Invention Promotion Scams: Red Flags and How to Vet Any Patent Marketing Firm

Invention promotion scams follow a script: a fast, glowing evaluation, a promise of profits or manufacturer connections, and a large fee before any real work is done. To vet any patent marketing or brokerage firm, ask for the five written disclosures that 35 U.S.C. § 297 requires of invention promoters, check the USPTO’s published complaints and the FTC’s case records, and make sure every promise appears in the contract. A firm that hesitates on any of these has already answered your question.

What the enforcement record shows

The pattern is old, and official records document it well.

In 1997, the FTC and two state attorneys general announced “Project Mousetrap”, seven actions against invention promotion companies, five of them brought by the FTC. The agency alleged the defendants had generated more than $90 million and said that “virtually no consumers have even made back their investment.”

Two decades later came World Patent Marketing. According to the FTC’s case record, the agency sued the Florida company, a related company and their principal in March 2017. It alleged that they used bogus “success stories” and testimonials to sell patenting and marketing services that delivered little, and that they threatened consumers who complained. A court order halted the business that month. In May 2018 a stipulated order banned the defendants from invention promotion and imposed a $25,987,192 judgment, partly suspended. In March 2020 the FTC sent 5,503 refunds averaging about $185. The FTC had said consumers paid thousands of dollars each.

A third record shows why names alone tell you little. A 2008 FTC settlement concerned a business called the Patent & Trademark Institute. According to the FTC, people barred by a 1998 court order from misrepresenting their services had revived the operation under that new name. A contempt ruling followed in 2007, and the settlement left the promoter with about $59 million in liability that bankruptcy could not erase. Businesses can change their names. The people behind them stay the same.

The FTC’s red flags

The FTC’s consumer guide to invention marketing scams lists the warning signs. Here they are, with the question that tests each one.

The FTC’s summary is blunt: “reputable invention marketing firms usually don’t rely on large upfront fees.” Fake reviews and review suppression are also addressed directly by the FTC’s rule on consumer reviews and testimonials, 16 CFR Part 465.

The five disclosures 35 U.S.C. § 297 entitles you to

Under 35 U.S.C. § 297, an invention promoter that advertises in mass media must give you a written disclosure before you sign a contract. It must state:

1. How many inventions it evaluated for commercial potential in the past five years, and how many of those evaluations were positive or negative.
2. How many customers contracted with it in the past five years, excluding customers who bought only trade show, research, advertising or other non-marketing services, and customers who defaulted on payment.
3. How many customers it knows received a net financial profit as a direct result of its services.
4. How many customers it knows received license agreements as a direct result of its services.
5. The names and addresses of every invention promotion company it or its officers have been affiliated with in the past 10 years.

If a material false statement, a material omission or a failure to disclose injures you, the statute lets you sue. You can recover actual damages or elect statutory damages of up to $5,000, plus reasonable costs and attorney’s fees. A court can treble the award if the promoter intentionally deceived you.

How to read the numbers. Compare item 1 with items 3 and 4. Take a hypothetical firm that evaluated 4,000 inventions, rated 3,900 of them positively, and knows of four clients who made a net profit. Its evaluation is a sales step, not a filter. Item 5 matters for the reason the 2008 case shows: it reveals the previous names a team has worked under.

The exemption. Section 297(c) excludes some parties from the definition of an invention promoter. These include government agencies, qualifying nonprofits, and anyone evaluating, licensing or selling an issued utility patent or a filed nonprovisional utility application. That last exemption’s wording does not reach bare ideas, provisional applications or design patents. An exempt broker can still answer the same five questions, and you should expect a reputable one to.

Check the public record

The USPTO’s scam prevention page suggests checking FTC records, asking for client references, searching the USPTO’s complaints, and checking the Better Business Bureau. If you already work with a patent attorney or agent, ask them about the firm too.

The published complaints page works like this:

• The USPTO forwards each complaint to the promoter, which has 30 days to respond. Responding is optional.
• The complaint is published with any response.
• The USPTO does not investigate and does not take part in legal proceedings.
• Published complaints come down three years after publication.

So a clean record is weak evidence. A cluster of complaints describing the same script is strong evidence. Read the promoter’s responses as carefully as the complaints.

Questions to ask before you sign

• Will you give me the § 297 disclosures in writing before I sign, even if you believe you’re exempt?
• What is the total cost of every phase, and which fees are refundable?
• How are you paid? What share of your revenue comes from client fees, and what share from licensing or sale proceeds?
• Who performs the evaluation, what sources do they use, and can I see a redacted sample?
• Which companies will you approach, and can you document past introductions?
• Can I speak with past clients I select from your full client list?
• Does the contract include every verbal promise? Will you wait while my attorney reviews it?
• If someone will prepare or file a patent application for me, what is that practitioner’s USPTO registration number?

Vetting checklist

If you think you’ve been taken

Keep every document and payment record. Report the firm to the FTC at ReportFraud.ftc.gov and to the USPTO, which will forward your complaint to the firm and publish its response. Ask a lawyer whether § 297 or state law gives you a claim.

This article is general information, not legal advice.

How Meta Dragons can help

If the bait is a promise of profit, look for the hook. We work the other way round. Before any inventor engagement we give you written disclosures, whether or not § 297 applies, and we tell you plainly if the commercial evidence is weak. A Prior-Art Snapshot gives you an honest first look in 3 business days. If you hold an issued patent, Sell Your Patent starts with a sale-readiness review, and our success-fee terms are written down before any marketing begins. No sale is promised.

Before you talk to anyone, read how to sell a patent and how much is my patent worth. Our scope and disclosures page sets out what we do and don’t do.