The following article appears in the journal JOM, 49 (9) (1997), p. 74. JOM is a publication of The Minerals, Metals & Materials Society

Invention Marketing: Let the Seller Beware

The ability to be innovative technically can result in falling victim to an unscrupulous invention promoter. An inventor may not only spend thousands of dollars and have nothing to show for it, but may also lose all rights he or she might have had to obtain a patent.

We have all been exposed to television, radio, and print advertising advising us that companies are in desperate need of inventions and that Fly-By-Night Invention Marketing can provide the services you need to license your idea to a company. All you have to do is wait for the royalty checks to arrive. A significant segment of such marketing organizations have, at best, a disastrous record of licensing inventions, although they make a substantial amount of money for themselves. For example, a number of years ago, the U.S. Federal Trade Commission investigated a nationally known invention marketing company that had been in business for many years. The company admitted that over several decades it had served about 33,000 customers, of which only three made more money than they paid the company.

During a typical initial meeting with an unprincipled invention promoter, the inventor may learn that the invention has tremendous potential. The promoter will then offer to provide assistance with a market evaluation to determine whether there is commercial potential for the invention. After that, a patentability search can be made to determine if meaningful protection can be obtained, and a patent application may be filed. Further assistance is generally offered in disclosing the invention to companies that might be interested in licensing. Typically, the inventor is asked to sign a contract that calls for payment of many thousands of dollars. If the inventor does not have the ability to pay, the invention promoters have the ability to obtain financing for the inventor either through related companies or otherwise.

The forms the invention promoter employs typically contain disclaimers indicating in large print that invention promotion is a risky venture and that there can be no guarantee of success. Frequently, however, the customers are told the invention has tremendous potential and that large sums of money will be obtained.

The typical market study involves a great deal of "boiler plate" that is generally applicable to the relevant industry. A very small portion of the report will be devoted to the specifics of the invention, with little objective evaluation of the merits of the invention.

The typical patent search arranged by such a promoter is inadequate, either due to the ineptness of the searcher or by design. Generally, the most relevant prior art is not uncovered in the search and, as a result, an unrealistically positive opinion of patentability is obtained. A patent application is generally filed by a licensed individual hired by the invention promoter.

At the next stage, the invention promoter mails a form letter with a disclosure of the invention to a long list of companies from a mailing list. The list is generally not current and often does not target effectively the correct potential market. What inventors are not told is that when an invention is published in the United States, a patent application must be filed within one year after such publication or the right to seek a patent is forfeited. Such a publication can bar filing in most major countries other than the United States because the countries do not offer a period of grace between the date of publication and filing. Patent rights may be forfeited and trade-secret rights may be lost to the extent to which the invention is disclosed to the public by such a mailing. Typically, the inventor is not warned that this is likely to happen.

A bill to regulate those who are engaged in the business of providing invention-promoter services is pending in Congress. Among the features of the bill are the requirements that, at the time of entering into a contract, the customer must be provided with a written disclosure including the usual business terms of contracts between the invention promoter and customers, the approximate amount of usual fees, and certain information provided in bold print. The customer may cancel the agreement within five business days after signing. The invention promoter must also indicate the number of inventions evaluated during the past five years and the number of those evaluations that resulted in a positive evaluation and a negative evaluation. The customer must be warned that if the inventor assigns a partial interest in the invention to the promoter, the invention promoter may have the right to sell the invention without the customer's consent and may not have to share profits with the inventor. The promoter must also disclose the total number of customers in the past five years who received more money than was paid to the promoter as well as the total number of customers who contracted with the invention promoter during that period. The customer must also be encouraged to consult an attorney before signing the agreement. Enactment of this proposed legislation would be a large step toward minimizing the number of inventors taken advantage of by unscrupulous invention promoters.

There are many honorable and competent invention-marketing organizations. These companies typically screen inventions before accepting some of them into their program and do not have high-pressure sales efforts causing the inventor to commit at an early date to spending a large sum of money.

Many states and some universities have organizations that will assist inventors in invention evaluation by obtaining prototypes, further development work, and funding. It is suggested that inventors check with the states where they reside and colleges and universities in their area to determine if such assistance is available.

Another alternative is to seek the advice of a patent attorney who is admitted to practice before the U.S. Patent and Trademark Office. A pamphlet identifying patent attorneys and agents registered to practice can be obtained from the U.S. Patent and Trademark Office in Arlington, Virginia. Also, referrals from other members of the bar, the local bar association, or the yellow pages may be obtained.

The American Intellectual Property Law Association has a booklet available titled How to Protect and Benefit from Your Ideas. Information on this booklet may be obtained by calling (703) 415-0780.

For more information, please contact A.B. Silverman at Eckert Seamans Cherin & Mellott, LLC, 600 Grant Street, 42nd Floor, Pittsburgh, Pennsylvania 15219; Telephone (412) 566-2077; fax (412) 566-6099; e-mail: ARNIE@TELERAMA.LM.COM.