Sun Sentinel Palm Beach Edition
FTC says promoter misled inventors
CEO says in filing, company warns success is ‘unlikely’
An electric heating pad to keep dinner plates warm. A machine that cleans golf clubs. Car floor mats with changeable air freshener inserts.
Disposable travel diapers with built-in pockets containing single-use packets of baby wipes, rash ointments and baby powder.
Didn’t realize you needed these items?
Apparently no one else did either, and so they haven’t been manufactured, marketed or sold to consumers.
But a Miami Beach company made millions of dollars telling hundreds of people that those and other erstwhile inventions were great ideas with the potential to rack up huge sales — if the inventors first forked over big bucks to make it happen.
That’s the accusation filed in federal courts by both the Federal Trade Commission and a purported class of consumers claiming they were deceived by World Patent Marketing, its parent company Desa Industries Inc. and its founder Scott Cooper.
Both the companies and Cooper, according to a complaint filed by the FTC, “operated an invention-promotion scam that has bilked thousands of consumers out of millions of dollars.”
If true, the allegations against the company represent yet another incarnation of an invention marketing scheme that has undergone boom and bust cycles for decades, as such companies as Lawrence Peska & Associates, The Raymond Lee Corporation and International Inventors Incorporated solicited ideas from dreamers with ads in the backs of Popular Science and other consumer magazines, then faced regulatory actions after customers complained.
“Contrary to Defendants’ representatives, virtually none of Defendants’ customers has made money, or even recouped his or her investments, through the Defendants’ purported patenting and invention-promotion services,” the FTC complaint says. “Defendants have not actually secured third-party licensing or manufacturing agreements for their customers, and their customers have not received income from patent royalties or sales of products as a result of De-
fendants’ work on their behalf.”
The complaints say Cooper, the company and its employees engaged in a sophisticated scheme that typically cost investors thousands of dollars each and resulted in the company routinely breaking promises to secure patents, market ideas to investors, promote inventions in the media, and introduce clients to manufacturers and distributors.
Chris Seaver, a surgeon based in Pembroke Pines, testified for the FTC at a hearing last Thursday in U.S. District Court in Miami.
Seaver told investigators that he gave Cooper $300,000 after Cooper said he planned to market Seaver’s idea for a cellphone case with an attached net that users would use to hold earphones, keys or other accessories.
In an interview with the Sun Sentinel on Friday, Seaver said he raised the money by taking out two $80,000 loans, emptying $120,000 from his savings, and borrowing $20,000 from his mom.
Customers lost their life savings or were left in debt with nothing to show for it, according to a news release by the FTC. “Then [the company] added insult to injury by threatening people who complained,” Acting FTC Chairwoman Maureen K. Ohlhausen was quoted in the release as saying.
For now, the company isn’t marketing its promises to any new clients. On March 6, a Miami federal judge granted the FTC’s request for a temporary restraining order halting operations and freezing assets of the company. The FTC is seeking to take permanent control of the company, and wants Cooper and the company to refund customers’ money and rescind their contracts.
A receiver has taken control of the company’s assets and its website has been shut down. The hearing on Friday in which Seaver testified was intended to determine whether the injunction should remain in place. Time ran out, however, and arguments are scheduled to resume April 20.
Cooper, who bragged in blog posts on the company’s website of owning expensive cars and a family yacht, has been barred from selling those items — or the waterfront home he bought for $3.2 million in April 2016 — pending resolution of the FTC action.
An attorney representing Cooper from the Miami law firm of Marcus Neiman & Rashbaum said he was unable to comment about the case, but referred the Sun Sentinel to court filings by Cooper and the company.
In one filing, Cooper argued that inventors received ample warnings about the risks. “WPM’s website, its marketing materials and its customer contracts are replete with express statements warning customers that the invention business is incredibly difficult and that success is highly unlikely,” one filing states. The fact that 99 percent of inventions fail to become commercially successful “is why there are bound to be disgruntled WPM customers no matter the quality of services provided by WPM,” it says.
After securing company offices in downtown Miami, Miami Gardens and Chicago and examining the company’s assets for nearly a month, the receiver, Jonathan Perlman of the Miami law firm Genovese Joblove & Battista, reported that the company had taken in $25.9 million from about 1,500 customers, but had just $349,022 in the bank.
A class action suit filed in the Southern District of New York by three victims in December states the company has been in operation since 2010. The Florida Division of Corporations database lists the company and its parent, Desa Industries, as forming in 2014.
According to the class action suit, the company would set clients up for a multi-tiered engagement by convincing them to spend $1,295 for a “Global Invention Royalty Analysis” — an expert determination by “such purported entities as the ‘Ivy League Research Lab’ or Baylor University of an idea’s potential to secure a patent and become successful.
“No matter how un-novel, obvious and useless the consumer’s invention is, with absolutely little to no chance of ever being able to obtain a design or utility patent….the GIRA will always give the invention a positive chance of securing a patent from the [U.S. Patent and Trademark Office],” the class action suit states.
The next tier of the scheme, the suit charges, involved sending a “World Patent Marketing 10 Point Patent Protection and Publicity Commitment” brochure that outlines services the company promised to provide, including patent protection, trade show marketing, a 3D “virtual model” of the invention, brochures, media department and press releases, a “personal product web page” and an internet commercial “that plays on your website instead of your TV.”
The company also promised to provide a Personal Licensing Agent and an “International Invention Roundtable” in which “‘we bring millionaire businessmen and women together with the next generation of America’s Inventors,’” the suit says.
Available services include a Utility Patent Application for $10,995; a European Union Patent Application, $18,995; a Global Patent Application, $34,995.
Very little happens after inventors sign contracts with the company and spend thousands more dollars, according to the suit.
“At most,” the company engages patent agents “who don’t have the skills or are incapable of obtaining the patent so desired by the WPM consumer,” the suit says. “Indeed, many of the patent agents that have been engaged by WPM are under investigation by the USPTO.”
Customers routinely contact the company, asking the status of their patents, “but are provided with the proverbial run-around.” Eventually, the company “completely abandons” the patent process.
In his response to similar assertions in the FTC complaint, Cooper said marketing packages were prepared for all customers who purchased them. They included product branding materials, the 3D model and press releases. Web pages were created as part of World Patent Marketing’s site.
Video commercials were created that were intended to be “brash, funny and memorable” and have the potential “to go viral,” Cooper said.
But on the company’s YouTube channel, 58 short videos present inventions by the company’s customers using a similar 3D animation style and stock music.
Products include artificial heads of lettuce, a cosmetic compact with a built-in digital camera, and flavored pacifiers called Paciflavor.
There are no live actors or actresses, no voice overs explaining what the products do, and no descriptions on individual video pages. None of the videos appear to have gone viral — collectively, the 58 videos have been viewed 2,611 times.
“After some time, WPM realized that generating interest from so-called ‘big box’ manufacturers … was difficult,” Cooper’s response states. Cooper and the company shifted strategy and began working with customers to make and sell their products, hoping there might be a “groundswell” of interest.
In March 2016, the company entered its first licensing agreement with an inventor to create the “Safety Blade” — a razor blade that retracts inside a plastic housing, Cooper’s response states.
Part of the company’s new strategy involved placing the products on its website and developing its online store as a crowdfunding website, Cooper’s response states. Cooper wants the court to reject the permanent injunction and approve a “corporate monitorship” that would enable him to pursue the company’s “New Business Model.”
Seaver said in an interview that Cooper, long after taking his $300,000, told him his idea was worthless and in its place the company would market a series of cell phone cases that people would want to collect.
The company created a web page for the so-called “Janus Case” and sent Seaver a sampling — about 30 units. “It was a joke,” he says. “It was no different than a regular cellphone case.”
Seaver is hoping the cases uncover more assets so he can recover his investment. “I am in total and absolute disgust,” he says. “I’m devastated personally, financially, and emotionally on every level you can imagine.”