Invention companies is a broad label covering businesses that work very differently, and the difference that matters most is who pays them.
If a buyer pays them, their interest is aligned with yours. They earn when you earn.
If you pay them, it is not. They earn whether or not anything ever sells, which is not fraud in itself and does change what their enthusiasm is worth.
Federal law requires certain firms to tell you how many of their customers actually made money. Asking for that number is the single most useful thing you can do.
The categories
| Type | Who pays | Aligned with you? |
|---|---|---|
| Invention promotion firm | You, upfront | No |
| Patent broker (contingency) | The buyer, from proceeds | Yes |
| Licensing agent | Usually from royalties | Mostly |
| Product development firm | You, for the work | Neutral — you get a product |
| Prototyping / engineering | You, for the work | Neutral |
| Manufacturers' agent | Commission on sales | Aligned |
| Registered attorney or agent | You, for drafting | Neutral — regulated |
Neutral is fine. Paying an engineer to build a prototype gets you a prototype, and the transaction is honest.
The problem case is paying for enthusiasm — evaluations, submissions and marketing that produce activity rather than outcomes.
What the law requires
35 U.S.C. §297 obliges invention promoters to disclose, in writing, before you contract:
| Disclosure | Why it matters |
|---|---|
| Total customers in the past five years | Context |
| How many received a net financial profit | The number that matters |
| How many obtained licence agreements | Not the same as profit |
| Other names the business has traded under | Reveals history |
Net financial profit means made more than they paid. A firm can truthfully report thousands of customers, hundreds of licence agreements, and a handful of people who came out ahead.
Refusal to provide it is the answer. The disclosure is a legal requirement, not a courtesy, and a business that will not give it has told you what the numbers look like.
The pattern to recognise
| Step | What happens |
|---|---|
| 1 | They contact you — ad, mailing, or after a patent publishes |
| 2 | Free initial consultation, encouraging |
| 3 | Paid evaluation — comes back positive |
| 4 | Larger fee for a submission or marketing package |
| 5 | Your idea is sent to a list of companies |
| 6 | Little or nothing happens |
Step three is where the money is made and where the tell is. If positive evaluations lead to larger paid engagements, the evaluation is a sales step.
A real assessment is willing to say no. Ask directly what proportion of evaluations come back negative.
Step five is cheap to perform. Sending material to a list costs almost nothing, which is why the fee sits at step four.
Product development firms are different
| Promotion firm | Development firm | |
|---|---|---|
| You receive | Submissions to a list | A prototype, drawings, a working design |
| Deliverable | Activity | A tangible thing |
| Value if nothing sells | None | You still have the design |
| Judging quality | Hard | You can see it |
Paying for engineering is an honest transaction. You get a prototype, and whether it later sells is a separate question.
The distinction is whether the deliverable exists independently of an outcome.
Red flags
| Signal | Meaning |
|---|---|
| They contacted you first | Enthusiasm preceded evaluation |
| Paid evaluation returns positive | Positive evaluations are the product |
| Large upfront fee | Submission is cheap; the fee is the business |
| Pressure to decide quickly | Filing deadlines are real; sales deadlines are not |
| Will not give §297 numbers | The numbers are bad |
| Guaranteed outcomes | Nobody can guarantee a licence or a sale |
| No named registered practitioner | Nobody accountable is drafting |
| Vague deliverables | Nothing to hold them to |
| Testimonials but no statistics | Selection, not evidence |
Urgency is the one to watch. Patent deadlines are genuinely unforgiving — maintenance fees, the twelve-month provisional window, foreign filing after disclosure. Sales urgency almost never is.
Contingency brokers work differently
| Promotion firm | Contingency broker | |
|---|---|---|
| Paid by | You | The buyer, from proceeds |
| Paid if nothing sells | Yes | No |
| Selects which assets to take | Rarely | Heavily |
| A decline means | — | Free diagnostic information |
Brokers decline most patents offered to them, because unpaid effort on an unsaleable asset is a loss. That selectivity is the mechanism working, not rudeness.
Which makes "will you take this on" a free valuation. See patent brokers without upfront fees.
Licensing agents
| Feature | Detail |
|---|---|
| Paid | Usually from royalties |
| Aligned | Mostly |
| Selects assets | Yes |
| Relationships | Industry-specific |
| Watch for | Upfront fees attached to a "royalty" model |
A genuine licensing agent earns from the licence. Where an upfront fee appears alongside a royalty share, ask what the fee buys and what happens if no licence is signed.
Agents decline most submissions, which is the same selectivity that makes contingency brokers useful.
Do this before contacting anyone
| Step | Cost | Why |
|---|---|---|
| 1. Free prior art search | $0 | Eliminates most inventions |
| 2. Read the close references | $0 | Where the reformulation comes from |
| 3. Check whether products already exist | $0 | A product on sale is prior art |
| 4. Check micro entity eligibility | $0 | 80% off USPTO fees |
| 5. Apply to a law school IP clinic | $0 | Real work, free |
The free search changes every conversation afterwards. Whatever a company tells you, you will already know whether the idea is new.
Search by function in several vocabularies, and search products as well as patents. See patent an idea free.
Free and low-cost help exists
| Resource | Provides |
|---|---|
| USPTO Pro Se Assistance Program | Guidance for unrepresented filers |
| Law school IP clinics | Supervised drafting and prosecution, free |
| Bar association inventor clinics | Reduced or no-fee consultations |
| Patent and Trademark Resource Centers | In-person help at partner libraries |
| Google Patents, Espacenet, Patent Public Search | Free searching |
Law school clinics do real work under the USPTO's Law School Clinic Certification Program. Capacity is limited and worth applying for early.
None of these is selling you anything, which is what makes them the right first call.
Disclosure destroys rights
| Action | Effect |
|---|---|
| Public disclosure before filing | Forfeits patent rights in most countries |
| US grace period | 1 year from your own disclosure — US only |
| Disclosure under NDA | Protected, if properly handled |
| Company submission portals | Frequently require waiving confidentiality |
| Trade show or crowdfunding launch | Public disclosure |
Read submission terms before uploading anything. Many corporate portals require you to agree the submission is non-confidential, which is reasonable from their side and consequential from yours.
File first, or disclose under NDA. A provisional costs about $60 in micro entity fees and preserves the position for twelve months.
Worked example: the same idea, two routes
An inventor with a kitchen tool concept.
| Route A | Route B | |
|---|---|---|
| Prior art search | Skipped | Free search first |
| Result | — | Two close references found |
| Reaction | Contacted a promotion firm | Reformulated around the gap |
| Paid evaluation | $800 — positive | — |
| Submission package | $9,500 | — |
| Provisional filed | No | $60 + drafting |
| Non-provisional | No | Micro entity, agent-drafted |
| Spent | $10,300 | ~$9,000 |
| Outcome | Material sent to a list; nothing followed | Patent granted; broker engaged |
Route A's spend produced no asset. The submission package bought activity.
Route B's spend produced something transferable. Almost the same money, and at the end there is a patent with claims.
The prior art search was the fork. It cost nothing and it changed everything after it.
What a realistic outcome looks like
| Reality | Detail |
|---|---|
| Most inventions are not licensed or sold | Whatever route is taken |
| Most patent applications draw rejections | §103 most often |
| 58.6% of US utility patents are abandoned | By their own owners |
| Only 41.4% reach full term | 2014 cohort |
| Ipiry Patent Survival Curve v1.0 | Rate |
|---|---|
| Survive the 3.5-year fee (2022 cohort) | 85.8% |
| Survive the 7.5-year fee (2018 cohort) | 64.6% |
| Reach full term (2014 cohort) | 41.4% |
Computed from 27,273,654 USPTO maintenance fee records covering 8,262,336 US utility patents — see the patent survival curve.
Nearly three in five granted patents are released by their owners, usually because nobody practises the claims. That is the base rate any promise should be measured against.
Questions to ask any invention company
| Ask | Weak answer |
|---|---|
| What are your §297 numbers? | Evasion |
| What proportion of evaluations are negative? | "Almost none" |
| Who pays you, and when? | Unclear |
| Is a registered attorney or agent doing the drafting? | No name |
| What exactly is the deliverable? | "Marketing" |
| What happens if nothing sells? | No answer |
| Can I see the contract before paying? | No |
| Do you own any rights in my invention? | Ambiguous |
Never sign anything transferring rights to a firm you are paying. You should be paying for services, not giving away ownership.
If you already paid
| Step | Detail |
|---|---|
| Read the contract | What was promised, and what was delivered |
| Check the §297 disclosure | Was one given at all? |
| Gather records | Payments, communications, materials |
| Report it | FTC, and your state attorney general |
| Consider a bar association referral | For advice on remedies |
A missing §297 disclosure is itself significant. The obligation is statutory, and failure to comply carries consequences.
Invention companies: the checklist
- Establish who pays them. It determines what their enthusiasm is worth.
- Demand the §297 disclosure in writing before paying anything.
- Read the net-profit figure, not the customer count or licence count.
- Treat unsolicited contact as a signal, not an opportunity.
- Run the free prior art search first. It changes every later conversation.
- Never disclose publicly before filing. Most countries have no grace period.
- Read submission portal terms, which often waive confidentiality.
- Use free resources first — Pro Se Assistance, law school clinics, PTRCs.
- Ignore sales urgency. Only patent deadlines are real.
- Never transfer rights to a firm you are paying. You are buying services.