It sounds like there was some “inventing” going on at Florida-based invention promotion firm World Patent Marketing, but a Preliminary Injunction in a case brought by the FTC suggests it wasn’t the kind that unsuspecting consumers bargained for when they forked over millions of dollars based on the defendants’ misleading promises about patenting and promoting their products.
For FTC watchers, the opinion is a page-turner from start to finish. We’ll focus on just a few of the claims the company “invented.”
The defendants’ initial business model involved online ads that induced people to submit their product ideas. Salespeople responded, telling interested consumers that World Patent Marketing’s “review team” was researching the proposal because “the company is so selective with the ideas they choose to work with.” After a bit of a wait, salespeople called the would-be entrepreneur back to say:
We had our final meeting with the Review Team regarding your idea. And basically from all the research that’s been done on [your idea], the research tells us there’s definitely potential to patent your idea. Because of that, I have the green light from the company to let you know that WPM wants to be a part of your new product idea and help you to protect it and bring it to the commercial marketplace. So, first of all congratulations! . . . The company loved your idea! They think it has a lot of potential. Especially the Sr. Product Director, who is in charge of which ideas are considered for the upcoming trade show. He sees some good opportunities ahead.
But as the U.S. District Court concluded, those salespeople were reading the pitch from a script. In fact, “there is no evidence that WPM ever had a review team or rejected a large number of ideas.” What about the company’s “Global Invention Royalty Analysis” containing a marketability study created by a “Harvard University & MIT Research Team”? Despite the defendants’ claim that the “University” had given “the green light to continue,” the Court concluded that the defendants didn’t have a relationship with Harvard, MIT, or any other college.
The defendants’ malarkey induced many consumers to pay between $9,000 and $65,000 for a “10 Point Patent Protection & Publicity Commitment.” (The pricier packages promised a “global patent.”) When consumers asked for updates, the defendants strung them along. Behind the scenes, the picture was less rosy because even when the company’s contract patent agents submitted applications to the U.S. Patent and Trademark Office, the PTO typically rejected them as deficient.
In addition to patent services, the defendants claimed to offer product development and marketing know-how, touting that “some of the world’s most respected brands trust World Patent Marketing,” including, for example, Target. The FTC isn’t the only one to say that was balderdash. A representative for Target testified that the defendants had no relationship whatsoever with the national retailer. The Court also cited misrepresentations regarding purported “success stories,” licensing and manufacturing agreements, and an “Invention Team Advisory Board” with big-name members who didn’t actually advise the company or review invention proposals.
One anecdote is particularly telling. When an undercover FTC investigator contacted the company, the salesperson claimed that the History Channel had run a “whole segment” on World Patent Marketing. The truth? The defendants paid $17,000 to air their own ad on the channel. It ran once – at 6:00 AM on January 29, 2015.
Not surprisingly, consumers started to speak up when their hefty cash outlays weren’t yielding the promised results. But according to the Court, the defendants “intimidated and threatened customers to prevent them from complaining and to compel them to retract complaints” – a tactic consistent with the company’s blog boast about a security detail of ex-Israeli soldiers who “knockout first and ask questions late.” By suppressing honest consumer reviews in an effort to maintain a false front of reputability, the company “instituted a positive feedback loop in which their unfair and deceptive practices reinforce each other.” Here’s just one example of an email the company president sent to a dissatisfied consumer:
Hey Genius [ ] I understand you emailed one of my board members telling her you think my company lacks integrity and you think we might be a fraud. Just wanted to let you know that is probably going to be the most expensive email you ever sent. I hope it was worth it . . . meet my attorneys Eric Creizman and Andrew Levi [ ] they really enjoy meeting new people.
Even if you don’t have “invention promotion” clients, the Court’s opinion is a legal compendium on preliminary injunctions, asset freezes, the FTC’s deception and unfairness standards, and the use (and misuse) of disclosures. For example, the Court offered four persuasive rejoinders to the defendants’ argument that they made “numerous conspicuous disclaimers” about the low likelihood that consumers would achieve success:
- “Caveat emptor is not a valid defense to liability arising from misrepresentations.”
- “Even if caveat emptor were a valid defense, ‘disclaimers or qualifications . . . are not adequate to avoid liability unless they are sufficiently prominent and unambiguous to change the apparent meaning of the claims and to leave an accurate impression. Anything less is only likely to cause confusion by creating contradictory double meanings.’”
- “Even if the disclaimers contained unambiguous disclosures, they failed to change the net impression created by Defendants’ salespeople who verbally promised financial gain.”
- To the extent that consumers even read the disclaimers, they were contradicted by statements from the company’s salespeople. “These representations were likely to cause confusion for consumers who, on the one hand, were told that the company believed their ideas would succeed, and on the other, read that most inventions fail.”
With the preliminary injunction in place, the defendants are prohibited from making misrepresentations to induce people to buy products or services, and from threatening anyone who complains about them – a practice the Court held met the FTC’s unfairness standard. The Court continued the asset freeze and made the court-appointed receiver permanent.
Entrepreneurs, before investing in invention promotion services, consider this advice from the FTC.
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