Invention Promoters and the American Inventors Protection Act

Invention promotion firms, sometimes referred to as invention promotion companies, have been widely criticized in numerous circles, including political circles in Washington, DC, for many years.  The American Inventors Protection Act (AIPA) was enacted into law in 1999 and by its very name sought to address head on the problems faced by so many inventors.  In truth, the title of the Act probably had more to do with selling the patent reform bill, which many individuals did not think would benefit independent inventors.  Whatever your view of whether the AIPA was a net positive or net negative for independent inventors, it is clear that certain provisions of the Act, which are now law and codified at 35 USC 297, unequivocally attempted to provide important protections for inventors against those invention promotion firms who have such a checkered past.

In light of recent developments, namely IPWatchdog, Inc., me personally and my wife Renee personally being sued by an invention promotion company that didn’t like what we wrote about them, I thought it might not be a bad idea to take a stroll down memory lane, explain a bit about the Act, take a look at what US Senators Joseph Lieberman and Orrin Hatch had to say and made a part of the legislative history.

Where to begin?  For this episode lets start with October 27, 1999.  The scene is the floor of the United States Senate.  Picture Senator Orrin Hatch (R-UT), who begins his remarks by saying: “Mr. President, I am pleased to rise today, along with the Ranking Member on the Judiciary Committee, Senator Leahy, to introduce the American Inventors Protection Act of 1999.”  Senator Hatch went on to say:

Like the House bill, our legislation will achieve a number of important substantive patent reforms, consistent with the principles of protecting American inventors, our national competitiveness, and the integrity of our patent system.

First, the bill provides inventors with enhanced protections against invention promotion scams by creating a private right of action for inventors harmed by deceptive and fraudulent practices and by requiring invention promoters to disclose certain information in writing prior to entering into a contract for invention promotion services. An inventor who is harmed by any  material false or fraudulent statement or representation, or any omission of material fact, by an invention promoter, or by the invention promoter’s failure to make the required disclosures, may recover actual damages or, at the plaintiff’s election, statutory damages in an amount up to $5,000, as the court considers just, plus reasonable costs and attorneys’ fees. A court may award increased damages, up to treble damages, where it finds such conduct to have been intentional and done with the intent to deceive the inventor. And, in an effort to provide better access to information for inventors, the Patent and Trademark Office is required to make publicly available all complaints received involving invention promoters, along with any response of the invention promoter.

See: 145 Cong Rec S 13258-259 (emphasis added).

The next scene finds us once again on the floor of the United States Senate.  The date is November 10, 1999.  This time it is Senator Joseph Lieberman (CT – then a Democrat, now an Independent) who rose to address the Senate, speaking specifically about inventor protections and patent reform.  Senator Lieberman said, in part:

Mr. President, I rise to express my support for S. 1798, the American Inventors Protection Act. Yesterday I became a co-sponsor of the patents reform legislation, which was recently reported out of the Senate Judiciary Committee. It is my understanding that the provisions contained in that legislation are being folded into a larger bill, which also addresses satellite television and other matters. Although I urge passage of this larger bill, in my comments today I will speak only to the provisions dealing with patent reform and inventor protection, provisions which I strongly believe will provide vital new protections both to businesses and to individual inventors. In particular, I am pleased to see an entire title dedicated to regulating invention promoters, many of whom are little more than con artists. In 1995 I introduced the “Inventor Protection Act” of 1995, which was the first bill to target the unsrupulous firms that take advantage of inventors’ ideas and dreams. Several of my bill’s provisions now appear in the House and Senate legislation, and I am glad to see that the work we did in the 104th Congress, combined with the efforts of others since, should finally result in the passage of long needed protections against invention promotion scams.

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Finally, I applaud the new regulations and remedies which will provide inventors with enhanced protections against invention promotion scams. Each year thousands of inventors lose tens of millions of dollars to deceptive invention marketing companies. In 1994, as then-Chairman of the Subcommittee on Regulation and Governmental Affairs, I held a hearing on the problems presented by the invention marketing industry. Witness after witness testified how dozens of companies, under broad claims of helping inventors, had actually set up schemes in which inventors spend thousands for services to market their invention-a service that companies regularly fail to provide.

The legislation I introduced in 1995 used a multi-faceted approach to separate the legitimate companies from the fraudulent and guarantee real protection for America’s inventors. I am gratified that a number of the provisions from my bill have been used in a title of this year’s patent reform legislation specially devoted to invention marketing companies. Both bills provide inventors with enhanced protections against invention promotion scams by creating a private right of action for inventors harmed by deceptive fraudulent practices, by requiring invention promoters to disclose certain information in writing prior to entering into a contract for invention promotion services, and by creating a publicly available log of complaints received by the PTO involving invention promotes.

See: 145 Cong Rec S 14521 (emphasis added).

As you can see, respected US Senators characterize the problem presented by invention promoters using the terms “scam,” “unscrupulous,” “con artists,” deceptive” and “fraudulent.”  Senator Lieberman even talked about how these firms “take advantage of inventors’ ideas and dreams.”  Perhaps this language is familiar to you.  It should be if you read the pages of IPWatchdog.com.  But US Senators use those terms, and even the Patent Office (e.g., see USPTO Scam Prevention Brochure) and the Federal Trade Commission (e.g., see Consumer Alert: Spotting Sweet-Sounding Promises of Fraudulent Invention Promotion Firms) use those same terms to describe the seedy side of invention promotion.

In any event, the AIPA requires invention promoters (i.e., those who provide “invention promotion services”) to disclose a number of things in writing, prior to entering into a contract for invention promotion services.  These are:

(1) 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;

(2) 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;

(3) 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;

(4) 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

(5) 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.

35 U.S.C. 297(a).

Title 35 also defines “invention promotion services” to mean “the procurement or attempted procurement for a customer of a firm, corporation, or other entity to develop and market products or services that include the invention of the customer.”  Essentially one who provides invention promotion services is an invention promoter and must disclose the items listed above in writing.  There are certain exemptions, for example the following are among those who are not required to disclose the information identified above, but which may literally fit the definition of an “invention promoter,” including any department or agency of the Federal Government or of a State or local government; and certain nonprofits, charitable, scientific, or educational organizations. For a complete list of the exemptions see 35 USC 297(c)(3).

While your views may differ from my opinion, it is my opinion that the statistics show that there is very little hope of succeeding if you use the services of an invention promoter, despite what the marketing or sales people may tell you.  It well could be that they tell everyone the same things about how their invention will be a great success and that is how they get you to believe you will be the exceptionally small percentage of those who make more than they spend.  Who knows for sure why so many people decide to go with an invention promoter despite the long odds and high cost.  Perhaps if more people asked the people doing the selling whether they are commissioned or not (which I have been told they are) they might think twice about whether the sales/marketing person is more concerned with the commission than the ultimate success of the invention.

Regardless of what you think, allow me to take a moment to thank the United States Congress for their efforts.  Without the AIPA we wouldn’t likely have these statistics.  I know at times I am hard on Congress, they are easy to beat, but they deserve a tip of the hat for 35 USC 297.  They would deserve even more gratitude if they would undertake some hearings and investigation to see if the AIPA protections are working and have, in fact, rid the industry of the “scams” and “fraud” mentioned by Senators Hatch and Lieberman.  My opinion is that not much has changed, we just know have the statistics to show how enormous the problem really is.

One final thought… you have to love the First Amendment, don’t you?  I have a right to express my opinion and even if some don’t like it, I can still say it!  God Bless America!