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Scams

Inventor scams are numerous. They include not only promising to "try" to find a marketer or licensee for you but "getting you a patent" and "creating 3D videos" and "making works-like, and maybe even looks-like, prototypes" and perhaps many other things that make sense BUT ONLY IF YOU ACTUALLY K-N-O-W, NOT JUST ASSUME (or guess or hope), THERE IS A SOUND BUSINESS CASE for your invention.

So just what is a "scam"? How do you tell a "scam" from legitimate business? If you want a magic answer there is none. Inventors scam themselves all the time. "I just need a patent and I'll get rich." "I know they'll buy my product when they see a real one." "All it needs is someone to do the 'engineering' and it will work." And the famous "Everybody will want one!" These are all scams but they're perpetrated by the inventor and often primarily to fool themselves. (We won't even get into the "perpetual motion and "free" energy FRAUDS committed by inventors.)

But inventor scams weren't what you wanted to know about? They should however give you some clues. Scams all have one thing in common, they promise (or at least seem to promise) a GREAT future result, with essentially NO SUBSTANTIATION for that result, from very little effort and/or (relatively) little cost. And they use YOUR ego, greed, and misconceptions against you. Let's look at all the factors separately: big promise, no substantiation, small cost.

Big Promise

A fortune in royalties. The scammer doesn't even have to say it because it's what you already expect! And you expect it because you simply don't know any better. In grade school you thought you learned that patents always make the inventor money--you may even think they are an essential ingredient in spectacular profits. The reality is that studies have shown that less (probably substantially less) than 2% of all patents ever issued have, or will, make anyone any money. Less than 2%! IBM, the U.S. company that gets more patents than anybody, in an internal study some 10 years ago determined that of the 10,000 of their own patents studied only 40 had real value. Only 40. That's a whopping 0.4%.

So why does IBM continue to get around 3,000 patents year after year? Because, for them, the file "early and often" scenario of applying for patents is far cheaper than the alternative of studying the potential value of a budding technology or invention. So they spend the $3,000 or so it costs for their mostly in-house patent practitioners to get a patent rather than spend $10,000, $20,000 or even more it would take to analyze future business viability. And their method pays off big time. That tiny little 0.4% nets, not grosses, nets about $2 billion a year in licensing fees alone (they don't account separately for patents where they protect their own proprietary exclusivity to some profit stream from their own products). But you can't afford the "file early and often" method of applying for patents in the hopes for a big payoff.

A fortune in royalties or millions in profits. Again, it's what you tell yourself. The scammer doesn't even have to say it though even a nickel scammer will likely allude to those profits often, or, at least your imagination will tell you that they do. "It takes money to make money." "It takes money to make money." The mantra runs through your brain when contemplating expending money toward marketing your invention. But wait, why doesn't the "A fool and his money are soon parted." saying run through your head instead? Would you believe: "it's not what you want to hear"? While the first saying is UNDOUBTEDLY TRUE it is NOT equivalent to saying "this specific expense WILL return 10 or 100 (or more) times its cost in profits."

In fact, if you have not made a realistic probability study of the prospective return on any investment the reality is the above statement is equivalent to saying "this foolish expense WILL return 10 or 100 (or more) times its cost in profits." See what a difference switching that one word, "specific" to "foolish," makes. If you cannot make a realistic expected-return BUSINESS case for an expense then the odds are overwhelmingly that you are just a fool parting with money, not using money to make money but merely spending money in HOPES of making money.

That is NOT what IBM does. They know from their track record that only 1 in 250 patents they get will be a winner but they don't know which one. They also know that the cost of analyzing to figure out which that one is will be substantially higher than just getting the patent. And they also know that 1 in 250 will net an annual average of $50 million in licensing fees versus the $1.25 million ($2,000 in filing fees plus $3,000 in in-house costs times 250) in average annual patenting costs for the 250. They are spending "calculated money to make calculated expected profits."

What your mantra should be therefore is "it takes calculated expenses (money) to make expected profits (money)." I know, pretty crummy mantra and this page won't tell you how to determine either the calculated money or the expected money but other pages on this site and other sites linked to will tell you how to get a handle on computing both of those numbers.

Do the people who you THINK are "promising" you the big royalties or profits know you have NOT computed either the calculated expenses or the expected profits numbers? You betcha. They count on the fact that you assume your invention idea is that one in 250 (actually far more than out of 250 because we're not counting all IBM's engineering "inventiveness" that is NOT being patented).

No Substantiation

Is the fact that IBM nets $50 million a year in licensing fees substantiation for you getting a patent (or spending money to find a licensee or for engineering or whatever)? Of course, but it's very weak in that all it really says is that it IS POSSIBLE to achieve that kind of return on a (theoretical) $5,000 investment. The actual investment IBM makes to get it though is $1.25 million---not counting IBM's development cost!

Is the fact that one specific inventor made a million dollars after using some particular service substantiation for your invention being able to make a million dollars? Is it substantiation for the particular service being able to make a million dollars for you from your invention? No in both cases. If you further knew that the service provider had "helped," for $55 million in up front fees from 5,000 inventors, only that one inventor to achieve a million dollar return (and one other to recover their $11,000 costs plus a little) would that substantiate the service provider's ability to make your invention a million dollar winner? Of course not, the reality is they "lost" $54 million of the $55 million "invested" in them. ("Lost" it right into their own pockets.)

And by law "invention promoters" (and ONLY "invention promoters") must tell you their miserable track record up front and yet inventors still throw probably some $200 to $300 million a year to them. And that's not counting the probably $1.5 to $2 billion a year spent on consultants, patent practitioners (both agents and attorneys), prototypers, engineers, industrial designers, machinists, packagers, tooling makers, contract manufacturers, etc. that are NOT obligated by law to tell you their track record in assisting inventors achieve at least profits, if not millions, from their inventions.

Is that substantiation that you'll lose everything you invest in your invention? Well yes, but again it's weak. What it does tell you is that sight unseen it would be very prudent to bet $100 or $1000 (or more or less it doesn't matter) AGAINST any and all inventors or their inventions' success.

By now you should have figured out that any substantiation for the possibility of your success with your invention MUST be SPECIFIC to your invention, or at the very least with similar types of inventions in your invention's field (that's why big corporations wind up with a line of products for a particular field, each item in the line partially substantiates the need and the saleability of the next item in the line). Obviously your invention standing by itself does not have any such direct line substantiation. Also obviously it will take some effort, and perhaps some expense, to provide any specific substantiation for the possibility of the success of your invention. Can you get that and what will it cost?

Of course you can get that and I highly recommend you make the effort to do it yourself via the suggestions in the book "Will It Sell?..." $  which I wrote (so my recommendation may be biased). Can you get it by paying for it? Of course (and I'll be glad to do it for you) but you first must be willing and able to understand what you're going to get and what it means. The scam artists will be glad to have you believe that's what they are going to do for you too. Unfortunately what they actually provide is something totally different that often fools the business naive (that's you) into thinking a bona fide marketability analysis on their invention has been performed when the reality is that only the market for their field of invention has been (generically) described.

What is the difference between "the market of" and "the marketability of"? It's a chasm a mile wide. What do you get for the $99 to $1100 you pay someone to do a market study or a marketability evaluation of your invention? It depends but here's the bottom line: you'd better know BEFORE you pay your money. What does their description of their future report actually say it will be? The scammers contracts often actually say their report will not be a marketability study or evaluation of your invention---and their contract is what rules if it goes to court, not whatever they might tell you vocally.

Ask what percent of the inventions the service provider studies they actually suggest inventors continue working on. The scammers will have to either lie or tell you 95% (plus or minus a little) while the honest evaluators will tell you that it's under 20 percent that should seriously be pursued or maybe a bit bigger percent that might warrant CAUTIOUS additional effort--i.e., collecting enough facts to be able to make a valid go/no-go decision.

A "market" (pseudo)study, which is what the scammers provide, will focus on the general market for whatever BROAD category your invention falls in. If it's gardening they'll talk about the multi-billion dollar market for gardening products but they won't identify the 7 shovels already on the market that yours would compete with. They might provide some patent prior art but they will plead they aren't attorneys and haven't evaluated your invention against what other's can legally do even if you get a patent for the specifics of your invention. And they will suggest or imply that due to the size of the market and/or it's growth that there is room for your invention and your invention "should be" able to secure a (lucrative, they let you imagine) niche.

To summarize you need substantive information on what your study dollar will produce and you need your dollar to produce substantive information SPECIFIC TO YOUR INVENTION on it's probable viability in the marketplace.

Low Effort and/or Cost

Do you want to do a lot of (ugh) work to profit from your invention? Do you want to put a lot of money at risk that you might lose if it turns out your invention can't be gotten to market or fails if it does get to market? Probably no to both---and that is what the scammer is counting on. They promise to make it cheap and easy on you. Maybe at first they will do a FREE "examination" or "consideration." But probably not an "evaluation" unless they contractually spell out it will not be a "professional" one. Or maybe they'll charge a "nuisance" fee---to keep the riffraff that just want to submit idea after idea 'til maybe they come up with a winner idea. You don't have to do anything, just send in the idea and sign the non-disclosure form and mini-agreement (which may be embedded in the non-disclosure).

Piece of cake---you KNOW they'll love the idea (and, so you hope, take it and run with it paying you your millions as a fair royalty). And OH MY GOSH, lo and behold, in a week and a half, maybe two, you get this fantastic phone call---everybody in the office loved the idea. They all think you should take it to the next step---unfortunately their main office, sad to say, (a bunch of crass dweebs--or so you catch the implication) has a strict rule of not even looking at ideas until after a "professional market study." So of course the next step is you write them a "small" check--it can even be a credit card cash advance check if you like <grin>--for maybe $745 or $895 or some not too uncomfortably high number.

"It takes money to make money" you tell yourself and write the check. After all if the folks in the office loved your idea the odds are the "professional market study" will show it's a winner too? (You've forgotten all about IBM's one out of 250 already, eh?) A month and a half or two months that you can barely stand creep by (hey, a good study takes time) then a caller says your report is in the mail they think you'll love it! They are so confident of that they included a contract with several options. They'll call you in a couple of days after you've had a chance to study the report and contract. "THE BOOK" arrives. It has a fancy cover, it's hardbound, it's 70, maybe 80, pages, it shows the market your invention fits in is BILLIONS BIG, possible returns could be millions, there are NO patents like your invention...

What you don't know (or notice) is no market study specific to your invention was done, the name you gave your invention has simply been substituted in one of 50 or 80 generic market area computerized word processor "reports" the company has in stock, the fancy cover and hard binding cost a mere $4, the page count is inflated by large type, large margins, double spacing, many nice bold headings, and a sheaf of patents with a boilerplate (except for a few select lines) "patentability opinion," that when you break a multi-trillion dollar market like the U.S. (or the world?) into only 50 or 80 segments every segment will be BILLIONS BIG, that possible losses are NOT impossible, and that several of the patents presented also solve the same problem you think you've solved...

You savor every word in the report and dream of the riches it implies, you scan briefly the (obviously inferior) prior invention patents, you try to read the contract but it's boring and complicated and convoluted and small type and you haven't even gotten through the first page when you get the next call.

"Did you understand the report? It shows that the opportunity is there NOW. It shows that there is nothing like your invention NOW (who knows what tomorrow may bring). The options are YOU can KEEP ALL the royalties if you pay ALL the costs of "seeking a licensee"--luckily just what their firm specializes in--or, if they share in the expenses--and RISKS (they won't lie to you <big grin>) there are risks, MANAGEABLE risks,--they would take a portion of your royalty, only 20% if you participate with $18,000 instead of the full cost $25,000 or only a maximum of 40% if you only contribute $11,000--you'll never get less than 60% of THE ROYALTY when working with us. Did you have any questions about the contract? Do you see where to sign and choose your preferred option?"

Your head is swimming. Royalty checks flowing in would improve your situation immensely. But you don't even have the $11,000. So you tell the caller you can't come up with that kind of money "right now." "Not a problem" you're told, "remember we're specialists we deal with this problem all the time, in fact we're affiliated with a financing group, and I have their paperwork right here if it comes to that, but let's explore some other options first..."

The bottom line is that via credit card cash advance checks, or student loans, or a second mortgage on your house, or borrowing against your life insurance, or, as a last resort, getting a "loan" via their affiliated financing group they will (with a little shaming you for even suggesting you don't believe in your own invention thrown in) do everything in their power to convince you that you should "invest" this money---and it's almost (if not actually) nothing out of pocket now for those (implied) large royalties (not guaranteed, of course, but, in your case, heh, heh... because of your genius) SOON.

But once you're committed to the $11,000 (or maybe as a special deal they wheedle it down to $8,000 to break your resistance) you're committed whether a royalty check ever shows up or not. And NOT is exactly what will happen 4,994 times out of 5,000. But they convinced you, **with no substantiation** **of future income** and **low (out of pocket) cost**. Is it fraud? No, not technically which is usually what the courts, if you sue, will evaluate. Even if you got a "loan" via their affiliate the records will show a transfer of $11,000 (otherwise it would be fraud) and you'll have signed just as iron clad a repayment agreement as if it was with your credit card company or mortgager or student loan banker.

But what will you get for your minimal (up front anyhow) money besides a big (in your terms anyway) debt? If you're lucky a semi-professional flyer which they will call by a fancier name such as "brochure" or "portfolio." The flyer will be a one sided sheet of paper with (usually) an image of your invention of some kind, if you sent them a reasonable one that's what it will be, and a few hype bullet points. And the flyer will be slapped together with a form cover letter and blindly mailed to maybe 100 company addresses picked from a not to carefully culled list at least based, if you're lucky, on SIC code. That's it! Total cost to them for everything they do for you will likely be under $1,000 including what they pay employees (or freelance contractors) and including what you got for your $745 "market study."

And that's just the obvious scam scammers. What about the patent attorney who says "I can get you a patent on that" and doesn't clue you in that the patent claims will be too narrow to protect your interests due to prior inventors with, in essence, the same idea. What about the foundry that will take your money to cast your part without telling you a metal stamping would be far more cost effective? Please, read and sign the "I Agree..." $  article before contracting any of them.

Why not "Money Up Front"?

Often well-meaning people will tell you the sure sign of an invention scammer is that scammers ask for "money up-front." Unfortunately those people are wrong as it regards general business dealing, what they mean their wisdom to apply to are only those "invention promotion companies" that (more or less) promise to "do it all" for you---especially to try to get you a licensee. The reality is you need to LEARN about business and LEARN about the specifics of the market for your type invention and LEARN about the various manufacturing processes that might be appropriate and LEARN about what really happens in marketing and LEARN about the distribution channels available and appropriate to your invention and then LEARN some more. And if that is too much effort for you believe me you will soon enough LEARN that there are plenty of people willing to accept your money and do, or attempt to do, what you say to do.

Are You a Target

Below is a link is to the USPTO's "Are You a Target" brochure in a .doc format. But first, just a couple of comments to introduce the brochure. Be aware that there is no 1 question test to identify a scam, you must deal with a preponderance (or whatever reasonable level you are comfortable with) of answers or evidence to reach your conclusion about whether to trust someone or not. For example the brochure states one of the "hooks" of scammers is "the 'free' inventor's kit" and that's true--unfortunately many, many legitimate operators have to offer "'free' inventor's kits" or information too or guess what, novice wannabe inventors WON'T EVEN PAY ATTENTION TO THEM---it's almost impossible to help a stupid sap without first getting their attention and that you have to do just like the folks that want to rip the stupid sap off. (Would you have accessed InventorHome.com if it cost $2? Would you if a friend had told you the $2 was worth it? How would your friend have figured out the $2 was worth it? What if the cost were 37 cents and a letter or a 10 minute phone call?)

My suggestion, if you have any doubts don't trust them until you get a second opinion from someone who's experience and business judgement you already trust. Talking with one person or firm is rarely a good way to understand (or even guess) who to trust or not. After you've talked with at least half a dozen people or firms (and, hint: learned a bunch) you'll have a much better perspective. And, like it or not, the end decision is still yours as are the risks. Now to the brochure:

"Are You a Target?" (official .doc version??? gone missing??? from www.uspto.gov)

(HTML version $ )

Also see the links in the SCAMS! box on the Home page and the Inventor Scam Come-ons page.

Copyright 2004 James E. White
All Rights Reserved