Invention "Developers" (Were Almost) In Trouble
Updated 4/25/06
By Curtis L. Harrington


The sheer number of so-called "invention development companies" continue to plague inventors.  These companies cause inventors problems through several mechanisms:

(1)    Invention development companies perform extremely limited searches which are statistically likely to result in  use searches which are not really indicative of the success or failure of the patent application.  Many practitioners use such searches as a "come on" to give inventors a false sense of value to encourage them to go forward with a patent.

(2)    Most invention development companies will write a patent on a concept.  In this century, concepts are for anti-gravity and time travel.   Patents need to be technically complete.  I question all of my inventors to "finish the invention" and to tell me what their unit cost is for various levels of production.  The impact to me is that I would rather not have a client who really doesn't have enough technical detail to have a chance to make a go of it.  I'd rather have happy inventors than disappointed concept generators.  If there isn't enough details in the patent application, the patent process could be fatal with no cure (outside of a continuation application containing the data).

(3)    Many invention development companies take a percentage of the inventor's royalties.  This is unconscionable, especially as it can cause the inventor to lose control of licensing.  Further, because of the good tax treatment to the inventor, the inventor may end up giving away valuable 15% post tax dollars when it was un-necessary.

    Congress proposed the following described law in the mid 90's but it never left the ground.  It was eventually used to segue into the dreaded "harmonization" statute.  State codes, particularly California, have attempted to curb "invention developers", but invention development companies only add boiler plate which tips its hat to the statute and promptly circumvents it. For years, so-called invention development companies have been cheating small inventors by promising big-time promotion for big-time fees. States have tried to curb their activities by continually adding to state statutes requiring disclosure in the contracts which the companies make with the inventors.

Further complicating attempts at regulation, these shady companies advertise and attract inventors nationwide, and do all of their business with the inventor through the mail. In many cases inventors submit information and pay a fee of several thousand dollars, only to have the development company make a few copies of the disclosure and it out to the companies by mail.

Most reputable companies hire a non-technical person to screen such submissions, and promptly mail them back to the source along with a form for re-submission which waives the rights of the inventor. As a result, the "developer" receives money for doing a useless thing, if the developer even goes to the trouble of mailing out the information to begin with. Even when the developer often knows that no patent has been applied for no steps are taken to insure that the companies receiving the information will not take it for their own use.

All of this (would possibly have changed) with the passage of a new federal law to protect unwary inventors. The bill has was introduced in the senate as S.909 and in the house as H.R. 2419 and is entitled "The Inventor Protection Act of 1995."

The proposed law would have relied not only upon mandatory disclosure requirements but would have also added an enrollment scheme for developers, a 5 day waiting period within which inventors can void a development contracts, and a new civil liability section which makes it relatively easy for inventors, termed by the new law as "customers," who have been taken advantage of to collect both damages and attorney fees.

The enrollment scheme provides for registration of invention developers with the Commissioner of Patents & Trademarks. Any contract with an unenrolled invention developer is voidable by the customer. A developer would be suspended from enrollment if found to be incompetent, disreputable, liable for gross misconduct, or for non-compliance with the disclosure portions of the statute.

The disclosure provisions require the developer to state, in large type, several facts including their batting average for the past 5 years in terms of the numbers of positive and negative evaluations of submitted invention ideas. Even more damaging, the developer must also state the total number of customers who have contracted with the developer in the past five years, and the number of such customers who have received an amount of money in excess of the monies paid to the developer. If requested, the developer must provide the names and addresses of such "winning" customers to any person.

A 5 business day waiting period begins when the customer receives a copy of the contract for invention development services signed by both the invention developer and the customer. Before expiration of the 5 day period, the customer has the option to refuse to enter into the contract, and no payment which has been previously given by the customer shall be treated as required, accepted, or received. Where payment is made by check, it will be considered received on the date when it is given irrespective of its date, so post dating checks will not help the developer.

The new civil liability portion of the statute places severe and easily obtainable penalties against developers. Any customer injured by the developer, or injured by any false or fraudulent statement, representation or omission of material fact by the developer's employees, agents, directors, officers, partners or independent contractors, can bring suit for damages, attorney fees, and costs. Damages will be the greater of $5000 or the actual amount of damages suffered. With a mini mum of $5000 damages presumed upon a finding of liability, it will be easier to encourage an attorney to take the case. This harsh statute is sorely needed to correct the abuses inflicted by inventor "help" companies who do little or nothing for the relatively large amounts of money they receive from inventors.

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The statute didn't make it through Congress in 1995 in its original form.  Too Bad....

 


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