Testimony of Robert G. Lougher, President, Inventors Awareness
Group, Inc, 171 Interstate Drive, Suite 6, West Springfield, MA
01089-4533 to US Senate Subcommittee on Regulation and Government
Information Hearing regarding Invention Promotion Companies


August 19,1994

On January 15, 1990 I answered a classified advertisement for a
position in the marketing of new products. Little did I know at
the time that this action would change my life forever. As a
result of this reply and my eventual hiring as a marketing
director, I would ultimately witness widespread fraud, listen to
horror stories from people who lost their homes, their cars and
life savings and sink to the lowest moral depths a human being
can sink to. Because of this experience and my own personal
actions, I have been threatened, my family has been threatened, I
have been followed by detectives and dragged through a long and
costly court case.

In the beginning of this new career, I felt the same way that the
victims of this fraud felt. I was pumped up with false
enthusiasm, looking forward to the good life and the wealth that
this new position would bring to me and my family. As an
employee, I was treated to opulent dinner parties, all expense
paid excursions and generous bonus checks. It was exciting and
personally rewarding to watch the owner drive to work in various
expensive foreign automobiles, to be invited to his luxurious ski
lodge in Vermont, to be a guest at his mansion on Russell
Mountain, complete with indoor and outdoor tennis courts, and be
escorted to events in his personal customized bus. Witnessing all
of these riches and helping aspiring inventors get their new
products to the marketplace, I felt that it could not get much
better than this.

Unfortunately, just like the victims that support this sumptuous
lifestyle, the false illusions and hopes slowly drifted away.
While employed by this invention promotion company, I witnessed
conflicting patent searches. Each of the inventor's files
contained two different patent searches. In many cases, one
patent search would state that the idea was unpatentable, while
the other would say it was patentable. The company would choose
the one that best fit the company's needs. The inventors were
deliberately misguided into believing that the patent attorneys
hired by the company to provide a patent search, were working for
the inventor. The inventors were also told that the initial work
being done for the inventor cost well over $500 and that the
company was willing to share in those costs. Since the patent
attorneys worked exclusively for the company, positive patent
searches were sent to the inventor while conflicting negative
patent searches were routinely concealed from the inventor and
the cost of the actual work was less than what the inventor
ultimately paid, in my opinion, this constitutes fraud.

Most of the ideas that I came into contact with had little or no
economic value. In fact, during one pitch to an inventor, (a
pitch is the initial prepared sales presentation with an inventor
to obtain the initial fee, usually a few hundred dollars) the
inventor started asking me questions about his idea. Since it was
never necessary to look at the idea, I quickly started reviewing
the idea so that I could adequately answer his questions. After
telling this inventor that our engineers thought his idea had
good potential and that the company would like to do a patent
search and a feasibility report on his new product, I was stunned
when I discovered his idea was sea water. Yes, plain water taken
from the ocean which would be used as a hair conditioner. I have
no doubt, if the inventor had sent in the initial fee, that this
individual would be told that it was a patentable idea.

While employed with this company, I had the opportunity to
observe how the feasibility reports were compiled. Invention
promotion firms use a variety of misleading titles for these
reports. Feasibility report, new product report and market or
product analysis are just a few. These are presumed reports on
the marketability of an idea which the inventor pays hundreds of
dollars for. All of these reports are generated in a matter of
minutes. They are computer generated "generic garbage." Whatever
the title of the report, all reports are basically the same. The
computer simply inserts the name of the inventor and the name of
the invention at specific locations. There is a brief description
of the invention which is normally provided by the inventor. The
attractive binder and the contents of this report are used for
only one purpose, to persuade an inventor to pay thousands of
dollars in up-front fees to the company. In essence, the
unsuspecting victim is paying for his own sales presentation. All
reports give the impression that the idea is marketable, when in
fact most are not and virtually no study was completed on the
idea. It is paramount that an aspiring inventor obtains, in the
early stages of development, a formal, unbiased, objective,
written evaluation. An invention promotion company, which accepts
most of the ideas sent to them, is not  providing an objective
unbiased evaluation. Most all of their reports falsely portray
the invention as being marketable and this, in my opinion,
constitutes fraud.

One of the hooks used by this company to lure inventors away from
similar invention promotion firms was the guarantee of a patent.
The company would tell inventors that no one could guarantee that
the US Patent and Trademark Office would issue a patent on their
idea. But, if the USPTO issued a final rejection on the patent
application, then this company would return to the inventor all
fees paid to the company. The salesmen would also tell inventors
that all correspondence sent from the USPTO to the patent
attorney hired by the company to do the work, would be forwarded
to the inventor. Company policy dictated that final rejections
would never be sent to the inventor. If a final rejection was
received on the patent application, a new patent application was
prepared and resubmitted. On the second or third new patent
application the invention was either physically changed or some
sort of ornamental design would be added to the idea. In essence,
the inventor would eventually end up with a patent and this
process of resubmitting patent applications would take years.
Unfortunately, the patent would not be on the inventor's original
idea. The company's signed contract with the inventor stated:
"COMPANY agrees that in the event no patent is issued by the U.S.
Patent & Trademark Office regarding CLIENT's IDEA/PRODUCT,
COMPANY will refund one hundred percent (100%) of the service fee
paid to COMPANY. The company's well known policies and procedures
of having patent applications changed and resubmitted to the
extent that the invention was no longer the "CLIENT's
IDEA/PRODUCT" means, to this layman, that thousands of inventors
that paid this company millions of dollars to represent their
invention are due refunds of 100% of their service fee paid to
the company. In addition, because of this practice and a
subsequent investigation by the USPTO, hundreds of patent
applications have gone abandoned in the USPTO. These inventors
have not only lost their money, they have lost any rights they
may have had on their invention. In my opinion, the company's
policy of concealing legal documents, participating in the
changing of an inventor's original invention and routinely
ignoring written and oral agreements, constitutes fraud.

If written and oral agreements were proven to have been
flagrantly and deliberately ignored, then the company should be
held liable for tens of millions of dollars in refunds. In many
cases, if not most, I feel that the inventors who were routinely
misled because of the company's well known, established policies
and procedures should be entitled to punitive damages as well.
This, regrettably, will never ever occur. History will repeat
itself, as it has done so many times before when a fraudulent
invention promotion firm gets into any sort of legal difficulty.
A typical solution to this company's dilemma, which has
frequently been employed by invention promotion firms of the
past, is to start a new company, transfer assets and declare
bankruptcy. Using these well established legal maneuvers offers
fraudulent companies the protection of a legal system that they
routinely misuse and abuse on a daily basis. This way, the
company keeps the inventor's up-front fees and the inventor loses
everything. A win-win situation for the fraud and a lose-lose
situation for the unsuspecting victim.

A few states, much too few, have enacted disclosure laws to
protect inventors from similar fraud. Though disclosure laws vary
from state to state, basically they require invention promotion
firms to post a bond in the state, be licensed and disclose the
companies true success rate, in writing, to each inventor. These
laws have had very little impact on stopping or slowing down the
activities of invention promotion firms. Two states, North
Carolina and Minnesota, have enacted disclosure laws and these
laws are rigidly enforced. To get around these laws and avoid
prosecution by the individual state, the company I worked for
lured the inventors from NC and MN, at the inventor's own
expense, across state lines into states that have not enacted
like legislation. All contracts would be signed outside these
states and all protection afforded to the inventor was lost.
Since this policy was only used to obtain the big money, I have
always questioned the legal aspects of obtaining the initial
money. Since all initial documents are signed and the initial
fees are sent in from these states, and the company is not
licensed to operate in those states, then in my opinion, they are
breaking the laws of those states. In any case, it is my opinion
that if a company deliberately lures inventors across state-lines
for the sole purpose of avoiding existing laws, this constitutes
fraud.

Why have fraudulent invention promotion firms flourished for
decades in a country whose economic strength has relied so
heavily on the ingenuity of its individual inventors? For the
most part, today's individual inventor is ignorant of the
processes involved in getting any new product to the marketplace.
They may very well have a viable product, but do not have a clue
of where to turn to for assistance. Because of our country's mass
media, these inventors are turning to the companies that can well
afford to advertise their services in the back of national
newspapers, magazines, radio and television. In many cases, these
are the companies that through untruths, deceptive sales
practices, misleading information and outright fraud have amassed
huge fortunes and can afford national advertising. In this
situation the individual inventor is receiving mostly distorted
and inaccurate information. In the mass media arena it is
unfortunately fraud vs. fraud. Who ever distorts or misrepresents
the truth the most gets the golden apple. In most every case, the
unsuspecting inventor is told what the inventor wants to hear,
"your invention has great potential to be developed and you will
assuredly reap the riches." The unsuspecting victim predictably
lets the enthusiasm of their invention overpower common sense.
Government sponsored Small Business Development Centers and
Inventor Assistance Programs are not funded to reach these
inventors before they become victims of fraud. The non-profit
inventor groups spend all their funds in the promotion of new
products. The smaller and effective invention promotion companies
can ill afford to utilize the national media. Their funds go into
the development and marketing of new products. No legitimate
inventor organization can financially compete with invention
promotion companies that advertise nationally. Their initial
contact with inventors normally occurs after the inventor has
been the victim of fraud and, as a result, exhausted all of their
financial resources.

The profit margins of fraudulent invention promotion firms are so
enormous, they can effectively manipulate and eliminate any
legitimate threat to their operations. These companies do not
make their money from getting new products to the market. These
companies make their money from up-front fees paid to them by
inventors seeking services and promises that are seldom provided.
Our group estimates that in 1994 fraudulent invention promotion
companies will convince approximately 25,000 inventors to pay
them $180,000,000 in up-front fees. This $180,000,000 will most
likely not generate even one new product on the market. Where is
this money going, if it is not going for the its intended
purposes? It is going for national advertising which generates
more victims. It is going for attorney's fees, whose mission is
to delay any legal action which will impede the company's
fraudulent operation. It goes to pay off the few victims that
complain the loudest (when a settlement is decided upon, the
inventor is forced to sign a statement of confidentiality which
prohibits the inventor from speaking out against the company in
the future). It goes into the pockets of the owners of these
operations. Which, in turn, is invested in real estate, new
businesses, expensive cars, opulent parties and a luxurious life
style. To the inventors on fixed income who have invested their
life savings chasing false dreams and false promises there is no
way to adequately rationalize how their life savings went to
support the" lifestyles of the rich and famous." The harm that
fraudulent invention promotion companies are inflicting on
innocent's lives is not only criminal, it is immoral. For this
reason, our group refers to these type operations as "Invention
Pimps" and "Vulture Capitalists."

The damage that these companies are inflicting on our country's
economy goes far beyond the damage they are inflicting on their
guileless victims. Most, but not all, of the inventions these
companies choose to represent have little merit or value. Because
it is not the promotion companies intent to get new products to
the marketplace (their success rate proves this), much needed new
technology and new products are gathering dust and cobwebs in the
storage areas of these fraudulent companies. The inventors of
these new and desperately needed technologies and products have
long since given up any hope. Devastated by the loss of their
financial resources and discouraged by the lack of response from
potential manufacturers, these inventors simply give up. They not
only lose faith in their invention, they lose all enthusiasm to
create other new products. If our country is actively seeking new
technology and new products to bolster our economy, then they
have to look no further than the archives of the fraudulent
invention promotion companies.

Further complicating an already deplorable situation, fraudulent
invention promotion firms are responsible for tens of thousands
of inventors losing all rights to their inventions. Some
invention promotion companies tell inventors that an invention
does not need to be patented and then deliberately fail to tell
the inventor that "If the inventor describes the invention in a
printed publication or uses the invention publicly, or places it
on sale, he must apply for a patent before one year has gone by,
otherwise any right to a patent will be lost." (source USPTO)
Since the normal length of a contract with an invention promotion
company is two years, and during that time the invention has been
offered for sale and described in a printed publication ,the
inventor loses all rights to the idea. Some invention promotion
companies will file a disclosure document with the USPTO
Disclosure Document Program and then tell the inventor that the
company filed paperwork on the invention and it is protected for
two years. The USPTO charges a nominal fee of $10.00 for this
service and affords no protection on the invention. Other
invention promotion firms will generate simple design patents
which have little or no intellectual value. Most recently, the
company that I worked for was involved in activities that
resulted in hundreds of patent applications being abandoned in
the USPTO. These inventors have now lost all rights to their
inventions.

What does an inventor really receive when they pay thousands of
dollars in up front fees to many invention promotion firm? They
will receive a slick looking product report which contains little
or no useful information on the inventor's invention. The product
report is used and compiled exclusively for the company's sale
presentation. The inventor may or may not receive a patent
search. Again, this is part of the company's sales presentation
and has extremely questionable value. The inventor may or may not
receive a patent. If a patent is obtained, most likely, it is a
design patent with little or no intellectual value, or it is a
patent on something other than the inventor's original invention.
The inventor will receive a one or two page poorly prepared
product proposal. The product proposal will be mailed to a few
manufacturers which, in turn, will be discarded in the trash can
without ever being opened. The product proposal will then be
taken to a number of inappropriate merchandising shows in
loose-leaf binders, along with thousands of other one or two page
product proposals. The company's attendance at merchandising
shows is not for the purpose of getting new products to the
market. It is used exclusively to entice potential victims to
send their money in at once so the company will have time to get
the product proposal in the show. This maneuver allows the
inventor very little time to think about the ultimate
consequences. At the expiration of the company's contract, the
inventor will be no closer to success then when he started this
very costly program. During the course of the contract the
inventor may well have lost any rights to the invention. Who does
the individual inventor turn to now? Most turn to no one. Totally
disgusted and discouraged the inventor gives up.

What can be done to effectively eliminate this decades old fraud?
The first and most immediate action would be for law enforcement
agencies to start filing criminal charges against the owners of
these fraudulent invention companies and the salesmen who
knowingly commit the fraud. This action will effectively
penetrate the corporate veil, which all these frauds turn to when
threatened. The salesmen would lose the confidence of corporate
protection and be more inclined not to misrepresent the company's
services. All of these fraudulent operations are controlled by
fear, intimidation and the promises of legal protection from the
top level of management. If the promise of legal protection is
erased by filing criminal charges against individual salesmen,
then the sales force may overcome their fear and intimidation.
This would seriously damage the company's daily operation. The
owners of these fraudulent operations have already amassed huge
personal fortunes, so they may decide it is time to find an
honest profession. In any case, criminal charges would act as a
very strong warning, that it is no longer safe to commit fraud
and then hide behind the corporate umbrella.

Steps should be taken to enact federal disclosure laws for
invention promotion companies. A few states including Minnesota
and North Carolina have passed this type of legislation. These
laws have had some effect, but are completely ineffective when
the inventors are lured across state lines into states that do
not have disclosure laws. Some of the stipulations of these law
are that the invention promotion companies provide in writing
their actual success rate in getting new products to the market
before any contracts are signed or money is exchanged. The
invention promotion company must be licensed and bonded inorder
to operate. It is my recommendation that all invention promotion
companies be prohibited from participating, in any way, in the
patent process. It should be mandatory for all invention
promotion companies to provide each inventor with written
information on the patent process prepared solely by the US
Patent & Trademark Office. Invention promotion companies should
be forced to provide information on how their product evaluations
are prepared. Is it an objective evaluation or simply used as a
sales tool?

It is paramount that the federal government provide an
"information highway" for our country's greatest natural
resource...the individual inventor. One focal point, where an
inventor can turn to for unbiased and accurate information;
educational material that explains the patenting and marketing
processes in layman's terms; information that explains to
inventors the many alternatives available to inventors; a source
directory of government agencies, non-profit inventor groups and
any legitimate company that provides useful services to
inventors. The "information highway" could provide, upon request,
manufacturers that are looking for new products and the types of
products they are looking for. The inventors should be provided
information on where they can obtain an unbiased, objective
evaluation of their invention. This information should be
provided free to all aspiring inventors and advertised nationally
in an attempt to reach inventors before they commit their ideas
and resources to a fraudulent invention promotion company. This
program could be implemented with very little initial federal
funding. The entire operation could ultimately be totally funded
by corporate sponsors, especially corporations searching for new
products, and paid advertisements from individuals and companies
that provide legitimate and useful services to inventors. In
fact, the government already has the mechanics in place to
implement this program. The Small Business Development Centers
(SBDC's) could easily absorb this additional function. With
increased advertising and minimal training of in-place personnel,
the SBDC's could become the government's most instantaneous and
effectual weapon in fighting this fraud.

America's individual inventors were responsible for the cotton
gin, the sewing machine, barbed wire, the telephone, the light
bulb, the machine gun, the automobile, the airplane, the
transistor, Xerography and thousands of other new and
revolutionary products. Because these inventors were willing to
go where no man had gone before, our great nation became the most
powerful nation in the world. We credit our greatness to the
natural resources available in this country. The trees for
timber, the minerals for construction material and precious
metals, the rich soil for growing a major portion of the world's
food source, petroleum that keeps our machinery running, the
abundance of water which provides life are some of our frequently
mentioned natural resources. Our Nation's individual inventors
were the ones that showed us how to harvest, obtain, manage and
effectively utilize these resources. Without them, our natural
resources would not be resources at all. That is why the
individual inventor is our Nation's greatest natural resource.
This natural resource should be encouraged and protected, not
discouraged and victimized. If the present trend continues, our
citizens will be visiting their once greatest natural resource in
public zoos along with the other endangered species or travel to
foreign countries where inventors are protected and roam free.

I would like to personally thank Senator Lieberman and the US
Senate Subcommittee on Regulation and Government Information for
taking an interest in this often overlooked and ignored subject.
It is our hopes and hopes of hundreds of thousands of inventors
that these hearings will result in corrective measures of a long
standing injustice. After the hearings, I will be returning to
Massachusetts to disband our group of volunteers. We have
exhausted all of our personal funds and the funds of the few that
have graciously supported us. We have no regrets, only fond
memories of what we have been able to accomplish. During our
group's existence, we reached an estimated 16,000 inventors and
saved them approximately $40,000,000. These figures may be
impressive by themselves, but they are a "splash in the pan" when
compared to the operations of the fraudulent invention promotion
companies. Our consumer group won many battles but will
ultimately lose the war. The fraudulent invention promotion firm
that I worked for, and have been referring to in this testimony,
is American Inventors Corp. of Westfield, MA and their new
company is American Institute For Research & Development also of
Westfield, MA. They have been trying unsuccessfully to stop the
distribution of our free booklet. Since they knew of our lack of
financial resources, they have embarked on a long and costly
court battle. They could not get an injunction against our
booklet, but they did force us to spend what little finances we
had in legal fees. Ironically, they used the funds of victimized
inventors to stop the only national consumer group looking out
for the inventor's best interest. I do not mean to infer that
this company is the largest or the most vial of the invention
promotion firms. This company is just one of over 20 companies
that operate in a similar manner and all of these companies are
controlled by a handful of owners. It is now up to you and our
legal process to stop this injustice. The fraudulent invention
promotion companies have at their disposal millions and millions
of dollars in illegally obtained assets to effectively stop any
individual threat to their operations. Fortunately, there is no
amount of money on earth that can effectively stop the government
that represents the will of the people of the greatest nation on
earth. 


Robert G. Lougher
President, Inventors Awareness Group, Inc.