Court Halts Bogus Invention Promotion Claims
Orders $26 Million in Redress For Consumers; USPTO's Director Jon Dudas Praises Court Decision
A U.S. district court judge has ordered an invention promotion operation to pay $26 million in consumer redress and has ordered a permanent halt to the bogus claims the company used to recruit customers. The court also ordered that in future dealings with consumers, the company make specific, detailed disclosures about their track record in helping inventors market their ideas. "This affirmative disclosure statement is needed due to defendants' blatant, varied, and repeated misrepresentations . . . " Judge Gary L. Lancaster of the U.S. District Court for the Western District of Pennsylvania wrote in his decision.
"This outfit is typical of invention promotion scams," said Lydia Parnes, Director of the FTC's Bureau of Consumer Protection. "They touted their ability to turn inventors' ideas into profitable products, but fewer than one percent of the customers who invested in their services got royalties from their patents that amounted to more than they paid the promoters."
In a complaint filed by the FTC as part of "Project Mousetrap," the agency charged that the company used Internet ads and classified ads to lure inventors across the country to sign up for their services. The agency charged that they made false claims about their selectivity in choosing products to promote, false claims about their track record in turning inventions into profitable products, and false claims about the relationship they had with manufacturers. They deceptively claimed that their income came from sharing royalties with inventors rather than from the $800 to $12,000 fees they charged inventors.
Jon Dudas, Under Secretary of Commerce for Intellectual Property commented, "Judge Lancaster's decision sends a strong signal to all those invention promotion and licensing firms that prey upon America's independent inventor community that fraudulent and unscrupulous practices will not be tolerated."
The agency alleged that the defendants made false and misleading statements that:
* Consumers who bought their invention-promotion services stand a reasonably good chance of realizing financial gain.
* Their invention-promotion services helped many of their customers' invention ideas become profitable products.
* Their invention-promotion services helped specific inventions become profitable products.
* That they have a vast network of corporations with whom they have ongoing relationships and regularly negotiate successful licensing agreements.
* That their invention marketing services are necessary for consumers to license their invention ideas.
* That they prepare objective and expert analyses of the patentability and marketability of consumers' invention ideas.
Judge Lancaster agreed that the company had engaged in deceptive practices, noting that even after he had issued an order barring deceptive claims, "defendants continued to engage in deceptive practices, albeit in slightly different forms. Based on this past pattern of conduct, there is a very real danger that defendants will alter their business again, yet continue to engage in wrongdoing."
To prevent those practices, he ordered the company and its principals to pay $26 million for consumer redress and to provide any future clients with a 10-point disclosure statement to allow them objectively to measure the value of the defendants' assistance. He ordered that when they highlight or advertise specific consumer products or ideas in advertising, they disclose whether the inventor earned royalties that exceeded the total amount of fees paid by the consumer to the defendants. If the defendants claim that they have "matched" or "targeted" an invention to a corporation, they must disclose how many submissions they have made to that corporation in the past five years and the number of licenses entered into with the corporation over the past five years. He required them to disclose that the "Pre-Inventegration" and "modeling" services they sold to inventors were not necessary to achieve licensing agreements and that they disclose that they are not providing consumers with objective or expert opinion of marketability or potential commercial success.
The court also established record keeping provisions to allow the FTC to monitor compliance with Judge Lancaster's order.
Defendants in this case were Davison & Associates Inc., now known as Davison Design and Development, Inc., Manufacturer's Support Services, Inc., George M. Davison, President and CEO, Thomas Dowler, Gordon M. Davison and Barbara Miele-Davison. The defendants are based in Pittsburgh, Pennsylvania, but have operated nationwide.
Copies of the FTC complaint, and the courts Findings of Fact and Conclusion of Law and the Order for Permanent Injunction are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.htm. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to thousands of civil and criminal law enforcement agencies in the U.S. and abroad.
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