Global Development Services, Inc., an invention promotion firm with offices in Manassas, Virginia, has agreed to pay $1 million for consumer refunds under a settlement announced by the Federal Trade Commission today. The settlement also requires Global and its president, Kenneth A. Rogers, to give customers a written notice stating that, since the firm’s inception in January 1994, not one of its clients has received profits of any kind from an invention as a result of Global’s services. The FTC negotiated the settlement to resolve a complaint the agency filed in federal district court in May, alleging that the defendants’ invention promotion telemarketing scheme was fraught with misrepresentations about the financial gain its clients were likely to achieve.
At the time it filed the charges in this case, FTC Bureau of Consumer Protection Director Jodie Bernstein cautioned consumers that the chances of developing and marketing an invention into a commercial success are well below 1 percent. A free FTC brochure for consumers, titled “Invention Promotion Firms,” advises inventors to be wary of firms that will not disclose their success and rejection rates, and adds that “an invention promotion firm that does not reject most of the inventions it reviews may be unduly optimistic, if not dishonest, in its evaluations.”
The FTC said in the Global case that the firm has sold thousands of “product research” reports for between $488 and $788 each, and that hundreds of consumers have purchased Global’s patent and product promotion services, which it markets for an additional $5,990 to $8,990. None of Global’s product research reports addresses the specific market potential, patentability, technical feasibility or merit of the inventions, however, the FTC said. Moreover, the agency said, 99 percent of the patents filed for or obtained by Global’s attorneys are “design patents,” which protect only the external appearance of an idea, as compared to “utility patents,” which protect the utility or function of an idea and, therefore, provide far more legal protection.
Upon filing of the FTC complaint detailing the charges in the case, the judge immediately issued a temporary restraining order halting the allegedly deceptive scheme and freezing the defendants’ assets. Under the proposed consent judgment to settle the FTC charges and end the litigation, the asset freeze will be lifted upon payment by the defendants of $950,000 to the FTC to be used for consumer redress. The settlement requires the defendants to pay another $50,000 over five months for the redress fund.
In addition, the consent judgment prohibits the defendants from making any material false statement or omission in connection with offering their invention promotion services in the future. At the initial contact with each future customer, they are required to give the client a specifically-worded notice, which includes the statement that no clients have ever profited from Global’s invention-promotion services to date. Global is required to obtain and retain a signed copy of the notice from each new customer, as well as from each current customer who still owes money to the firm. The proposed consent judgment also prohibits the defendants from selling or transferring their customer lists. Finally, it contains extensive recordkeeping requirements, designed to assist the FTC in monitoring their compliance.
The Commission vote to accept the consent judgment for filing was 5-0. It was filed in U.S. District Court for the Eastern District of Virginia, in Alexandria, on July 17, and approved by the court on July 19.
NOTE: This consent judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the “Invention Promotion Firms” brochure, and the consent judgment and other documents associated with the case are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov
(FTC File No. 962 3121)
(Civil Action No. 96-676-A)