exhibit your idea at tradeshows.
Most invention promotion scam artists don’t even go
to these tradeshows, much less market your idea effectively.
agree in their contracts to identify manufacturers by coding
your idea with the U.S. Bureau of Standard Industrial Code
(SIC). Lists of manufacturers that come from classifying
your idea with the SIC are usually
of limited value.
sure your contract contains all the terms you agreed to,
verbal and written, before you sign. If possible, ask an
attorney to review the agreement.
Here’s how to follow up if you hear the following lines:
"We think your idea has great market
ideas "however good" become commercially successful.
If a company fails to disclose that investing in your idea
is a high-risk venture, and that most ideas never make any
"Our company has licensed a lot
of invention ideas successfully."If
a company tells you it has a good track record, ask for a list
of its successful clients. Confirm that these clients have
had commercial success. If the company refuses to give you
a list of their successful clients, it probably means they
don’t have any.
"You need to hurry and patent your
idea before someone else does."Be wary
of high pressure sales tactics. Simply patenting your idea
does NOT mean you will ever make any
money from it.
"Congratulations !We’ve done
a patent search on your idea, and we have some great news.
There’s nothing like it out there." Many
invention promotion firms claim to perform patent searches
on ideas. Patent searches by fraudulent invention promotion
firms usually are incomplete, conducted in the wrong category,
or unaccompanied by a legal opinion on the results of the search
from a patent attorney. Because unscrupulous firms promote
virtually any idea or invention without regard to its patentability,
they may market an idea for which someone already has a valid,
unexpired patent. In that case, you may be the subject of a
patent infringement lawsuit, even if the promotional efforts
on your invention are successful
"Our research department, engineers
and patent attorneys have evaluated your idea. We definitely
want to move forward." This is a standard sales
pitch. Many questionable firms do not perform any evaluation
at all. In fact, many don’t have the "professional" staff
"Our company has evaluated your
idea, and now wants to prepare a more in-depth research report.
It’ll be several hundred dollars."If
the company’s initial evaluation is "positive," ask
why the company isn’t willing to cover the cost of researching
your idea further.
"Our company makes most of its money
from the royalties it gets from licensing its clients’ ideas.
Of course, we need some money from you before we get started."If
a firm tells you this, but asks you for a large upfront fee,
ask why they’re not willing to help you on a contingency
basis. Unscrupulous firms make almost all their money from
large upfront fees.
What’s a Patent?
A patent is a grant issued by the federal government that gives
inventors the right "to exclude others from making, using,
offering for sale, or selling the invention throughout the U.S.
or importing the invention into the U.S." Three types of patents
Utility patents, which are
granted to the inventor or discoverer of any new and useful process,
machine, article of manufacture, or compositions of matter, or
any new and useful improvement;
Design patents, which are
granted on any new, original and ornamental design for an article
of manufacture; and
Plant patents, whichare
granted on any distinct and new variety of asexually reproduced
The cost for a patent depends on the type of patent and whether
the applicant is an individual inventor, a nonprofit organization,
a small business, or a corporation.
U.S. patent protects your invention only in the U.S.
patents are granted for a term of 14 years from the date
of the grant. Utility and plant patents are granted for a
term that begins on the date of the grant and ends 20 years
after the patent was first filed. A patent holder loses exclusive
rights to the invention when the term expires or when periodic
maintenance fees are not paid.
Patent and Trademark Office cannot help inventors develop
or market their inventions, but will publish a notice in
the weekly Official Gazette that the patent is available
for licensing or sale if the patent owner requests the notice
and pays for it.
For More Information
An excellent site on the topic is InventorFraud Patentlawlinks
Consumer Response Center
Federal Trade Commission
Washington, DC 20580
Minnesota Inventors Congress
PO Box 71
Redwood Falls, MN 56283-0071
1719 N Street, NW
National Congress of Inventor Organizations
PO Box 93669
Los Angeles, CA 90093
The Patent and Trademark Office offers information about patents,
trademarks, and copyrights. Write to the U.S. Department of Commerce, Patent
and Trademark Office, Washington, D.C. 20231; call toll-free
For more information about the Disclosure Document Program, call
703-308-4357. In addition, every state has a Patent and Trademark
Depository Library that maintains collections of current and previously
issued patents and Patent and Trademark reference materials.