Question 8. A Brief Introduction to Scam CompaniesAre you confused about companies that assist inventors?
Do you always wonder about the credibility of *any and all* companies that work with inventors? If so, it's not surprising since there is a lot of bad press about invention scam companies. Many people are even confused about what legitimate companies do or don't do for inventors!
To help you spot these firms, following is a short summary that should give you a good guideline, written by Stephen Paul Gnass who is also the Executive Director of the nonprofit umbrella inventor organization, The National Congress of Inventor Organizations .A Brief Introduction to Scam Companies
By Stephen Paul Gnass
In brief, invention submission/marketing firms thrive off of first-time inventors who believe they have a million-dollar winner but don't want to do any of the work themselves. Many times the reasons for not being able to personally work on the invention are valid - such as they work full-time and have families so they have no time or money to spend on developing the idea themselves.
But there are also several misconceptions in our society about "great ideas" that lead bright people to believe the scam companies. Such as the myth of being able to sell a raw idea outright, or the myth that you can just turn over your raw idea to some *magic* person or company who will "do it all for you". So most people with a new idea immediately start looking for a company that will buy or license their idea.
This is where invention promotion firms and marketing companies come in. Their ads on TV, radio and back of magazines offer to submit ideas to industry and they offer their assistance as a "one-stop-we'll-do-it-all-for-you" source. Because the scam companies advertise heavily on television, radio and magazines, they are the most visible companies and many people with new ideas go to them first. The scam companies feed off the inventor's misconceptions about inventing and this is how they end up taking off with the inventor's money, while the inventor's idea never takes off.
How can you tell whether a particular company is a scam company? The first clue is that they will send you a free kit in the mail with a pre-signed confidentiality (also known as a non-disclosure) form with general information about their services. They request that you fill out this confidentiality form with all the details of your idea after only a brief telephone inquiry from you! The truth is that only a handful of legitimate large companies will even agree to review a "raw" idea, let alone sign a confidentiality agreement.
Next the scam companies promise inventors success and say they can "do-it-all-for-you" in that they offer the entire process of development from the initial evaluation, to patent searches, to filing the patent, to invention promotion, submission to industry, and licensing the idea. These companies initially charge about $300-$500 for the evaluation, and $3,000-$10,000 or whatever the market will bear for the patent and other services.
As the well known quote goes, these firms promise to be " a jack of all trades", but are "masters of none". The patents they issue are usually weak or worthless "design" patents, and sometimes they only file a $10.00 Disclosure document which may even jeopardize the idea's future patentability. Next the inventor ends up waiting for something to happen for a very long time before either hearing that the company is a scam, or get nowhere when they try to find out about the idea's progress.
Over the past few years, some of these scam companies have been investigated and fined. By law, they are now required to include a disclaimer in their literature that states the number of successes they have had. Surprisingly, people still sign up with these scam companies and overlook the written words that usually say something like "zero people have actually earned more money than they have paid for services"!
The FTC has been conducting a law enforcement sweep called "Project Mousetrap". If you are in contact with one of these "one-stop-we'll-do-it-all-for-you" scam firms, we suggest that you contact the Federal Trade Commission (FTC) to either ask them whether the company is under investigation, or to let them know that you have already paid money to one of these firms (you may be able to get a portion back, though usually the chances are slim).
Additional information can be found on the nonprofit organization NCIO's Scambusters site and the FTC's web site www.ftc.gov. You can find a list of the most notorious scam companies at the FTC web site by entering the word "INVENTION" in the FTC's web site search engine. Here you'll find a list of FTC press releases about invention scam companies that have been investigated and/or fined.
Now, what about the right way to go about launching a new idea? The truth is that commercializing a new idea is a complicated process that takes time, energy, knowledge and persistence. It can take up to an average of six years to launch a new product. Considering that ideas are in different industries, and that the inventors have a wide variance in life and business experience, there's no definite road map for success - nor any one company that can do it all for you. Each part of the invention process is a very specialized area, especially for each different industry. Each inventor must ultimately carve out his own path to success, and even then, nobody can guarantee you success.
In the beginning stages, there are many steps that inventors must do themselves in order to put value into the idea and to develop ownership rights to the idea. This phase is called "research and development". We teach the general principles and guidelines for this phase through our Inventing #101 Home Study/Consulting Course, a program that takes you step-by-step through each part and also personally coaches you through telephone consultations. During this phase, some people even discover that the idea doesn't have the kind of potential and future they thought it did - which ends up saving them thousands of dollars which would have been spent on patents, prototypes, etc.
As a starting point, you can find a lot of free information at your local library, and at NCIO's site where we'll be adding free information each month.
We can't stress enough how vital it is that you learn as much as possible about the process of inventing before you ever start spending money on patents, prototypes, etc. Our belief is that if you educate yourself, and make sure that you do not abdicate your responsibility and accountability, that you will not only possibly save thousands of dollars, but will also greatly increase your chances of success.Back to top / Back to Frequently Asked Questions