FTC Charges Invention Promotion Swindlers with Contempt

The Federal Trade Commission has filed a civil contempt action against four individuals and eight business entities for allegedly operating a fraudulent invention promotion business in violation of a court order.

The individuals were employed by International Product Design Inc., which the FTC charged with fraudulent business practices in 1997. A court order issued in 1998 prohibited Julian Gumpel, Darrell Mormando, and Greg Wilson from deceptively marketing invention promotion services, but Gumpel later revived the same scam under the name, “Patent and Trademark Institute of America” (PTI).

For a fee of $895 to $1,295, PTI promised to evaluate the marketability and patentability of inventors’ ideas, but its evaluations were almost always positive and were not meaningful, according to the FTC. For a fee of $5,000 to $45,000, PTI’s clients were offered legal protection and assistance to obtain commercial licenses for their inventions. They also were told that PTI would help them earn substantial royalties from their inventions, but PTI did not help consumers license their inventions, and clients did not earn royalties.

The FTC alleges that PTI’s business practices violated the court order, which prohibited the defendants from falsely promising to evaluate invention ideas and falsely claiming that consumers would profit financially if they bought PTI’s invention promotion services. The FTC also alleges that PTI never sent consumers the “Affirmative Disclosure” form required by the order; the form should have disclosed PTI’s non-existent track record in bringing inventions to market.

On January 8, 2007, the Commission initiated contempt proceedings against Gumpel and eight corporate entities under his control: Technical Lithographers Inc., d/b/a Patent and Trademark Institute of America (PTI), United Licensing Corporation, International Patent Advisors Inc., Datatech Consulting Inc., International Product Marketing Inc., Unicorp Consulting Inc., d/b/a/ UNI Corp. Inc, Azure Communications Inc., and London Communications Inc.

On January 10, the U.S. District Court for the Eastern District of Virginia issued an order placing PTI in court receivership pending the outcome of the contempt litigation. According to a report prepared by the receiver, PTI has taken approximately $60 million from more than 17,000 consumers since 2000 but could not identify a single successful consumer.

On March 9, the court issued an order to show cause why Michael Fleisher, Wilson, and Mormando, a/k/a Darrell Johnson, should not also be held in contempt for violating the court order issued in 1998. The FTC alleges that they knew about and were subject to the court order, but repeatedly violated it in their roles as managers and salesman for PTI. A hearing on the FTC's charges against all of the defendants is scheduled for April 30, 2007.

The FTC has established a phone line for consumers who may have been harmed by PTI's conduct. Consumers may call 202-326-2926 for more information.

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 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. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.

MEDIA CONTACT:

Frank Dorman,
Office of Public Affairs
202-326-2674

STAFF CONTACT:

Elizabeth Tucci or Matthew Wilshire
Bureau of Consumer Protection
202-326-2402 or -2976

(FTC File No. X97-0071)


A promotion firm stands accused of offering inventors the moon but only taking their money

Richard J. Dalton Jr.
Consumer Watch

March 18, 2007

When Marie Gonzalez of Bellport was scrubbing toilet bowls, a light bulb went off: She realized the surface would be much easier to wipe if the toilet seat's hinges were flush with the surface.

So Gonzalez, who runs a cleaning business, invented a toilet seat with hinges that don't protrude.

She contacted the Patent and Trademark Institute of America, or PTI, a Garden City company that promises to help inventors turn their ideas into products.

Gonzalez paid PTI $1,295 in December 2005 for a book to assess the potential of her invention and then $10,150 two months later to patent the idea.

So far, the only moneymaker has been the Patent and Trademark Institute.

Gonzalez is not alone, according to documents filed earlier this month by the Federal Trade Commission in U.S. District Court for the Eastern District of Virginia.

PTI's principal director, Julian Gumpel, 55, of Roslyn Heights, had a previous run-in with the FTC when his company was based in Virginia. The agency filed a lawsuit in 1997 charging him and co-defendants with deceptive acts in violation of the FTC Act: lying to customers that the invention promotion services would make them money. Gumpel, who declined to comment for this article, settled with the FTC in 1998, agreeing not to falsely promote his patent services.

But in recent years, the FTC received complaints about PTI from consumers around the country, including a letter from the New York State Consumer Protection Board asking the FTC to reopen its investigation of Gumpel's activities.

Full story.

 


Patent schemes fleece inventors

Patent schemes fleece inventors

By AKWELI PARKER, Knight-Ridder
First published: Sunday, June 25, 2006

PHILADELPHIA -- Sandwiched between the pitches for videos of young women "gone wild" and skin blemish eliminators, insomniac TV viewers may also notice temptations from firms that claim they will turn your ideas into money-earning inventions.

Savvy inventors say it's best to just change the channel.

Scam artists outweigh the good guys 100-to-1 said Jeffrey Dobkin, a marketing consultant and a director of the Philadelphia-based American Society of Inventors.

"We had one guy who spent $23,000 with a patenting scheme company," and wound up with nothing to show for it, Dobkin said.

Tracking the industry is an inexact science since many of the companies open and close quickly.

But there are dozens, if not hundreds of them, and the U.S. Patent and Trademark Office estimated in 2002 that consumers lost $200 million a year to the schemes. Experts say it likely has gone up since then.

Dobkin said that after an inventor calls seeking help with his creation, the companies ensnare their prey using a combination of sweet talk and escalating financial commitment on the part of their mark:

"They say, 'Don't tell us, we don't want to steal your idea.'

"They say, 'This is so great, we've never heard of a mousetrap. ... We'll do an investigation of the industry,' and charge you $500.

"They give you a leather book -- it's full of all boilerplate -- rather than a true custom analysis."

Next, Dobkin said, they promise, " 'We'll do a patent search,' and they'll charge, well, whatever they think you'll pay.

"They'll 'alert the industry,' and that costs $3,000.

"They keep fleecing you until you're out of money."

Full story.


Court Halts Bogus Invention Promotion Claims

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.”

Full story.