Invention Developer Services for Inventors Are Highly Regulated

You’ve had that moment.

I’ve had that moment.

The moment when the light bulb turns on and the idea hits you.

You are now convinced that this is the million dollar idea.

But you have no experience with taking an idea from just an idea to a marketable product.

This is where some of you might end up going down a frustrating path.

Maybe you see an advertisement on television or do an internet search and find a company that offers to take your idea and develop it into a marketable product.

They make it sound so easy for you. You just need to sign the contract and they take care of everything else. You just collect royalties from your invention.

If you live in California, the contract you enter with such a company, called an invention developer, is subject to certain regulations.

According to California legislators, the odds of your making any profits from your idea when you contract with an invention developer is very slim.

To protect the public from unscrupulous invention developers who collect fees from would-be inventors, California law imposes certain safeguards.

If you have that once-in-a-lifetime idea, and want to sign up with an invention developer, make sure certain things are in place because the law requires them.

The contract you enter into with the invention developer must be in writing and you should get a copy of the contract.

You have the right to cancel the contract for any or no reason within 7 days after entering into the contract. This applies even if the contract has a provision that prohibits you from canceling during this time.

The contract must have a cover sheet with certain disclosures about your right to cancel within 7 days.

Other disclosures on the cover sheet regard waiving certain rights under patent law once you try to commercialize your invention without securing a patent and that the invention developer cannot advise you about patent law and cannot secure patent protection for you.

An invention developer cannot take an ownership interest in your invention unless the developer is contracting to manufacture your invention and your assignment of ownership is stated in the contract.

But even though an invention developer is generally not allowed to take an ownership interest in your invention, the developer is still allowed to contract with you for a percentage of your earnings as part of the payment for the developer’s services under the contract.

Once you have entered into the contract with the invention developer, the invention developer has to give you a quarterly statement of what services they have provided to you.

Your contract with the developer also needs to have several other required disclosures. And the invention developer must maintain a surety bond in an amount of at least $25,000.

The idea part is always the easy part.

Once you have THE idea be careful about signing up with an invention developer to take your idea to the marketplace.

There have been many unscrupulous companies that take advantage of would-be inventors.

At the very least, check that the contract has all the required disclosures.

Check to make sure the invention developer has the necessary surety bond on file.

You can also have your contract reviewed by an attorney to make sure the contract satisfies all the legal requirements, which is a good sign the company is legitimate.

But even better, you can also consult with a qualified intellectual property attorney who can advise you on the best way to protect your idea while getting it to market.

References: California Business and Professions Code sections 22370-22371, 22372-22378, 22379, 22389.

This discussion is not legal advice, a solicitation of you as a client, nor the engaging in the practice of law in any jurisdiction.

This discussion is merely for information/education and should not be relied upon for legal advice by anyone because the facts discussed may be different from your own situation.  If you need legal advice, consult a qualified attorney.

For more information please visit my website at www.palacioslawoffice.com.

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About Elio Palacios, Jr.

Attorney Elio Palacios, Jr., represents individuals, corporations, entrepreneurs, small businesses, startups and early stage businesses, physicians, dentists, and healthcare businesses in corporate, business and commercial transactions and litigation. He also counsels employers and individuals on visa, immigration and naturalization matters. Visit www.PalaciosLawOffice.com to learn more.
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