Opening Statement Of Jodie Berstein Director, Bureau Of Consumer Protection At A Press Conference On July 23, 1997

Today we are here to announce the results of Project Mousetrap, a campaign targeting firms that exploit the dreams and enthusiasm of perhaps America's most sympathetic entrepreneur, the individual inventor. This is a crackdown on fraudulent invention promotion firms, companies that pretend to scrutinize an inventor's idea so carefully, and then offer their patenting and marketing expertise to only a select few that purportedly have tremendous commercial potential. All this for only $10,000 to $20,000 -- up front.

Fraudulent invention promotion firms target middle America -- the worker who tinkers away in the garage late into each night in the hope of building a better mousetrap; the individual who does not have connections to major U.S. corporations that might take the financial risk to develop and market a potentially great idea; the enthusiastic consumer who might be partially blinded by professional looking reports that purport to evaluate and authenticate the potential commercial success of the invention. There are tens of thousands of these people across America, and it can be overwhelming for these individuals to try and sell their ideas to a manufacturer who would pay them royalties. That is why they turn to invention promotion firms and that is why they are vulnerable to false and exaggerated claims.

It is a fact that less than one percent of all new product concepts succeed in the marketplace. Yet the fraudulent firms in this industry claim, after a purportedly professional evaluation, that virtually every new idea or product crossing their desks is patentable and that it has tremendous market potential. They promise professional assistance in getting that patent and in securing licensing and manufacturing agreements. Time after time, however, these firms blind consumers with lies about the sincerity of their belief in an idea and its marketability. Mark Twain once said that the name of the greatest inventor is "Accident." But it is no accident that these firms profit while the dreams of their customers die. That is their plan and, up to now, they have been very successful in perpetrating it. Virtually no consumers have even made back their investment, let alone any profit, from these companies' services.

Project Mousetrap is a two-pronged campaign to help nullify that plan. The first prong is the law-enforcement effort. Today we announce federal or state charges in seven actions against the corporations and individuals behind six allegedly fraudulent invention promotion schemes. The FTC staff believes that the defendants in its five cases alone have generated in excess of $90 million dollars in sales, but provided very little of value in return. The schemes we challenge are all woven with a common thread: false claims about the firms' track records and their potential for helping inventors generate substantial profits. To bolster these lies, they tend to weave in additional deceptive claims about how selective they are in screening ideas, perhaps the special relationships they have with manufacturers, or the benefits of getting an idea patented. And they use disguised high-pressure sales tactics, saying for instance that you must patent your idea quickly before someone else does. Examples of the reports they provide to consumers, purportedly offering a professional evaluation of an idea, show page after page of virtually identical text with the name of the inventor and the idea dropped in from time to time.

Invention promotion fraud has been such a persistent problem that it is clear to us that a more massive, coordinated approach, rather than case-by-case enforcement was needed. Our partners in this effort are the Pennsylvania and Florida state Attorneys General, who also have filed actions in their state courts.

The second prong of Project Mousetrap is consumer education. Together with the U.S. Patent and Trademark Office and the Department of Justice, we have formed the Invention Promotion Fraud Task Force, which will explore ways in which we can gather and share information about law enforcement efforts, and develop a long-term campaign to give consumers information about invention promotion fraud at key times where they might be especially receptive to the message -- for instance, when they receive information in connection with a patent application from the Patent Office. The FTC and the Patent Office also are jointly issuing three education pieces today -- you'll find them in your press packets.

Reporters who cover the FTC always want to know what's new . . . what's different about the fraud of the day. Well, there's nothing new about invention promotion fraud. It's been around a long time, and despite numerous FTC and state actions, it continues to flourish. So what's new today is that we are applying the coordinated, federal-state, multi-pronged approach that has been successful in deterring and preventing other "hot" frauds. And what has to happen in order to write a new ending for the invention promotion fraud story is for consumers to recognize the scam so they can avoid it. Our advice:

• If a firm is enthusiastic about your idea, but insists on a substantial up-front fee, take your business elsewhere;

• Realize that many ideas can be patented, but very few have real commercial value;

• Ask the firm you're working with for their success rate -- the percentage of ideas it reviews and finds acceptable, and which then make more money for their inventors than the inventors paid the promotion firm; and finally,

• Avoid firms that use high-pressure sales tactics. (Bernstein then introduced other speakers.)