FTC hammers invention, patent promoters with $10M settlement

The owners of an invention promotion operation that charged up to $12,000 to evaluate and promote consumers' inventions agreed today to pay $10 million in consumer redress to settle Federal Trade Commission charges that they deceived consumers across the country.

The defendants  -- Davison Design and Development and Manufacturer's Support Services -- enticed consumers with false claims about their selectivity in choosing products to promote, their track record in turning inventions into profitable products, and their relationships with manufacturers. They also deceptively claimed that their income came from sharing royalties with inventors, rather than from the fees consumers paid, the FTC said.

The settlement - which came after an 11 year court battle -- also bans the defendants from misrepresenting that they've helped inventions become products without disclosing whether consumers have profited from the product, and that they have a vast network of corporations with which they regularly negotiate licensing agreements. They also can't misrepresent that their services are necessary for consumers to license their ideas, and that they prepare objective and expert analyses of the marketability or patentability of ideas, the FTC said.

The FTC settlement requires the defendants to post on any Web site or advertising, and to furnish to prospective clients, an affirmative disclosure statement that clearly and unequivocally states:

• How many consumers submitted ideas within the past five years;
• Of those, how many were offered, and how many signed, agreements for defendants' several services including research, presentation, and licensing services; and
• How many consumers succeeded in licensing their ideas, how many made more money in royalties than they paid the defendants in fees, and the percentage of the defendants' income that comes from royalties earned from their customers' inventions.
• The statement must include, in bold print, how many consumers in the last five years made more money in royalties or sales proceeds than they paid the defendants, and the percentage of the defendants' income that came from royalties paid on licenses of consumers' products.

Specifically the settlement includes a cash payment of $6.9 million, plus other property valued at $3.1 million, the FTC said.

The Davison case was part of the FTC's "Project Mousetrap," announced in 1997.  According to the FTC Project Mousetrap was a law-enforcement sweep that brought federal and state charges in seven actions against companies and their principals involved in schemes purportedly to help independent inventors who tinker away in their garages late into each night in the hope of "building a better mousetrap."

The FTC, which brought five of the cases, said the defendants in its actions generated in excess of $90 million for their own pockets by exploiting the ideas, hopes and dreams of tens of thousands of consumers.

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