[Congressional Bills 104th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2419 Introduced in House (IH)]







104th CONGRESS
  1st Session
                                H. R. 2419

  To amend part I of title 35, United States Code, to provide for the 
protection of inventors contracting for invention development services.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                           September 28, 1995

Mr. Moorhead (for himself and Mrs. Schroeder) introduced the following 
       bill; which was referred to the Committee on the Judiciary

_______________________________________________________________________

                                 A BILL


 
  To amend part I of title 35, United States Code, to provide for the 
protection of inventors contracting for invention development services.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Inventor Protection Act of 1995''.

SEC. 2. INVENTION DEVELOPMENT SERVICES.

    Part I of title 35, United States Code, is amended by adding after 
chapter 4 the following new chapter:

              ``CHAPTER 5--INVENTION DEVELOPMENT SERVICES

``Sec.
``51. Definitions.
``52. Contracting requirements.
``53. Standard provisions for cover notice.
``54. Reports to customer required.
``55. Mandatory contract terms.
``56. Remedies.
``57. Enrollment of invention developers.
``58. Records of complaints.
``59. Enrollment fee.
``60. Suspension or exclusion from enrollment.
``61. Unenrolled representation as invention developer.
``62. Rule of construction.
``Sec. 51. Definitions
    ``For purposes of this chapter, the term--
            ``(1) `contract for invention development services' means a 
        contract by which an invention developer undertakes invention 
        development services for a customer;
            ``(2) `customer' means any person, firm, partnership, 
        corporation, or other entity who enters into a contract for 
        invention development services;
            ``(3) `invention developer' means any person, firm, 
        partnership or corporation, who offers to perform or performs 
        for a customer any act described under paragraph (4), except--
                    ``(A) any department or agency of the Federal, 
                State, or local government;
                    ``(B) any nonprofit, charitable, scientific, or 
                educational organization, qualified under applicable 
                State law or described under section 170(b)(1)(A) of 
                the Internal Revenue Code of 1986; or
                    ``(C) any person duly registered and in good 
                standing before the United States Patent and Trademark 
                Office acting within the scope of that person's 
                registration to practice before the United States 
                Patent and Trademark Office; and
            ``(4) `invention development services' means, with respect 
        to an invention submitted by a customer, any act involved in--
                    ``(A) evaluating the invention to determine its 
                protectability as some form of intellectual property;
                    ``(B) evaluating the invention to determine its 
                commercial potential; or
                    ``(C) marketing, brokering, licensing, selling, or 
                promoting the invention or a product or service in 
                which the invention is incorporated or used.
``Sec. 52. Contracting requirements
    ``(a)(1) Every contract for invention development services shall be 
in writing and shall be subject to the provisions of this chapter. A 
copy of the signed written contract shall be given to the customer at 
the time the customer enters into the contract.
    ``(2) If a contract is entered into for the benefit of a third 
party, such party shall be considered a customer for the purposes of 
this chapter.
    ``(b) The invention developer shall--
            ``(1) state in a written document, at the time a customer 
        enters into a contract for invention development services, 
        whether the usual business practice of the invention developer 
        is to--
                    ``(A) seek more than 1 contract in connection with 
                an invention; or
                    ``(B) seek to perform services in connection with 
                an invention in 1 or more phases, with the performance 
                of each phase covered in 1 or more subsequent 
                contracts; and
            ``(2) supply to the customer a copy of the written document 
        together with a written summary of the usual business practices 
        of the invention developer including--
                    ``(A) the usual business terms of contracts; and
                    ``(B) the approximate amount of the usual fees of 
                the invention developer or other consideration, that 
                may be required from the customer for each of the 
                services provided by the developer.
    ``(c)(1) Notwithstanding any contractual provision to the contrary, 
no payment for invention development services shall be required, 
accepted, or received until the expiration of a period of 5 business 
days beginning on the date on which the customer receives a copy of the 
contract for invention development services signed by the invention 
developer and the customer.
    ``(2) Delivery of a promissory note, check, bill of exchange, or 
negotiable instrument of any kind to the invention developer or to a 
third party for the benefit of the invention developer, irrespective of 
the date or dates appearing in such instrument, shall be deemed payment 
received by the invention developer on the date received for the 
purpose of this section.
    ``(d)(1) Until 5 business days after the payment described under 
subsection (c) is made, the parties shall have the option to refuse to 
enter into the contract as provided under paragraphs (2) and (3).
    ``(2) The customer may exercise the option by--
            ``(A) refraining from making payment to the invention 
        developer; or
            ``(B) providing written notice of the refusal to the 
        invention developer.
    ``(3) The invention developer may exercise the option by giving to 
the customer a written notice of the exercise of the option. The 
written notice shall become effective upon receipt by the customer.
``Sec. 53. Standard provisions for cover notice
    ``(a) Every contract for invention development services shall have 
a conspicuous and legible cover sheet attached with the following 
notice imprinted thereon in boldface type of not less than 12-point 
size:
            ```YOU ARE NOT REQUIRED TO MAKE ANY PAYMENTS UNDER THIS 
        CONTRACT UNTIL FIVE (5) BUSINESS DAYS AFTER YOU SIGN THIS 
        CONTRACT AND RECEIVE A COMPLETED COPY OF IT.
            ```THE TOTAL NUMBER OF INVENTIONS EVALUATED BY THE 
        INVENTION DEVELOPER FOR COMMERCIAL POTENTIAL IN THE PAST FIVE 
        (5) YEARS IS __________. OF THAT NUMBER, __________ RECEIVED 
        POSITIVE EVALUATIONS AND __________ RECEIVED NEGATIVE 
        EVALUATIONS.
            ```IF YOU ASSIGN EVEN A PARTIAL INTEREST IN THE INVENTION 
        TO THE INVENTION DEVELOPER, THE INVENTION DEVELOPER MAY HAVE 
        THE RIGHT TO SELL OR DISPOSE OF THE INVENTION WITHOUT YOUR 
        CONSENT AND MAY NOT HAVE TO SHARE THE PROFITS WITH YOU.
            ```THE TOTAL NUMBER OF CUSTOMERS WHO HAVE CONTRACTED WITH 
        THE INVENTION DEVELOPER IN THE PAST FIVE (5) YEARS IS 
        __________. THE TOTAL NUMBER OF CUSTOMERS KNOWN BY THIS 
        INVENTION DEVELOPER TO HAVE RECEIVED, BY VIRTUE OF THIS 
        INVENTION DEVELOPER'S PERFORMANCE, AN AMOUNT OF MONEY IN EXCESS 
        OF THE AMOUNT PAID BY THE CUSTOMER TO THIS INVENTION DEVELOPER 
        IS ______________. THE NAMES AND ADDRESSES OF SUCH CUSTOMERS, 
        IF ANY, SHALL BE PROVIDED TO ANY PERSON REQUESTING IT.
            ```THE OFFICERS OF THIS INVENTION DEVELOPER HAVE 
        COLLECTIVELY OR INDIVIDUALLY BEEN AFFILIATED IN THE LAST TEN 
        (10) YEARS WITH THE FOLLOWING INVENTION DEVELOPMENT COMPANIES: 
        (LIST THE NAMES AND ADDRESSES OF ALL PREVIOUS INVENTION 
        DEVELOPMENT COMPANIES WITH WHICH THE PRINCIPAL OFFICERS HAVE 
        BEEN AFFILIATED AS OWNERS, AGENTS, OR EMPLOYEES). YOU ARE 
        ENCOURAGED TO CHECK WITH THE UNITED STATES PATENT AND TRADEMARK 
        OFFICE, THE FEDERAL TRADE COMMISSION, YOUR STATE ATTORNEY 
        GENERAL'S OFFICE, AND THE BETTER BUSINESS BUREAU FOR ANY 
        COMPLAINTS FILED AGAINST ANY OF THESE COMPANIES.
            ```YOU ARE ENCOURAGED TO CONSULT WITH AN ATTORNEY OF YOUR 
        OWN CHOOSING BEFORE SIGNING THIS CONTRACT. BY PROCEEDING 
        WITHOUT THE ADVICE OF A QUALIFIED ATTORNEY, YOU COULD LOSE ANY 
        RIGHTS YOU MIGHT HAVE IN YOUR IDEA OR INVENTION.'.
    ``(b)(1) In addition to the requirements of subsection (a), every 
contract for invention development services shall contain the 
appropriate matter under paragraph (2) or (3).
    ``(2) For invention developers who are enrolled the contract shall 
contain the following:
            ```(NAME OF INVENTION DEVELOPER) IS ENROLLED WITH THE 
        COMMISSIONER OF PATENTS AND TRADEMARKS AND BEARS ENROLLMENT 
        NUMBER ____. THE FACT THAT AN INVENTION DEVELOPER IS ENROLLED 
        WITH THE COMMISSIONER OF PATENTS AND TRADEMARKS AS REQUIRED BY 
        LAW IS NOT AN ENDORSEMENT OF THE INVENTION DEVELOPER NOR IS IT 
        AN INDICATOR THAT THEY ARE AUTHORIZED BY THE COMMISSIONER TO 
        REPRESENT APPLICANTS OR OTHER PARTIES BEFORE THE PATENT AND 
        TRADEMARK OFFICE IN PATENT, TRADEMARK, OR OTHER MATTERS.'.
    ``(3) For invention developers who are not enrolled the contract 
shall contain the following:
            ```(NAME OF INVENTION DEVELOPER) IS NOT ENROLLED WITH THE 
        COMMISSIONER OF PATENTS AND TRADEMARKS AS AN INVENTION 
        DEVELOPER. BY NOT SO ENROLLING, (NAME OF INVENTION DEVELOPER) 
        HAS INDICATED THAT IT WILL NOT OFFER TO PERFORM OR PERFORM FOR 
        A CUSTOMER ANY ACT INVOLVED IN FILING FOR AND OBTAINING PATENT, 
        TRADEMARK, OF DESIGN PROTECTION.'''.
    ``(c) The cover notice shall contain the items required under 
subsections (a) and (b) and the name, primary office address, and local 
office address of the invention developer, and may contain no other 
matter.
``Sec. 54. Reports to customer required
    ``With respect to every contract for invention development 
services, the invention developer shall deliver to the customer at the 
address specified in the contract, at least at quarterly intervals 
throughout the term of the contract, a written report that identifies 
the contract and includes--
            ``(1) a full, clear, and concise description of the 
        services performed to the date of the report and of the 
        services yet to be performed and names of all persons who shall 
        perform the services; and
            ``(2) the name and address of each person, firm, or 
        corporation to whom the subject matter of the contract has been 
        disclosed, the reason for each and every disclosure, the nature 
        of the disclosure, and copies of all responses received as a 
        result of those disclosures.
``Sec. 55. Mandatory contract terms
    ``(a) Each contract for invention development services shall 
include in boldface type of not less than 12-point size--
            ``(1) the terms and conditions of payment and contract 
        termination rights required under section 52;
            ``(2) a statement that the customer may avoid entering into 
        the contract by not making a payment to the invention 
        developer;
            ``(3) a full, clear, and concise description of the 
        specific acts or services that the invention developer 
        undertakes to perform for the customer;
            ``(4) a statement as to whether the invention developer 
        undertakes to construct, sell, or distribute one or more 
        prototypes, models, or devices embodying the invention of the 
        customer;
            ``(5) the full name and principal place of business of the 
        invention developer and the name and principal place of 
        business of any parent, subsidiary, agent, independent 
        contractor, and any affiliated company or person that may 
        perform any of the services or acts that the invention 
        developer undertakes to perform for the customer;
            ``(6) if any oral or written representation of estimated or 
        projected customer earnings is given by the invention developer 
        (or any agent, employee, officer, director, partner, or 
        independent contractor of such invention developer) a statement 
        of that estimation or projection and a description of the data 
        upon which such representation is based;
            ``(7)(A) the name and address of the custodian of all 
        records and correspondence relating to the contracted for 
        invention development services, and a statement that the 
        invention developer is required to maintain all records and 
        correspondence relating to performance of the invention 
        development services for that customer for a period of not less 
        than 2 years after expiration of the term of the contract for 
        invention development services; and
            ``(B) a statement that before destruction or disposal of 
        the records and correspondence, the invention developer is 
        required to notify the customer and make such records and 
        correspondence available to the customer at a reasonable cost; 
        and
            ``(8) a statement setting forth a time schedule for 
        performance of the invention development services, including an 
        estimated date by which performance of the invention 
        development services is expected to be completed.
    ``(b) To the extent that the description of the specific acts or 
services affords discretion to the invention developer as to what 
specific acts or services shall be performed, the invention developer 
shall be deemed a fiduciary.
    ``(c) Records and correspondence described under subsection (a)(7) 
shall be made available to the customer or the representative of the 
customer for review and copying at the customer's reasonable expense on 
the invention developer's premises during normal business hours upon 7 
days written notice.
``Sec. 56. Remedies
    ``(a)(1) Any contract for invention development services that does 
not comply with the applicable provisions of this chapter shall be 
voidable at the option of the customer.
    ``(2) Any contract for invention development services entered into 
in reliance upon any false, fraudulent, or misleading information, 
representation, notice, or advertisement of the invention developer (or 
any agent, employee, officer, director, partner or independent 
contractor of such invention developer) shall be voidable at the option 
of the customer.
    ``(3) Any waiver by the customer of any provision of this chapter 
shall be deemed contrary to public policy and shall be void and 
unenforceable.
    ``(4) Any contract for invention development services made by an 
unenrolled invention developer, as provided under section 57, shall be 
voidable at the option of the customer.
    ``(b)(1) Any customer who is injured by a violation of this chapter 
by an invention developer or by any false or fraudulent statement, 
representation, or omission of material fact by an invention developer 
(or any agent, employee, director, officer, partner or independent 
contractor of such invention developer) or by failure of an invention 
developer to make all the disclosures required under this chapter, may 
recover in a civil action against the invention developer (or the 
officers, directors, or partners of such invention developer) in 
addition to reasonable costs and attorneys' fees, the greater of--
            ``(A) $5,000; or
            ``(B) the amount of actual damages sustained by the 
        customer.
    ``(2) Notwithstanding paragraph (1), the court may increase damages 
up to 3 times the amount awarded.
    ``(c) For the purpose of this section, substantial violation of any 
provision of this chapter by an invention developer or execution by the 
customer of a contract for invention development services in reliance 
on any false or fraudulent statements, representations, or material 
omissions shall establish a rebuttable presumption of injury.
``Sec. 57. Enrollment of invention developers
    ``(a) The Commissioner of Patents and Trademarks shall require 
invention developers that offer to perform or perform for a customer 
any act involved in filing for and obtaining utility, design, or plant 
patent or trademark protection to enroll annually with the Patent and 
Trademark Office. Invention developers that offer to perform or perform 
such acts through an agent, employee, officer, partner, or independent 
contractor shall also enroll.
    ``(b) The enrollment required under subsection (a) shall include 
disclosure of--
            ``(1)(A) the names and addresses of all principal officers 
        of the invention developer; and
            ``(B) the names and principal place of business of all 
        invention developers with which the principal officers have 
        been affiliated during the 10-year period before the date of 
        enrollment; and
            ``(2) require disclosure of any administrative, civil, or 
        criminal action taken against the invention developer (or any 
        officer, director, or partner of such invention developer) by 
        any agent of Federal, State, or local government.
    ``(c) Subject to the approval of the Secretary of Commerce, the 
Commissioner may prescribe regulations that--
            ``(1) govern the conduct of invention developers and may 
        require an invention developer, before enrollment, to 
        demonstrate good reputation and necessary qualifications to 
        render to customers or other persons valuable service, advice, 
and assistance in the invention development process;
            ``(2) provide which agents, employees, officers, partners, 
        independent contractors or other individuals of an invention 
        developer are required to enroll under subsection (a); and
            ``(3) provide--
                    ``(A) what information and records held or retained 
                by the invention developer shall be required to be made 
                available to the Commissioner; and
                    ``(B) the conditions under which such information 
                and records shall be made available.
``Sec. 58. Records of complaints
    ``(a) The Commissioner shall make all complaints received by the 
Patent and Trademark Office involving invention developers publicly 
available.
    ``(b) The Commissioner may request complaints relating to invention 
development services from any Federal or State agency and include such 
complaints in the records maintained under subsection (a).
``Sec. 59. Enrollment fee
    ``The Commissioner may establish reasonable fees to cover all costs 
and expenses to carry out the provisions of this chapter.
``Sec. 60. Suspension or exclusion from enrollment
    ``(a) The Commissioner may, after notice and opportunity for a 
hearing, suspend or exclude, either generally or in any particular 
case, from enrollment as an invention developer, any person, firm, 
partnership, or corporation--
            ``(1) demonstrated to be--
                    ``(A) incompetent;
                    ``(B) disreputable;
                    ``(C) liable for gross misconduct; or
                    ``(D) not in compliance with the regulations 
                established under this chapter; or
            ``(2) who shall in any manner deceive, mislead, defraud, or 
        threaten any customer.
    ``(b) The reasons for any such suspension or exclusion shall be 
duly recorded.
    ``(c) The United States District Court for the District of Columbia 
under such conditions and upon such proceedings as by rule determined 
by such court, may review the action of the Commissioner upon the 
petition of the invention developer so suspended or excluded.
``Sec. 61. Unenrolled representation as invention developer
    ``Whoever, not being enrolled as an invention developer with the 
Patent and Trademark Office, holds himself out or permits himself to be 
held out as so enrolled, or as being qualified to provide invention 
development services, or provides invention development services shall 
be guilty of a misdemeanor and fined not more than $10,000 for each 
offense.
``Sec. 62. Rule of construction
    ``Except as expressly provided in this chapter, no provision of 
this chapter shall be construed to affect any obligation, right, or 
remedy provided under any other Federal or State law.''.

SEC. 3. TECHNICAL AND CONFORMING AMENDMENT.

    The table of chapters for part I of title 35, United States Code, 
is amended by adding after the item relating to chapter 4 the 
following:

``5. Invention development services.........................      51''.

SEC. 4. EFFECTIVE DATE.

    (a) In General.--Except as provided in subsection (b), this Act and 
the amendments made by this Act shall take effect 60 days after the 
date of the enactment of this Act.
    (b) Certain Requirements.--The provisions of sections 53(b), 
56(a)(4), 57, 59, 60, and 61 of title 35, United States Code (as added 
by section 2 of this Act) shall take effect 1 year after the date of 
the enactment of this Act.
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