It’s not always easy to tell the difference between a reputable patent attorney and a scam artist, particularly if you are not very savvy about the patent process. In this article I want to discuss one of the oldest invention scams in the United States – the gullible inventor scam – and walk through how to recognize the difference between that scam and a reputable firm.
To compare and contrast, I want to use World Patent Marketing as an example of the gullible inventor scam. This company returned to headlines in 2018 after one of its board members, Matthew Whittaker, was appointed as the acting attorney general of the United States. While I have no knowledge of Whittaker’s involvement in the company, the company is an exemplary example of a patent marketing scam. Examining the Federal Trade Commission’s (FTC) complaint against World Patent Marketing (WPM) can help inventors better understand the defining characteristics of patent marketing scams and take steps to better protect themselves, such as by hiring a reputable patent attorney.
The calling card of the gullible inventor scam is telling inventors they have a product that will make a lot of money without investigating whether even a single unit can be sold profitably. An honest attorney will help you understand how much you will need to charge for your product per unit, versus manufacturing cost, to turn a profit—this is often at least six times the manufacturing costs. The consequence of this is that many prospective products don’t have a chance of being profitable.
On the other hand, a patent scam looking to take advantage of the gullible will tell you something like, “This is the kind of product that could make half a million a year.” Admittedly, if your only goal is to get an inventor to cut a check, this is a much better sales pitch than telling them that most goods cannot be profitably sold. Patent attorneys regularly wade through prior art searches showing hundreds of items that are legitimately good ideas that were never profitable enough to be sold. Saying that a product has potential before knowing the selling price and the cost of goods sold is foolish.
A reputable patent attorney will present to you a list of the hundreds of patents they have secured, while an inventor scam will claim to have helped clients secure marketing agreements with major retailers, without providing clear evidence of such.
The gullible inventor scam relies entirely on unverified two-party communication. Here is an example from WPM’s website:
In court documents, WPM admitted that it never secured a marketing of sales contract with any of these venues, or others they claimed to have a working relationship with. But how would a potential customer know whether this claim was true or false? The FTC had investigators with the subpoena power necessary to go through Target’s records, for example, but the average person does not have that.
One of the services WPM offered was patent filing. One way to tell if patent applications are actually being filed is to ask for a list of issued patents. People ask me for this from time to time. I have prosecuted about 200 original non-provisional patent applications to issuance, and it can be a bit overwhelming to go through all that. However, this list shows third-party verification that I have actually done what I said I was going to do hundreds of times. WPM had no such list and seemingly no one asked for it.
However their website didn’t lack for success stories, with more than two dozen collected on the site. The blurb for Print Glow, a “multi-purpose glow in the dark technology,” starts out:
World Patent Marketing CEO and Creative Director, Scott J. Cooper, calls Print Glow “perhaps the biggest innovation in printing since the Gutenberg printing press”.
The company’s success stories page is littered with high praise for many improbable-sounding inventions, including Trivia Candy (“a mobile trivia app that syncs to [movies] in real time”), Squatch on a Box (described in a press release as a fully posable sasquatch figurine with magnetic accessories), Supreme Diva Jeans (jeans with built in rear padding), and Time Travel X (“an exchange, like Bitcoin, that would act as alternative currency and provide funding” for a scientist’s development of time travel technology).
So, how did they do it? How did WPM make these wild-eyed inventions a success? They didn’t. According to the FTC, the company secured glowing testimonials from their clients early on, before clients came to realize that WPM would never make good on the promises touted in the testimonials.
But in the case of WPM, while they didn’t disclose honest information on their clients’ success even what they did choose to publicize on their website should have made any cautious inventor turn tail. No ethical patent marketing business would have taken on clients with products that clearly weren’t patentable, let alone had a chance of being profitable.
When working with a patent attorney, your attorney will always be your point of contact, whereas your point of contact with a scam company will be a salesperson always looking to extract more money from you.
Patent scam companies don’t make a profit from successful inventions. They make a profit from the usurious fees they charge hopeful clients who are all-too-willing to spend thousands of dollars in the belief that they will make millions.
Given the company’s advertised connections with major retailers and marketers, it’s no surprise that hundreds of hopeful inventors were eager to pay the firm thousands of dollars. A then 24-year-old student described to a journalist at the Miami New Times how he paid the company $4,000 from an inheritance in return for their assistance in patenting and marketing an social networking application for people with disabilities that the company told him “could make millions.”
But the company’s sales representatives kept telling him they needed more money to help cover the cost of developing his product. The young inventor secured $19,000 through a high-interest loan. Then his father withdrew $50,000 from his 401(k) and wired it to the company. Every week for a year, he emailed World Patent Marketing, asking how things were progressing.
And what did the inventor receive for his money? Nothing. As described by the FTC: “In the end, after months or even years of stringing them along, [World Patent Marketing left] most of their customers with nothing… Indeed, many of [their] customers end up in debt, or losing their life savings or inheritances, after investing in [WPM’s] broken promises.”
Whenever someone called WPM the call would go to a sales team. That team took down information, read a script about submitting the idea to some team for evaluation. A few days later the idea would come back with a glowing review, and a request for money. A patent application would be filed upon the receipt of payment.
Alternately, after seeing an ad for WPM and calling the company, an inventor would be told that the company’s board needed written description and drawings of the caller’s invention, so that the company’s ‘board’ or ‘review team’ could look them over and debate the merits of the invention. A few days after mailing the requested documents, the inventor would be called back by a salesperson who told them that the non-existent board had approved the idea, and they could move forward.
At this point, it became a business transaction. The salesperson would tell an inventor that by paying for the firm’s invention promotion services, they would be able to make money by either licensing their patents or through the manufacture, distribution and sale of their inventions. The salesperson would name prominent stores where their products would be sold and examples of successful products that had already been placed in those stores. They would also give projections of how much money the inventor would make, and even how the inventor’s creation would change the world for the better. These descriptions didn’t lack for detail, even alluding to the owner of WPM’s luxury cars and yachts.
None of this was real. As the FTC’s complaint stated, the marketing materials and claims of salespeople created “the impression that WPM customers’ inventions are actual products in the marketplace when, in fact, they do not even exist yet.”
But this didn’t stop WPM from charging dearly for their services. The first step in their process was a “Global Invention Royalty Analysis,” conducted by supposed Ivy League researchers who would evaluate the patentability and marketability of the invention. This cost $1,295.
Inevitably, the report would return with favorable recommendations, and a salesperson would call soon after to discuss the good news. This conversation would turn to the next step—securing a patent protection and marketing package. The protection element of this service would involve securing the inventor’s patent rights both in the United States and around the world. On the marketing side, the inventor would be provided with renderings of the invention, brochures, press releases, commercials, promotional websites, and more. Of course, the inventor would be urged to move quickly to secure “global patent protection.” (There is no such thing as a global or international patent.) These services cost between $7,995 and $64,995.
This process went on for as long as inventors would continue to fork over money, with WPM’s representatives never telling inventors that their odds of making their money back were nonexistent.
An invention scam company will bury a risk disclosure somewhere on their website which spells out the low odds of profiting, while an attorney will provide you with such a disclosure upfront during the initial consultation.
What drew the ire of the FTC is not so much that WPM provided services that didn’t really help anyone. Rather, WPM’s initial consultations with inventors focused on the potential upside of the ventures, rather than the cost risk involved. Invention development is an extremely risky business, with between 1 in 10 and 1 in 10,000 inventors recouping their investment. Those odds vary widely. The most idealistic odds, with 10% of inventors turning a profit, occur when most inventors are turned away and only the highest potential clients are retained. The latter case occurs when nearly every interested inventor is retained, with only very few people succeeding.
In the unique case of WPM, no one broke even at all. The FTC generally lets firms operate, whether they are geared toward helping the 1 in 10 crowd or the 1 in 10,000 crowd. However, these firms are required (by law or court order) to publish their success figures (which is how it’s possible to know their rates of success).
The business model of the most reputable firms is to take as little money as possible to see if the invention will fly (either be licensed or manufactured at a profit). I encourage my clients to take this path as well. The unpleasant reality is that the vast majority of patent ideas aren’t patentable, let alone profitable. I have advised innumerable clients that their conceptualizations need a lot of work to become patentable products, without which they have little hope of being either patentable or profitable.
A patent attorney will always be responsive to your needs, whereas an invention scam company will slow-walk you as much as possible once they have your money in hand.
Once an inventor signed a contract and made their last payment to World Patent Marketing, the phone suddenly stopped ringing. When they attempted to contact WPM for an update, they often had difficulty finding a representative who had any information about the progress of their invention.
If they threatened to make a chargeback or submit a complaint to another party, they would occasionally be given a conciliatory service to keep them happy, such as drawings, logos, sales banners, brochures, or website domain registrations.
In a few cases, inventors paid tens or hundreds of thousands of dollars to cover the cost of manufacturing their products, so they could be distributed and sold through the company’s partner retailers.
When impatient customers grew more vocal in their complaints, WPM responded with the threat of lawsuits on the basis of extortion or defamation, and even criminal charges. When one customer threatened to go to the BBB, they received a letter stating that she had “proceeded far beyond what the law defines as free speech and, instead, have engaged in an unlawful and intentional interruption of World Patent Marketing’s business.”
What did WPM’s customers ultimately receive in return for their investments? According to the FTC, a handful received patents, along with low-quality marketing materials. None secured third-party licensing or manufacturing agreements. None made their money back, let alone turned a profit.
In March 2017, the FTC brought an injunction against World Patent Marketing, with the company being forcibly shut down shortly thereafter. The company’s owner, Scott Cooper, and his companies were banned by the FTC from any further involvement in the promotion and marketing of inventions. Cooper was compelled to pay $1 million in fines, and to sell his $3.5 million home and turn over the proceeds. To date, only $2 million of the $26 million paid to the company by inventors has been located by investigators.
It should be noted that World Patent Marketing is far from unique—invention scams have existed for decades, and many continue to operate legally, despite their low rate of success.
For decades now, unethical firms have been springing up with the single goal of taking the money of the hopeful and vulnerable. Before the days of the Internet, print magazines in the 1960s and ‘70s ran ads in their back pages for firms whose unfulfilled promises were near-duplicates of WPM’s. 40 years ago, the New York Times stated that investigations into two such scam companies sold “an expensive service that usually does little more than puff up the customer’s ego.”
Nothing has changed since then. Efforts to pass legislation that would bring harsher punishments to bear on scammers have failed to pass. In the meantime, the FTC has worked tirelessly to quash these scams. As we’ve talked about previously, in the 1990s the FTC’s Project Mousetrap shut down five such scam firms after they had made more than $90 million from idealistic inventors.
For those who think that perhaps these companies aren’t quite as bad as they seem, perhaps the victims of an overzealous regulatory agency, consider the following. One invention promotion company that we keep tabs on was allowed to continue operation on two conditions: (1) they had to pay the FTC a $10 million settlement, and (2) are now required to publish an ‘affirmative disclosure statement’ detailing how many clients they have taken on, and how many have made royalties on their inventions exceeding what they paid the firm to patent and market those inventions.
I previously noted the success rate of such firms being anywhere from 1 out of 10 to 1 out of 10,000. In case you thought the latter figure was excessively dire, as of November 2, 2018, this particular firm’s figures from the past 5 years of business are as follows:
- Clients who paid for a ‘pre-development agreement’ and/or other services: 54,623
- Clients who obtained a royalty license with an unaffiliated company: 102
- Clients who have made more money in royalties and sales proceeds than they paid to the invention submission company: 15
In short, only 1 out of every 536 of their clients secured a marketing agreement with an outside company, and only 1 out of 3,642 clients have turned a profit on their ‘investment.’ The other 99.9725% are in the red, with only losses to show for their time and money.
Inventors who wish to protect themselves from the unscrupulous would be wise to turn to patent attorneys for assistance and a clear-eyed perspective on their inventions.
First, you need to work with a patent attorney who only advises on the patentability of inventions, helps to refine claims, and ultimately works to secure a patent. If you contract with a company that offers ‘one stop shopping,’ as was the case with WPM, you are at risk of being taking advantage of. Someone who offers both patenting and marketing services will be inclined to be unrealistic about the former in order to make money from the latter.
When you approach a lawyer, you need to come to the conversation with specific goals, such as “I want to license my invention,” or “I want to sell my product, with exclusivity.” Then, you need to be receptive to what the attorney has to say. If they are honest, they will be up front about the fact that the vast majority of ideas are not patentable, and that most patents do not turn a profit. Listen closely when they describe your likelihood of success, the short-term and long-term costs, and what can be done to ensure the best possible outcome for you.
Lastly, they should be completely transparent about how they handle any deposits you make, which should be placed in a client trust account until they have done the work necessary to earn those funds. According to California Law, you should be provided with a fee agreement which explains how money is secured in the trust account and applied towards legal fees and costs. This agreement should specify that you will be given a statement showing these charges and what payments are necessary to keep the fund at the required minimum balance (‘evergreen account’).
It is critical that you put your hopes and dreams for your invention in check as you investigate what possibilities are out there. Any ethical and honest patent attorney will be careful to put the brakes on your expectations. If an attorney or marketing representative promises you the world, that’s the only clue you need to know that their first priority isn’t your success, but your wallet.