Invention Promotion: Facts for Consumers from the Federal Trade Commission

You may have a great idea for a new product or service, but a great idea
is not enough. You need to know how to develop and market it
commercially. You could try to sell your idea or invention to a
manufacturer who would market it and pay you royalties. But finding such
a company could be an overwhelming task. You also could consider using
the services of an invention promotion firm.

Some invention promotion firms may help you get your idea or invention
into the marketplace. But be aware, some inventors have paid thousands
of dollars to firms that promised to evaluate, develop, patent, and
market inventions and got nothing for their money.

So be cautious. Your enthusiasm for your idea may make you vulnerable to
promoters who make false or exaggerated claims about the market
potential of your invention.

This brochure tells you how to spot some common signs of trouble, how to
protect yourself, and what to do if you become a victim. It also lists
government agencies and private organizations that offer additional
information and assistance.

How to Identify Legitimate Firms

Often, it is difficult to distinguish between a fraudulent invention
promotion firm and a legitimate one. This may be because unscrupulous
and honest firms often use many similar advertising and sales
techniques, market evaluations, and contract strategies. However, there
are some comparisons made in the next three sections that may help you
identify legitimate companies.

Advertising and Sales Techniques

Some invention promotion firms advertise through television and radio,
and classified ads in newspapers and magazines. They target independent
inventors, frequently offering free information to help them patent and
market inventions. They also may advertise a toll-free “800” telephone
number that inventors can call for written information. However, the
information may consist only of brochures about the promoter.

If you respond to the ads, you may hear from a salesperson who will ask
for information about yourself, your idea, and a sketch of the
invention. As an inducement, the firm may offer to do a free preliminary
review of your invention.

Also, some invention promotion firms may claim to know or have special
access to manufacturers who are likely to be interested in licensing
your invention. Further, some promotion firms may claim to have been
retained by manufacturers who are looking for new product ideas. These
kinds of claims often can be false or exaggerated. Therefore, before
signing a contract with an invention promotion firm who claims special
relationships with appropriate manufacturers, ask for some proof.

A Market Evaluation

After giving your invention a preliminary review, a firm might tell you
it needs to do a market evaluation on your idea, which may cost several
hundred dollars. Such reports from questionable firms often make vague
and general statements and provide no hard evidence that there is a
consumer market for your invention. Reputable company reports, on the
other hand, deal with specifics. Before you pay for a report on your
idea, ask what specific information you will receive.

A Marketing and Licensing Contract

Some invention promotion firms also may offer you a contract where they
agree to act as your exclusive marketing and licensing agent. For this,
a questionable firm may require you to pay an upfront fee of as much as
$10,000 and to commit a percentage of the royalties the invention may
earn. On the otherhand, reputable licensing agents typically do not rely
principally on large upfront fees. They normally rely on royalties from
the successful licensing of client inventions and are very selective
about which ideas and inventions they pursue. A request for an upfront
fee frequently is another distinguishing characteristic of a
questionable invention promotion company.

How to Protect Yourself

If you are interested in working with an invention promotion firm,
consider taking the following precautions before you sign a contract and
pay significant amounts of money.

* Early in your discussions with a promotion firm, ask what the total
cost of its services will be. Consider it a warning if the
salesperson hesitates to answer.

* Be careful of an invention promotion firm that offers to review or
evaluate your invention but refuses to disclose details concerning
its criteria, system of review, and qualifications of company
evaluators. Without this information, you cannot assess the
competence of the firm or make meaningful comparisons with other
firms. Reputable firms should provide you with an objective
evaluation of the merit, technical feasibility, and commercial
viability of your invention.

* Require the firm to check on existing invention patents. Because
unscrupulous firms are willing to promote virtually any idea or
invention with no regard to its patentability, they may unwittingly
promote an idea for which someone already has a valid, unexpired
patent. This could mean that even if the promotional efforts on
your invention are successful, you may find yourself the subject of
a patent infringement lawsuit.

* If no valid, unexpired patent exists for your idea, seek advice
from a patent professional before authorizing the public disclosure
of your idea.

* Be wary of an invention promotion firm that will not disclose its
success and rejection rates. Success rates show the number of
clients who made more money from their invention than they paid to
the firm. Rejection rates reflect the percentage of all ideas or
inventions that were found unacceptable by the invention promotion
company. Check with your state and local consumer protection
officials to learn if invention promotion firms are required to
disclose their success and rejection rates in your locality.

In reality, few inventions make it to the marketplace and still fewer
become commercial successes. According to experts used in FTC cases, an
invention promotion firm that does not reject most of the inventions it
reviews may be unduly optimistic, if not dishonest, in its evaluations.

* Be wary of a firm that claims to have special access to
manufacturers looking for new products, but refuses to document
such claims. Legitimate invention promotion firms substantiate
their claims, which you can check.

* Be skeptical of claims and assurances that your invention will make
money. No one can guarantee your invention’s success.

* Avoid being taken in solely on a firm’s promotional brochures and
affiliations with impressive-sounding organizations.

* Beware of high-pressure sales tactics.

* Investigate the company before making any commitments. Call your
Better Business Bureau, local consumer protection agency, and
Attorney General in your state and the state in which the company
is located to learn if they know of any unresolved consumer
complaints about the firm.

* Make sure your contract contains all agreed upon terms, written and
verbal, before you sign. If possible, have the agreement reviewed
by an attorney.

* If you do not get satisfactory answers to all of your questions
with an invention promotion firm, consider whether you want to sign
a contract. Once a dishonest company has your money, it is unlikely
you will ever get it back.

For More Information

A number of government agencies and private organizations offer
publications and assistance to independent inventors. You can call the
U.S. Patent and Trademark Office at (703) 557-4636 and the U.S. Small
Business Administration (SBA) at 1-(800)-827-5722 for publications about
inventions.

You also may want to call your SBA district office to learn about
services available through the Small Business Development Centers
program. Inventor’s clubs, associations, and innovation centers also can
be valuable sources of information and services. For their locations
contact the following organizations:

United Inventors Association of the United States of America (UIA-USA)
P.O. Box 50305
St. Louis, Missouri 63105
(stamped, self-addressed envelope required)

National Congress of Inventor Organizations (NCIO)
727 North 600 West
Logan, Utah 84321
(801) 753-0888

Minnesota Inventors Congress
P.O. Box 71
Redwood Falls, Minnesota 56283-0071
(507) 637-2344

What to Do If You Are a Victim

If you believe you are a victim of a fraudulent invention promotion,
first contact the firm and try to get your money back. If you are
unsuccessful, report your problem to your Better Business Bureau, local
consumer protection agency, and the Attorney General in your state and
in the state where the company is located. Your information may help an
ongoing investigation or demonstrate the need for one.

You also may file a complaint with the FTC by writing: Correspondence
Branch, Federal Trade Commission, Washington, D.C. 20580. The FTC
generally does not intervene in individual disputes. However, the
information you provide may indicate a pattern of possible law
violations.

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SMBReviews is committed to providing small and mid-sized business owners with the information and resources they need to select the best service or product for their company.

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