The American Inventor's Protection Act (AIPA) is a United States federal law enacted in November of 1999. While the law is much debated and has many implications, the relevant portion of it for our purposes is Section 297, which deals with "Improper and deceptive invention promotion". Section 297 was included in the Act in an attempt to address the rampant problems of fraud within the invention promotion industry. It is probably the best protection afforded to the American inventor in an imperfect world. Unfortunately, it doesn't always work.
By "Improper and deceptive" the Act is referring to the practice within the invention promotion industry to hide the true nature of the business a firm is engaged in. A promoter may tell you that they specialize in "product placement" or "licensing agreements", but the truth is the overwhelming majority of their cash flow comes from the sale of worthless marketing services. A purchaser of these services stands little chance of gaining success in the marketplace and will almost always lose every penny they invest with the firm. It's a parasitic relationship, and "buyer beware" is ultimately the best defense.
At the outset, it is important for you to realize that Scott Norman, acting through MMG, DOES NOT adhere to the tenets of the AIPA. One could argue that Norman is morally bound to do so, but due to a gaping loophole in the law he is not legally bound to do so, and that's all that matters. I discovered this when attempting to sue him under the federal statute and he successfully got that part of the suit tossed.
In fact, Norman has managed to turn an Act of Congress upside down so that in this case it protects Norman, the invention promoter, and not you, the inventor. This is exactly the opposite of what was intended and you need to make this part of your thinking with MMG.
All of this is reason enough for you to have nothing
whatsoever to do with MMG (did you need another reason?). The
information being withheld is so critical to your making an objective
judgment about MMG that you should just give it a pass. Study this fact closely before you do anything stupid.
Here is how Section 297 reads:
Sec. 297. Improper and deceptive invention promotion
(a) IN GENERAL- An invention promoter shall have a duty to disclose the following information to a customer in writing, prior to entering into a contract for invention promotion services:
(1) the total number of inventions evaluated by the invention promoter for commercial potential in the past 5 years, as well as the number of those inventions that received positive evaluations, and the number of those inventions that received negative evaluations;
(2) the total number of customers who have contracted with the invention promoter in the past 5 years, not including customers who have purchased trade show services, research, advertising, or other nonmarketing services from the invention promoter, or who have defaulted in their payment to the invention promoter;
(3) the total number of customers known by the invention promoter to have received a net financial profit as a direct result of the invention promotion services provided by such invention promoter;
(4) the total number of customers known by the invention promoter to have received license agreements for their inventions as a direct result of the invention promotion services provided by such invention promoter; and
(5) the names and addresses of all previous invention promotion companies with which the invention promoter or its officers have collectively or individually been affiliated in the previous 10 years.
(b) CIVIL ACTION- (1) Any customer who is found by a court to have been injured by any material false or fraudulent statement or representation, or any omission of material fact, by an invention promoter (or any agent, employee, director, officer, partner, or independent contractor of such invention promoter), or by the failure of an invention promoter to disclose such information as required under subsection (a), may recover in a civil action against the invention promoter (or the officers, directors, or partners of such invention promoter), in addition to reasonable costs and attorneys' fees—
(A) the amount of actual damages incurred by the plaintiff; or
(B) at the election of the plaintiff at any time before final judgment is rendered, statutory damages in a sum of not more than $5,000, as the court considers just.
(2) Notwithstanding paragraph (1), in a case where the plaintiff sustains the burden of proof, and the court finds, that the invention promoter intentionally misrepresented or omitted a material fact to such customer, or willfully failed to disclose such information as required under subsection (a), with the purpose of deceiving that customer, the court may increase damages to not more than 3 times the amount awarded, taking into account past complaints made against the invention promoter that resulted in regulatory sanctions or other corrective actions based on those records compiled by the Commissioner under subsection (d).
OK, fair enough. Sounds like protection worth having, right? But there's a problem, and it lies within the AIPA's definition of "Invention Promoter". I cite only the most relevant portion of the "Definitions" below, my italics added:
(c) DEFINITIONS- For purposes of this section—
(3) the term `invention promoter' means any person, firm, partnership, corporation, or other entity who offers to perform or performs invention promotion services for, or on behalf of, a customer, but does not include—
(C) any person or entity involved in the evaluation to determine commercial potential of, or offering to license or sell, a utility patent or a previously filed nonprovisional utility patent application.....
Norman is a niche player in the invention promotion field. Unlike his competitor Davison Design, listed below, MMG's sales staff troll the USPTO database looking for the owners of patented inventions to become marketing targets. MMG solicits hundreds of patent owners every month with glowing form letters offering to promote their inventions to industry. You might therefore logically consider MMG to be an invention promotion firm, and in fact Norman is an invention promoter. But since Norman's niche is previously patented inventions, he is technically exempt from the disclosure requirements of the AIPA. This is called a "loophole" and Norman has taken full advantage of it. Norman denies being an "invention promotion company" as defined by the AIPA; instead he calls himself "...a full service intellectual property brokerage".
Further, you CANNOT file a complaint against MMG at the USPTO's Inventor Resources web site because complaints filed there must conform to the requirements of the AIPA. Nor can you sue Norman under the AIPA, a fact I discovered a little late in the game.
Norman may walk like a duck, and talk like a duck, and act like a duck, and shit like a duck, but AIPA says he is not a duck and therefore not bound to the rules of duckdom.
It is very important for you to understand, not only the fact, but the thinking behind this if you are considering doing business with Norman through MMG. Sections 1 through 5 above should apply directly to MMG and its "business model", but MMG is exempt, courtesy of the same people who brought you the wars in Iraq and Indochina. Norman does not want to disclose these numbers and will give you a whole litany of nonsense about why he won't. The real reason is simple. MMG's income from royalties is minuscule. The vast majority, if not all, of MMG's income derives NOT from licensing or venture deals but from the sale of marketing contracts, which are worthless. Norman calls this "confidential, or proprietary, information".
Just for the sake of argument let's look at another firm, an invention promoter meeting the definition above. In July of 2008 the Federal Trade Commission ended 11 years of litigation and ordered Davison and Associates, now Davison Design, to pay $10.7 million in cash, real estate and investment assets to the FTC, which will distribute the settlement to what it terms "victims" of Davison's fraudulent invention promotion practices. You can read more about Davison here. A previous court-ordered AIPA disclosure has disappeared from the Davison site, possibly as part of the settlement, but I reprint here the last two sentences which were current as of August of 2008:
The total number of consumers in the last five years who made more money in royalties than they paid, in total, under any and all agreements with Davison, is ten (10). The percentage of Davison's income that came from royalties paid on licenses of consumer's products is .001%.
Numbers current as of August 30, 2008
Now, Davison is a big, fancy, shiny company that has been forced by the FTC to disclose that it can't even earn lunch money on its royalty income. How much do you think that little old MMG, doing "business" out of Overland Park, Kansas, is really earning on royalties? Well, you're never really going to know, because Scott Norman sure as hell ain't gonna let you in on what he calls "proprietary information".
Folks you'd be better off feeding the homeless or playing the lottery or just burning the raw cash to heat the house than giving it to these people. Don't do it.
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