FTC Search & more
The Big Question:
By Stephen Paul Gnass
Scambusters: Table of Contents|
To check if a company has been investigated and/or fined by the Federal Trade Commission (FTC), enter the word INVENTION in the FTC's web site search engine and you will be able to view a list of FTC news releases about invention scam companies.
This is a lengthy reply because there is a lot of confusion about marketing firms, also known as invention promotion companies, invention development companies, or invention submission companies. Once you learn how to spot the invention scams, you will know exactly who to ask about their success rate.
After reading this article, hopefully you will understand that the question of success rate does NOT automatically apply to ALL companies that provide services to inventors.
One key way to spot these kind of firms is that they offer to handle everything from idea evaluation to patent search, patent application, invention promotion, submission,and licensing. They charge upfront fees anywhere from $3,000 to 30,000 (whatever the market will bear) often, in addition to a percentage of royalties. However, after collecting their high fees, these firms have no incentive to help the client because their intention is to make money by collecting the fees, not by marketing inventions. They are notorious for providing poor, ineffective and minimal services like filing weak or the wrong type of patents (design instead of utility). Sometimes they charge thousands for patent services and while the inventor assumes he's receiving a patent, he later finds out they filed a $10.00 Disclosure Document or a $75 Provisional Patent Application instead of a patent. They also put together generic evaluation reports that are literally worthless to the inventor, and do generic mailings to outdated lists, etc. Click here to read Spotting Invention Scams: We-do-it-all-for-you Warning Signs
After a free initial idea review, these scam companies claim that the idea has enormous potential and always promise inventors success, misleading inventors to believe that they will make a lot of money if they sign up with the firm. The FTC has investigated and charged many of these firms, finding their claims misleading and their services poor and not worth the high fees they charge.
This is where the idea of "success rate" came from. Since they charge such high fees and promise inventors success, they are mandated by law to disclose their "success rates" in their published literature to prospective clients. Success by the FTC is defined as how many people have at least received more in income than they paid in fees to the firm. In other words, if an inventor paid $10,000 to the firm, did the inventor receive at least $10,000 back in revenues? In my opinion, this is not a very good measure of "success". Yet looking at the fine print in their literature usually reveals that virtually "zero" people have even received more in income than they paid the firm!
Because of the increasing investigative expose's on TV about these unscrupulous firms, many people think that this question of "success rate" also applies to any and all organizations that provide any services to inventors. But this is not so.
On top of that, there is a problem because there is no standard definition for the word "success". When individuals ask companies and organizations about their "success" rate, what criteria makes a person a success?
The word "success" is a relative term anyway, isn't it? What is success? Most of us assume that we know what success is. But is there a standard definition for the word "success" in general?
Synonyms for the word "successful" include prosperous, flourishing, thriving, prospering, booming, growing, mushrooming, fruitful, lucrative, advancing, etc. But how do you ever measure and quantify these???
Is a person successful if he/she earns $10,000 from his invention? Or $100,000? Or $1,000,000? Or 100 million? At which point is he considered "successful"? What if a person spends 5 million dollars on his invention, has generated 1 million dollars in sales and is 4 million dollars in debt - is he successful or not? I would say that this is a matter of perspective - most businesses borrow money before they become profitable. So whose definition are you using?
Have you ever noticed that articles about successful people or companies also have unclear standards? Some people are hailed as successful entrepreneurs if they earn 5 million dollars a year, while others are considered successful if they earn $250,000 per year, and yet others are considered "equally" successful if they generate $25 million in revenues. They may all be inspiring models of success, even though financially the revenue range is worlds apart!
So is a person successful only if he benefits monetarily from his invention, and again, how much is enough? Or is he successful if he creates a socially beneficial product for a segment of the population (like the handicapped or sick children) that sells at cost, but earning no profits? What if a person is already wealthy or is just happy that his product is on the market and that people are benefiting from its use and he doesn't care about profits?
Is success determined by one's current status in life, or is it something that is determined by time? Is success considered what a person has accomplished over a one year period, or 5 years, or 10 years, or by what a person has achieved over his/her overall lifespan? Is a person successful only if he/she gets chauffeured in a limousine, owns a large house, eats in fancy restaurants, and travels around the world? Or are there an infinite variety of definitions for the word "success" depending on the individual person and his own private definition? By the way, are YOU clear on what success means to you? And does your definition apply to "everyone"? So do you begin to see that the term is really ambiguous?
The bottom line is that nobody can guarantee anyone success. I believe that ultimately, the true success of an inventor depends on several determinants, and I feel that most of these are internal to the inventors. Some of these include:
I must admit that there are a "tiny handful" of legitimate companies that take on products in the idea stage and do "everything" to commercialize them, taking their fees only as a percentage of royalties. But these companies DON'T CHARGE the inventors any upfront fees (maybe $100 processing fee), and are EXTREMELY PICKY about the products they accept (since they will be paying for all the development costs). For this reason, they normally accept only about 1/10th of 1 percent of the products submitted to them. As you can see, the majority of inventors will have to take another route!
Inventing is actually an "A-La-Carte" Process: Keep in mind that inventing is an a-la-carte process. Many legitimate organizations that help inventors only specialize in just a part or phase (but important part) of the entire puzzle - and you will eventually work with a variety of companies that specialize in different aspects of the invention process. Included in this are university evaluation services, patent attorneys, prototype makers, trade shows, advertising vehicles, etc. So you will deal with a patent attorney for a patent, and a prototype maker for a prototype, and an evaluation center for an evaluation, or a manufacturing company for molds/samples/product runs of your product, etc. A different company for each different function.
And the true measure of their success is not "success rate", but whether they provided the service that they offered their clients, and whether they have SATISFIED CLIENTS as a result of providing effective services. Did they fulfill an important need in the invention process? Were people happy with their services?
For example, we all know that a patent attorney specializes in filing patents. The filing of a good patent plays a very important part in the potential success of the product. Yet, having a patent - in and of itself - does not guarantee that the inventor will succeed. As we've stated, there are many other factors that enter into whether the inventor ultimately succeeds or not. So the question of "success rate" does not apply to a patent attorney. What the inventor does with the patent, is up to the inventor, and is not the responsibility of the patent attorney. Nor should a patent attorney be expected to be a marketing wizard or genie in predicting the invention's future. Many times, because inventors ask, patent attorneys feel obliged to give inventors their opinions on the "marketability" of the invention. But patent attorneys are only qualified to give inventors their opinion of "patentability" (whether a product qualifies to receive a patent). Once the patent attorney finishes his patent services, he has performed his job and his duty. And it's the same thing with prototype makers, trade shows, advertising vehicles, etc.
So what you're really looking for when shopping for and hiring a patent attorney (or another specialized service) is one that is efficient and known to provide "high quality" patent services for a reasonable price. Using the example of a patent attorney, you want to find out about:
1) the patent attorney's experience;
2) the patent attorney's competence;
3) his fees and billing terms
For this reason, it is useful to ask for references of some satisfied (yet not necessarily successful, or even on the market) clients.
Again, what you're really looking for when shopping for any services that you'll be using, is that their services are high quality and that they do a good job - like with a dentist, or an auto mechanic, or plumber, etc. Depending on the price of the service, sometimes people "gamble" with a new company. For example, someone may shop for competitive rates and decide to try out a new car mechanic if the price is right for an inexpensive and routine job like getting new car tires. Yet for the more expensive services, like getting a new carburator, etc., people generally try to get referrals from friends, etc. to minimize the risk factor. The same is true with a-la-carte services for inventors. Sometimes inventors can gamble with a standard, low price service. Many times, the more expensive services like good patent attorneys and other needed services are found by word-of-mouth and referrals.
Yet remember that referrals are never fool-proof. Sometimes what works for one person, doesn't work for another person due to possible personality conflicts, etc. So the inventor is ultimately responsible for qualifying the company and making the ultimate decision to contract with a service provider. But now that we know where the term "success rate" came from, and that "satisfied clients" are the true measure of a specialized invention service provider, now we're on to a new chapter - which is "how to shop for invention services" - which is coming soon. Subscribe to our free e-mail newsletter to receive notification of new articles and information related to invention.
On a final note in regards to the subject of "success", remember that having a great idea is not like winning a "lottery", but is a project that takes planning, research, and implementation of an action plan. Doctors, lawyers, dentists, and other high-earning professionals don't accomplish their vocations overnight. The best athletes work out diligently everyday tobecome their best. And successful entrepreneurs don't make it overnight either. It's true that you usually hear about successful people after they make it, but usually they have worked for years at it, struggling and learning from their failures behind the scenes, until they finally achieve success (of their individual goals)!
Determine within yourself whether you are committed enough to your idea to follow through with the initial education phase, the testing and evaluation phase to determine whether the idea is a "go" or a "no-go", and later the fees that come with the different services you will legitimately need as you go along.
While success "could" happen quickly for you, it usually does not. I believe that success is when preparation meets opportunity. On a positive note, it can be a fun and exciting learning process and experience for those who are willing to enjoy the journey.