Before Using An Invention Marketing Co.

NOTE: This article was sent to us by Gene Seach and is being posted for the purpose of educating inventors. There has been additional information concerning the use of the Better Business Bureau for references, presently if you use the BBB as references do with extreme caution.

"Like Vampires, the Invention Brokers can be killed off only by shining the bright light of truth to expose their operations". (ROBERT P. BELL P.C.)

INVENTION PROMOTION FIRMS

Checking their credibility.

There are numerous ways to verify the credibility of any firm that you contemplate doing business with.

1. Contact the Attorney General's Office of the state in which they are headquartered for any complaints against that firm.

2. Contact the Better Business Bureau of the city in which the firm is located. Don't be surprised if you receive conflicting reports from the BBB and State Attorney General's offices. Fraudulent invention marketing firms routinely settle complaints out of court. This procedure will keep their BBB report clean. However, the State Attorney General's Offices maintain records of all complaints. Some BBB's also have a program called "Tell Tips" where you call in and they will play a recorded message about the company you are inquiring about. This is a paid subscriber service that allows companies to record their own messages. So keep in mind that you are not receiving an objective evaluation of that company. You will be listening to the company's own sales presentation. Contact the Consumer Affairs Office in the city in which their headquarters are located. If you contact the Chamber of Commerce of which the firm belongs, remember that the Chamber of Commerce is a paid membership organization that was created to promote the business of its paid members.

3. Insist that the invention marketing firm provides to you in WRITING, the number of inventions the firm has represented and the number of inventors that have made more money than they invested. If they refuse to provide this information in writing then do not do business with them. A few states have made this a mandatory requirement for invention marketing firms wishing to operate within those states. The FTC only requires one invention promotion firm to disclose this information. Many invention marketing firms do not abide by these laws. Some firms will lure inventors across state lines into states that do not afford such protection.

BEWARE: If a marketing firm represents 4,000 inventions annually and 2 inventors make more money than they invested, that is only a .05% success ratio. Don't be misled by less than and more than numbers. Understand that "less than 3% are successful" could mean "0% are successful", and "They represent more than 200 inventions" could mean "They represent 20,000 inventions". "Less than" and "more than" figures are misleading sales techniques. Some invention promotion firms have a ZERO % success rate.

4. Ask what are the various names they have done business under. It is commonplace for disreputable companies to get in trouble either financially or legally, go out of business, then reopen using a different name. If they have operated under another name, find out why they changed. Some invention marketing firms will even create new companies, if they anticipate any adverse legal action. In this manner they will already have a functioning company to transfer operations to when they receive an adverse legal action.

5. Find out how long they have been in business under their present name. Nonetheless, longevity does not necessarily mean they have been successful in getting new products on the market.

6. Find out if they or their affiliates were a party to Federal Trade Commission punitive actions.

7. If there is a free evaluation, request in writing the number of ideas that are submitted for evaluation and the percentage of those ideas that they accept. Find out if it is an objective evaluation or appraisal. If they refuse to provide this information in writing, do not do business with them. Many invention marketing firms misrepresent the evaluation of your idea. They will state that they have evaluated the merit and marketability of your idea, when in fact they have not.

*Note: Some invention promotion firms have started parent companies. They have been known to tell inventors that they cannot represent your idea because they represent a similar idea. They then turn your idea over to their parent company. In this manner, they can tell inventors that they reject more ideas than they really do. If you have submitted your idea to one company and they have turned it over to another, proceed with extreme caution.

8. Find out if they are licensed to operate in your state. Many states have stringent laws governing the activities and operations of marketing firms. These laws were enacted for your protection. Contact your States Attorney General's Office for this information. BEWARE: If a marketing firm has to meet with you in another state, find out why. If you have to make a decision and sign a contract in another state, first contact your own State Attorney General's Office to see if they are allowed to operate within your state and secondly, seek competent legal counsel. If you sign a contract or an agreement in another state, you will lose all available protection afforded to you in your own state.

9. Request the names and addresses of inventors living in your area that the firm has represented. Don't be misled by statements such as, "Due to the confidential nature of the business, we are not allowed to do that", "We would only give you the good ones anyway." or "the FTC will not allow us to do that." If the company will not provide the information, approach with extreme caution. Some salesmen representing invention marketing firms have been known to tell potential victims that the Federal Trade Commission prohibits them from releasing such information. This is not the truth.

10. The Federal Trade Commission provides tips to help you avoid shady companies.

Deceptive sales practices

The following article appeared in the "New York Law Journal" in 1978: "Invention promoters invest large sums in advertising, usually in handyman's magazines and local newspapers. They offer "valuable" free information to inventors. When an inventor nibbles, the developers send the potential client a package of materials, including several sleek brochures containing seemingly legitimate endorsements by public officials and satisfied clients. Pictures of products ostensibly on the market give the impression of a firm thriving on the success of its clients. Also included is a confidential disclosure document or record of invention form to be filled out and mailed back to the company.

The developer promises to "examine" the invention, a commitment which leads the inventor to expect an evaluation, but which means little more than that a salesperson will soon be in touch. The inventor is contacted by a company representative who invites the potential client down to the firm's impressive offices, where pictures and certificates adorning the walls create an aura of respectability. A preliminary agreement is proposed in which a market analysis and a patent search will be done, at a cost to the client of $150 to $250. While the salesperson is encouraging, the inventor is given the distinct impression that the developer will not go any further unless the preliminary results are positive. After a month or so, the client will get a phone call (or simulated telegram) suggesting that the inventor hurry down to the promoter's offices.

The salesperson sounds excited and notes that the results of the preliminary research agreement are back. Explicit evaluations are rarely given, even orally, but clients are regularly told that their ideas have great potential, or that the firm has decided to take a chance. One company representative sent a client a personal note "I would like to discuss these search results and the marketing cost we are prepared to assume as a participant". The impression is conveyed that the developer does not make a profit unless the invention is sold or licensed. This is further advanced by the developer's insistence on taking 10 or 20 percent interest in the invention.

The patent results are presented to the inventor, who of course cannot understand them. The client assumes, incorrectly, that the firm would not go ahead with the venture if the results were not promising. The market analysis, little more than a compilation of statistics, contains impressive numbers which delude the unsophisticated client into believing that a detailed dollar analysis has been undertaken." Little has changed since 1978 when this article was written. The only real changes are the increases in their fees and that they advertise in a broader communications media.

The following excerpt was taken from an article titled "Patent Nonsense: Invention Marketing Companies Often Lead On Naive Clients, Their Critics Charge" that appeared in The Wall Street Journal September 11, 1991. "Inventors and others contend some of these firms are bamboozling thousands of inventors out of tens of millions of dollars annually. "These companies are simply ripping off inventors", says Tim Pope, an Oklahoma state legislator who helped push through a law to regulate invention marketers in his state. The problem is growing because amateur inventing is enjoying an upsurge. Between 1985 and 1990, the number of patents granted annually to individuals rose 40%. And, it turns out, aspiring inventors are vulnerable to a sales job, for they usually have no idea how to market their gadgets.

Watch out for deceiving sales practices. Once you send or call for free information from various invention marketing firms, most will have a commissioned salesman call you immediately, day or night, stressing the urgency of sending your idea to them. Never seeing the inventor's idea, some salesmen will emphasize that the idea has good market potential. Moreover, if you don't send it in right away you may lose your rights to the idea. This should immediately trigger a red flag warning signal. Don't let the enthusiasm for your invention overshadow your common sense. Remember the risks and think out any plan of action before jumping in with both feet.

Many deceptive marketing firms prey on the inventor's greed. For the firm's efforts, they will charge the inventor thousands of dollars in fees, then take a percentage of the royalties, if they are successful in getting the product on the market. However, if the inventor chooses to pay higher fees they would not share in the success. In the hopes they will not have to share in the success of their hard earned labor, many inventors will pay the higher fees. This does not mean that the amount of work and the amount of effort put forth by the firm increases or decreases. It does mean though, if they are a fee based company, that their profits increase drastically when you choose the higher fee. It does not increase the firm's success rate, but it may increase their Dun & Bradstreet financial rating. Escalating fees have, through the years, been their most successful ploy.

The initial evaluation is normally free and leads to progressively higher costs.The second fee varies anywhere from $150 to $800 and up. Then the inventor is confronted with the third, but not always final, fee. This fee varies anywhere from $3,000 to $12,000 and up. Quite often there are miscellaneous costs added after the inventor pays the third fee. Some firms will refuse to tell you what the third fee will be. Many marketing firms give the illusion that they are willing to share in the cost or risk. When the inventor is paying $3000 to $12,000 for their services and the actual cost of performing the service is $1100, where is their cost or risk? An authentic sharing in the cost or risk is for the firm to represent the invention on a contingency basis. This type of arrangement forces the firm to produce results before either party can realize a profit.

Read carefully any sales brochures sent to you by invention marketing firms. Pay special attention to the fine print and "disclaimers". If the brochure displays products, look for disclaimers, such as "not intended to represent success". The quality and color of an advertisement should not be, in any way, interpreted as a gauge of success. A sales technique often employed by marketing firms is the preparation of a product portfolio, brochure, report, etc., as part of the initial service fee. This may not determine whether or not the inventor's idea is marketable.

BEWARE: Generally, most information is "boiler plate" data with names of inventors/inventions inserted by computer. Don't be misled by the number of pages in the report. It is the quality of the report that counts, not the quantity.

Misleading guarantees

Don't be enticed by guarantees. Guarantees are used as a sales tool. Do not be misled by a misconception of what exactly the guarantee states.

1. Money back guarantee if successful in getting the inventor's product on the market. Yes, you read it right. This is not a money back guarantee if they are unsuccessful in getting your product on the market. If a firm has a 0% success rate, then the inventor has a zero percent chance of recovering his losses. Find out what the firm's exact success rate is.

2. Money back guarantee if no response in a specified period of time. Many manufacturers require waivers before considering new products. If a manufacturer requires a waiver, they will respond by stating "they are interested in the idea but would require a waiver before undertaking any further assessment." This could constitute a response. Moreover, a guaranteed response does not guarantee success.

3. Money back guarantee if unsuccessful in obtaining a patent may not guarantee a patent on your idea. Find out if the patent application should receive a final rejection from the US. Patent and Trademark Office, will a new application be submitted? BEWARE: If a new application is submitted, this process could take years and eventually the inventor may end up with a patent on a different idea.

4. Money back guarantee if a patent search determines that the idea is unpatentable. In a normal patent search, all classes and subclasses that are relevant to your idea are searched and a statement of patentability is issued by the patent practitioner. Invention promotion firms have been known to generate two patentability searches. One may say it is patentable, the other may say that it is unpatentable. The inventor will only receive one. Normally the one that says it is patentable. If the invention promotion firm says that your idea is patentable with a design patent, find out why it is not patentable with a utility patent. The design patent protects only the appearance of an article and not its structure or utilitarian features. If both are done, insist on receiving all copies. One search could say it is patentable, the other could say it is not patentable. By adding ornamental designs to an inventors idea, it is possible for a fraudulent invention marketing firm to obtain a design patent on almost anything.

BEWARE: If you only have a design patent, someone could copy your idea and simply make their product look different, and you couldn't stop them.

Other Traps

Get the facts in writing. You should never send a company your hard earned money based solely on a telephone conversation. Many contracts have clauses that state any verbal understandings are null and void. Since it is your money, you have a right to know their success rate. If that firm will not provide that information in writing, do not do business with them. An exclusive license to market your idea takes you completely out of the picture.

If you are unfortunate enough to choose a marketing firm that has a 0% success rate and you have signed an exclusive agreement with them, you have just assured yourself of failure. Don't be misled by commissioned salesmen employing sophisticated titles. Some known titles used are "new product development director," "assistant to the president" and "marketing director." No matter what titles they use, their pay is contingent on what you, the inventor, pay for their service or, in most cases, disservice.

If a salesman encourages you to send your money right in so they can get your idea in a forthcoming show or get it right out to an interested manufacturer, approach with extreme caution. These are sometimes used as tools to get you to send in money right away. If the firm wants to rush your idea into a show, have them provide to you in writing how many products they have successfully brought to the market as a result of the shows. If they will not provide this in writing, do not do business with them.

Understanding the risks

A University of Oregon study showed "from 100 initial ideas, fifteen may survive technical screening; eight may seem commercially feasible; five might then be developed; but probably only one would survive testing and commercialization to become a successful product." It is imperative that you, as the inventor, understand this kind of risk. There is no such thing as a sure thing. Do not compound that risk by contracting an outside invention marketing firm that has a minute or zero success rate.

ARE THEY A FEE BASED COMPANY? FEE BASED COMPANIES MAKE THEIR PROFITS FROM THE FEES YOU PAY THEM. BEWARE OF THE CLAIM "WE CAN MAKE OUR MONEY IN VARIOUS OTHER WAYS." CAN MAKE DOES NOT MEAN THE SAME AS DO MAKE.

The Wall Street Journal published an article on the "Invention promotion industry" on 2-11-94. Before considering using any invention submission company, look up this article at your local library. One quote from the article reads as follows, "Legitimate marketing companies do exist. But they generally relay on royalties rather than upfront fees, and tend to have high success rates, people familar with the industry say. In contrast, they say, some invention-marketing companies have batting averages close to ZERO.."

Scam marketing firms are subject to federal crime laws since they involve interstate mail and telephone. The Federal Trade Commission has now established a contact for invention marketing fraud. It is: Federal Trade Commission, Boston Office, Room 1184, 10 Causeway St., Boston, Ma. 02222-1073. Phone: (617)565-7240.

Also available from the Federal Trade Commission is a free pamphlet "Facts for Consumers: Invention Promotion Firms" to order call 202-326-3268. Or see their page on the web at: http://www.webcom.com/~lewrose/brochures/invent.html

ADDITIONAL LEGITIMATE SOURCES FOR INFORMATION

A very good magazine that does not promote inventing companies that are fraud's, is Inventors Digest. A free current issue can be obtained by calling 800-838-8808 or e-mail to [InventorsD@aol.com]. It is often referred to as the Inventors Bible. They are also on line at [http://www.inventorsdigest.com].

A second magazine that is for inventors and small business owners is called Dream Merchant. A free issue can be obtained by send a post card to 2309 Torrance Blvd., Suite 104, Torrance, CA 90501.

A source for reputable inventing marketing companies is available from the United Inventors Association of the USA. It is a nonprofit inventors organization which has compiled its second edition which contains valuable information about how to develop your invention PLUS a directory of services of companies that have been invited to advertise. It is available for $9.95. Write: UIA-USA, P.O. Box 23447, Rochester, NY 14692. If charging to a major credit card call 716-359-9310 or fax to 716-359-1132. They are a non-profit group.

A very good article about "What you should know about patents", is available from Vernon Brabham, P.O. Box 6308, Marietta, GA 30065 phone: 770-971-8342. He also will send you a list of inventing related books and materials that are for sale. He is a successful inventor and has produced an audio cassette that discusses why a patent is not always necessary to pursue a new idea.

LEGITIMATE WEB SITES FOR INFORMATION:

PREPARED BY:

The preceding article was taken from a great booklet written for all inventors. To receive a complete version of "INVENTION... TRUTH OR CONSEQUENCES" send $5.00 (postage and handling) to the above address. The Inventors Awareness Group is a non-profit organization.



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