The Way the SCAM Worked

I found the following while surfing the net. I don't know who to credit.

<"This page contains articles of all of the public discussions for this project.

In Re Daniele, BdPatApp & Inter, 4/24/96, 40 USPQ2d 1394.

A recent Bd. of appeals decision in a DESIGN case caught my eye, as it was related to the fallout from American Inventor's Corp.

For those of you not familiar with AIC, it is a so-called "invention broker" and is now defuct. AIC used the design patent gag to lure inventors into spending thousands of dollars on "invention marketing".

The amount charged varied, but one report I saw was typical con:

a) $5,000 with a 10% royalty for AIC;
b) $10,000 with 5% royalty for AIC; or
c) $20,000 with a 2% royalty for AIC.

Guess which terms most inventors took? You guessed it. Rule No. 1 in the con game is to play off the greed of the "mark".

AIC holds a special interest for me, as I left my last firm (and started my own practice) after the firm head took on AIC as a client to get them out of hot water with the PTO. At the time, they had over 1,700 design patents pending. Do the math, that's 34 MILLION dollars. (I had heard that it was 3,000 applications, making the total $60 Million, either way, this isn't chump change!). And that's just the pending cases. What annoyed me was that my boss had rationalized the entire messy affair in his mind. I would have stayed on if he had explained that hey, he owed an old friend a favor and had to do this as a result. But instead, he had come up with a theory that we were _helping_ the inventors by representing AIC. I didn't buy it and high-tailed it out of there. My momma didn't raise me to represent invention brokers. The interesting thing about that experience was how some folks can rationalize almost any behavior from which they profit. Very interesting, indeed. As for the Bd. of Appeals decision, the board very kindly left in a lot of juicy gossip about AIC and the entire invention broker business. Sort of like lifting up a rock and seeing all the little bugs underneath. Repulsive, yet facinating to watch.

AIC offered a "patent or your money back" to their clients. In order to get the patent, the draftsman would embellish the drawings with an additional design. In this case, some sort of plant motif. Of course, the whole point of the Design Patent gag is not to explain _clearly_ the difference between a Design and Utility patent to the client.

I saw one case, where they tried to convince a client to get a design patent on a chemical composition! (He saw through it, though).

The PTO, eager to bust AIC (but without power to do so) inquired as to who added the decorative elements to the Design application. Failure to respond would result in all 1,700 applications going abandoned. AIC would have to refund $34 MILLION to clients (!?!).

The actual facts of this case are trivial compared to the underlying story, and it is my firm belief that the Board wants this case published in USPQ for publicity reasons more than the facts of the case. Mr. S. Michael Bender took over as associate counsel and tried to salvage the case in question by filing a continuing application _without_ the added ornamentation. Nice try, but AIC had already sent out brochures over a year ago. The Examiner rejected under 35 USC 103 and the Board affirmed.

What is most telling is that _two_ responses were filed by the applicant in response to the inquiries by the PTO. In the first, the applicant stated that he did not know what the difference between a design patent and a utility patent was, that he intended to get a utility patent, and that he did not add the ornamentation to his design.

In the second, the answers are reversed, once his counsel "explained" the questions to him (!?!).

Good reading. If you are unfamiliar with this seemly underside of the Patent business, it is a good primer. Robert Lougher, after throwing off the libel suit slammed on him by AIC, went on to found Inventor's Awareness Group, and is active in helping shut down invention brokers. A worthy cause. If you feel the same way, an annual membership in IAG is a good way to help out.

As for AIC, it briefly reopened as AIRD (American Institute for Research & Design), but I understand that it, too, has been shut down, and that the prinicples are under indictment by the FTC for fraud.

End of the story? Hardly, Five new invention brokers have sprung up in their absence. The bulletproofing of AIC reports has been now widely copied by other invention brokers (which may be successors in interest).

I recently received search reports from two different invention brokers, from different attorneys in different states, for two different inventions.

They were word-for-word identical, including the description of the references! e.g., "The Smith reference is relevent to the extent that it shows a feature similar to your invention". Some analysis! Both concluded that _design_ patent protection was the way to go. A variation on the Design patent gag I have recently seen is the 'picture claim' gag.

What sent chills down my spine was the realization that the various invention brokers may be, in fact, interrelated as one entity.

The search reports also containted a blandly worded description of the difference between a Design and a Utility patent. Certainly not enough to alarm the client, but enough to shield the attorney.

Hats off to the PTO for taking a stand here, especially when they didn't have to. And they didn't have to.

If the inventor protection legislation could be seperated from the omnibus patent bill (and quickly passed) the PTO could be provided with additional powers to investigate such folks. As it is, it was a strech for the PTO to do what it did (e.g., where is the statutory authority to inquire about inventorship in these cases?)



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