Trademark and Patent Scams: What to Watch Out for

Recently, Hampshire Trading Standards, an organization that gives advice to consumers and businesses in Hampshire, England on problems with goods and services—including scams—received a complaint from a local business that a company called Intellectual Property Agency Ltd. (“IPAL”—how friendly!) had sent an invoice in the amount of £1,280 (approximately $2000) to renew a trademark: a charge three times higher than if the company went to an average intellectual property attorney. IPAL's “invoice” came in the form of an official-looking document that cited the company's trademark being up for renewal and offered its services for the far-too-substantial fee. In this case, the trademark was, indeed, due to be renewed, but IPAL's official-looking correspondence made it seem like the company had to use IPAL for its renewal—and pay its exorbitant rate—as opposed to the truth, which was that the company was free to use any service or attorney it chose, or simply file itself.

Trademark scams are not the only fraudulent intellectual property ploys that should concern companies and individuals. For example, Eric Fortier and his wife, Tina, invented a disposable cigarette butt holder that automatically snuffed out cigarettes. To help market their device, the Fortiers contacted an “invention promotion” company called NewInventions.com. NewInventions.com claimed that, for a small up-front fee, it would take care of all the marketing and patent filings in exchange for a portion of profits from the invention. The “small up-front fee” of $500 grew to $3,000 for a business plan, then another $3,000 for marketing and website development. The Fortier's patent never issued, and after they wrote their final check to NewInventions.com, their relationship with their former patron abruptly ceased. Now out of business, NewInventions.com claimed nearly 100 victims who handed over an average of $10,000 each. 

Registered trademarks and patents are forms of intellectual property rights that allow inventors and creators of that “property” to take legal action against those who infringe on those rights. According to the U.S. Patent and Trademark Office (USPTO), a patent protects an invention and gives the owner “the right to exclude others from making, using, offering for sale, selling or importing the invention.” A trademark, on the other hand, “is a word, phrase, symbol or design, or a combination of words, phrases, symbols or designs, that identifies and distinguishes the source of the goods of one party from those of others.” (See also "What is a trademark"). Because many business owners and individuals do not understand the ins and outs of intellectual property dealings, they can be susceptible to scammers who, with a just a bit of personal information, can cheat them out of thousands of dollars—often with a scary, official-looking letter that cost the sender pennies.

How did they get my information?

The USPTO makes nearly all trademark and patent applications public. The records that are public include applicants' and owners' names and addresses, trademarks or patents applied for, and information about any firm of record assisting with the application process. The USPTO also makes available the Official Gazette for trademarks and patents, which is a document published online every Tuesday that contains information about each item published, as well as other applications and registrations.

Trademark scams

Because trademarks are only required to be renewed once every ten years, some trademark holders may not remember who (if anyone) originally helped them file their trademark application, and thus may not think twice when they receive an unsolicited email or letter requesting payment for trademark renewal and/or various other services. Some things to watch out for:

• Renewing your trademark

  Usually through traditional mail, a trademark holder will receive an official-looking letter—complete with a seal that looks sanctioned by the U.S. government—warning about the timely renewal of a trademark. The sender will request hundreds or thousands of dollars to renew the trademark —even apart from the actual renewal fee required by the USTPO. This early notice is an attempt to subvert the communications from any firm that actually handled the trademark application previously. By the time the recipient discovers the subterfuge, it is often too late.

• Buying your domain name

  This type of scam warns the recipient that there are other companies either attempting to purchase his or her domain name or register the trademark as a domain name in foreign countries with different domain extensions such as .info, .asia, or .uk. The sender will ask for credit card information in order to stop these events from unfolding. There is often no danger of anything of the sort occurring—and even if there were, it may be only the communication's official and dire tone that alarms the trademark holder, rather than any serious commercial threat.

• International trademark registration

  Here, the trademark owner is directed to pay in order to be listed in a worldwide trademark registration directory. For all intents and purposes, there is no such thing: these “international listings” are in fact meaningless and are not recognized by any countries or treaties. For real trademark protection abroad, trademark holders should look into international filing mechanisms, like the Madrid Protocol, which allows U.S. trademark holders and applicants to seek registration of a trademark in multiple countries through a single filing.

• Electronic Trademark Monitoring

  A company called the United States Trademark Protection Agency (“USTPA”—not USPTO) claims to offer electronic trademark monitoring services for trademark holders. The actual government agency is the USPTO, which doesn't provide trademark-monitoring services. Your confusion is the USPTA's gain. The USPTO has placed a cautionary page on its site, expressly warning against organizations that attempt to make you think they're the USPTO.

If you have any question as to whether a particular trademark-related communication is legitimately from the USPTO, contact that office. If you're represented by counsel or someone else is assisting you with your trademark matters, always ask them before responding to any communications about your trademarks—and especially before sending anyone any money.

Patent scams

Unlike trademark scams, which are usually sent through email or traditional mail, patent scams—often in the form of “inventor promoters”—are commonly advertised on late-night television. However, similar to trademark scams, some patent predators will send official-looking letters requesting fees for filing a patent application, or for seemingly related services. These companies also sell business plans, licensing assistance, marketing, research and development and more…all of dubious quality, value, and even existence. The USPTO has estimated that inventors lose close to $300 million each year because of fraudulent companies that claim to make inventors' dreams come true. The actual percentage of inventions that are successful as a result of such companies can be counted on a pig's hoof.

There are legitimate companies out there to help inventors—you just have to be careful and do some digging. Most legitimate companies will charge relatively small upfront fees if any at all, and will make their money from a reasonable percentage of profits on the inventions they promote—often through licensing.

How to protect yourself

The main way to protect yourself from trademark and patent scams is to be vigilant about researching and double-checking the source of any unsolicited communication. The USPTO website provides information on signs to watch out for and what questions to ask [PDF]. And for information on how to spot legitimate invention promotion firms, visit the FTC's website at www.ftc.gov.

When dealing with invention promoters, inventors are protected by the American Inventors Protection Act of 1999. Before an invention promotion company can enter into a contract with you, it must disclose the following information about its business practices during the past five years:

• How many inventions it has evaluated;
• How many of those inventions got positive or negative evaluations (legitimate companies will have a fairly low acceptance rate, usually under 5%);
• Its total number of customers;
• How many of those customers received a net financial profit from the promoter's services (that is, the number of clients who made more money from their invention than they paid to the company);
• How many of those customers have licensed their inventions due to the promoter's services (if the success rate is too low, between 2 and 5%, the company's services may not be worth your out-of-pocket expenses, although such a number could also be indicative of a company's honesty);
• The names and addresses of all previous invention promotion companies with which the invention promoter has been affiliated;
• Is there an up-front fee and, if yes, how much is it, what is received for this cost, and what is the total cost for the complete process, from invention submission to obtaining a patent and licensing agreement;
• Who selects and pays for the patent attorney or agent to do the patent search, patentability opinion, and patent application preparation; and
• Whether the company ever been investigated by or under any scrutiny from the Federal Trade Commission, Better Business Bureau, the Attorney General's Office, or any consumer protection agency.

As in all areas of the law, do your research or consult with someone who knows the space. You can learn more about trademark and patent matters on the USPTO website or from an attorney experienced in intellectual property law.

Have an invention? Protect it by filing for a design patent, utility patent, or provisional application for patent. Have a business name, logo or slogan? Apply for a registered trademark.