Protecting Yourself From Invention-Promotion Scams

These firms have become so damaging and pervasive that the Federal Trade Commission issued a statement warning against them: "When it comes to determining market potential, inventors should proceed with caution as they try to avoid falling for the sweet-sounding promises of a fraudulent promotion firm." For more information call (877) FTC-HELP.

So how can you separate the good from the fraudulent when it comes to getting help promoting your idea? Here are eight important tips to keep in mind when considering an invention promotion company:

1. If it sounds too good to be true, it probably is. Anyone who gives you extreme assurances on getting your product licensed or is a little too enthusiastic about your product is probably giving you the hard sell. Licensing is difficult and never a certainty, no matter how brilliant your idea. They know you believe in your idea and they capitalize on your own initial bias.

2. Treat this relationship like you would any other serious business relationship. Insist on a written proposal. Read and ask questions about the fine print and check the company's credentials. Be sure you understand what they are committing to -- and not committing to -- as well as what is expected of you.

3. Get references. If a company has a good track record and reputation, ask to speak to at least two other clients with whom they've worked. Then, actually speak to those clients. Note that if a company is in the business of bilking inventors, they can easily concoct fake references. Therefore, cross-check the validity of these clients. Ask them questions that you can verify, such as: What is your patent number? When was it issued? What manufacturer licensed your product? Where is your product sold?

4. Be suspicious of pay-upfront deals. For a legitimate operation, a modest upfront payment is reasonable if it's clear how the money will be used and the prices seem appropriate. An example of this would be $100 to $500 for the creation and duplication of a marketing packet, with which you should be provided copies. A legitimate company is compensated on its performance and results, usually in the form of a percentage of future revenues.

Even if they don't charge a lot out of the gate, more upfront fees may be coming. These companies have been known to charge a small fee upfront for a "feasibility study" and then come back with, "Great news! Your product can make it big!" This is the hook. They'll then ask for another payment, which typically ranges from $3,000 to $15,000, and which they claim will go toward costs like market research, a preliminary patent search or identifying licensing partners. I have heard from a number of inventors that after paying this money, they never hear from the product submission company again.