FTC alleges company’s practices are “patently” deceptive

Threats of imprisonment, warnings about extortion, and a security team allegedly comprised of ex-Israeli Special Ops trained in Krav Maga? It sounds like an action-packed movie plot, but it’s all related to a complaint filed by the FTC. And you’ll never guess the nature of the defendants’ business.

They sell patent and invention promotion services – or at least that’s what defendants World Patent Marketing, Desa Industries, and CEO Scott Cooper claim.

Through TV ads, telemarketing, and the internet, the Florida-based defendants tout their services as a way for inventors to patent their products and make big money. According to the FTC, in their initial conversation with an inventor, the defendants’ sales people invariably praise the invention, but say they need “Board” or “Team” approval. Then comes the call saying the invention has been “accepted,” and that if the inventor signs up for the defendants’ services, they’re likely to realize financial gain and possibly see their product sold at big-name retail stores.

Sales people emphasize World Patent Marketing’s track record of success, often citing glowing testimonials on the company’s website. At some point, potential customers are told that to proceed, they’ll need to buy a “Global Invention Royalty Analysis” that supposedly contains expert evaluations of the patentability and marketability of the invention – a purchase that sets buyers back at much as $1295.

When the report arrives, the FTC alleges that inventors are told (surprise, surprise) that their idea is indeed patentable and marketable. That’s when the sales people amp up the pitch for “packages” of various services, ranging from $7995 to almost $65,000. But once the ink is dry and the checks are cashed, buyers say that the defendants’ enthusiasm wanes and all they get for their money are low-effort, low-value things like domain registrations, logos, or press releases.

According to the FTC, virtually none of the defendants’ customers have made any money through their services – or even recoup what they shell out. What’s more, the complaint alleges that the defendants generally fail to get people patents, don’t secure licensing deals or royalty income for them, and didn’t even successfully market the inventions featured in their website testimonials. The FTC says the defendants leave many customers in debt, having kissed their life savings good-bye.

So how does Krav Maga come in? According to the FTC, customers who dared to complain have been threatened with a one-two punch.

The FTC alleges that dissatisfied customers who said they were going to post unfavorable reviews about World Patent Marketing or report them to the Better Business Bureau or law enforcers were threatened with lawsuits, criminal charges, and even prison. For example, when one purchaser mentioned a possible BBB complaint, she allegedly received a letter from a lawyer for defendant Cooper, stating that “you have proceeded far beyond what the law defines as free speech and, instead, have engaged in an unlawful and intentional interruption of World Patent Marketing’s business.” When she went ahead and filed a complaint, she got a letter from a second lawyer saying that her efforts to get a refund constitute extortion under Florida law and “since you used email to make your threats, you would be subject to a federal extortion charge, which carries a term of imprisonment of up to two years and potential criminal fines.”

In addition to filing at least one lawsuit to suppress consumer complaints, the defendants allegedly use other tactics to cultivate a threatening atmosphere. For example, in an email to existing customers, the defendants linked to a company blog that claimed a consumer who visited the defendants’ office was expelled by the company’s “intimidating security team, all ex-Israeli Special Ops and trained in Krav Maga, one of the most deadly of the martial arts.” The blog further described them as “the kind of guys who are trained to knockout first and ask questions later.”

In addition, defendants have included in their consumer contracts a “Confidentiality and Nondisparagement” provision – we call it a gag clause – stating:

The Client and WPM shall refrain from making . . . any and all disparaging, negative, or other similar statements concerning either of them to any third party, including but not limited to individuals, entities, internet websites, blogs, publications, postings, emails, and any social media, such as Facebook, Twitter, blogs and wikis.

The lawsuit challenges a host of defendants’ business practices as deceptive. The FTC also alleges that the defendants’ threats, intimidation, and gag clauses constitute unfair practices, in violation of the FTC Act.

A federal court in Florida has entered a temporary restraining order against the defendants. But even at this early stage, the case offers tips both for companies in the patent or invention promotion business and for inventors. Businesses need to know that representations about patentability, marketability, or potential earnings are subject to established FTC truth-in-advertising standards. For inventors, the FTC has advice on questions to ask before paying for invention promotion services.

 

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