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FTC Charges Invention Promotion Swindlers with Contempt

Feds Say Scam Took More Than $60 Million from 17,000 Consumers

March 19, 2007

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The Federal Trade Commission has filed a civil contempt action against four individuals and eight business entities for allegedly operating a fraudulent invention promotion business in violation of a court order.

The individuals were employed by International Product Design Inc., which the FTC charged with fraudulent business practices in 1997. A court order issued in 1998 prohibited Julian Gumpel, Darrell Mormando, and Greg Wilson from deceptively marketing invention promotion services, but Gumpel later revived the same scam under the name, "Patent and Trademark Institute of America" (PTI), the FTC charged.

For a fee of $895 to $1,295, PTI promised to evaluate the marketability and patentability of inventors' ideas, but its evaluations were almost always positive and were not meaningful, according to the FTC.

For a fee of $5,000 to $45,000, PTI's clients were offered legal protection and assistance to obtain commercial licenses for their inventions. They also were told that PTI would help them earn substantial royalties from their inventions, but PTI did not help consumers license their inventions, and clients did not earn royalties.

The FTC alleges that PTI's business practices violated the court order, which prohibited the defendants from falsely promising to evaluate invention ideas and falsely claiming that consumers would profit financially if they bought PTI's invention promotion services.

The FTC also alleges that PTI never sent consumers the "Affirmative Disclosure" form required by the order; the form should have disclosed PTI's non-existent track record in bringing inventions to market.

On January 8, 2007, the Commission initiated contempt proceedings against Gumpel and eight corporate entities under his control: Technical Lithographers Inc., d/b/a Patent and Trademark Institute of America (PTI), United Licensing Corporation, International Patent Advisors Inc., Datatech Consulting Inc., International Product Marketing Inc., Unicorp Consulting Inc., d/b/a/ UNI Corp. Inc, Azure Communications Inc., and London Communications Inc.

On January 10, the U.S. District Court for the Eastern District of Virginia issued an order placing PTI in court receivership pending the outcome of the contempt litigation. According to a report prepared by the receiver, PTI has taken approximately $60 million from more than 17,000 consumers since 2000 but could not identify a single successful consumer.

On March 9, the court issued an order to show cause why Michael Fleisher, Wilson, and Mormando, a/k/a Darrell Johnson, should not also be held in contempt for violating the court order issued in 1998. The FTC alleges that they knew about and were subject to the court order, but repeatedly violated it in their roles as managers and salesman for PTI. A hearing on the FTC's charges against all of the defendants is scheduled for April 30, 2007.

The FTC has established a phone line for consumers who may have been harmed by PTI's conduct. Consumers may call 202-326-2926 for more information.

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