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Federal Trade Commission v. World Patent Marketing, Inc.

United States District Court, S.D. Florida

August 16, 2017

FEDERAL TRADE COMMISSION, Plaintiff,
v.
WORLD PATENT MARKETING, INC., et al., Defendants.

          PRELIMINARY INJUNCTION

          DARRIN P. GAYLES UNITED STATES DISTRICT JUDGE

         THIS CAUSE comes before the Court on Plaintiff Federal Trade Commission's (“FTC”) Emergency Ex Parte Motion for a Temporary Restraining Order [ECF No. 4]. The Court has reviewed the Motion and the record and is otherwise fully advised.

         I. PROCEDURAL BACKGROUND

         On March 6, 2017, the FTC filed its Complaint for Permanent Injunction and Other Equitable Relief [ECF No. 1], against Defendants World Patent Marketing, Inc. (“WPM”), Desa Industries, Inc. (“Desa Industries”), and Scott Cooper (“Cooper”), alleging that Defendants violated Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). In conjunction with the Complaint, the FTC filed an Emergency Ex Parte Motion for a Temporary Restraining Order [ECF No. 4]. On March 7, 2017, the Court entered a Temporary Restraining Order and froze all of Defendants' assets, including Cooper's personal assets. [ECF No. 11]. The Court also appointed Receiver Jonathan Perlman (the “Receiver”) to administer the affairs of the Corporate Defendants and to take necessary actions to protect consumers. [Id.].

         On April 6 and April 20, 2017, the Court held an evidentiary show cause hearing on the FTC's request for preliminary injunctive relief.[1] The FTC relied on approximately 59 exhibits, the Receiver's First Interim Report (“RR”) [ECF No. 46], and the testimony of five witnesses: Ryan Masti, a WPM customer; Steven Harris, a WPM customer; Christopher Seaver, a WPM customer; Reeve Tyndall, an FTC investigator; and Jonathan Perlman, the Receiver. Defendants cross-examined all of the witnesses and relied on approximately 24 exhibits.

         On May 25, 2017, the FTC filed an Amended Complaint for Preliminary Injunction and Other Equitable Relief [ECF No. 84]. On June 15, 2017, Defendants moved to dismiss the Amended Complaint [ECF No. 92].

         II. BACKGROUND

         A. The Parties

         The FTC is an independent agency of the U.S. Government, which is authorized to initiate federal district court proceedings to enjoin unfair or deceptive acts or practices in or affecting commerce. 15 U.S.C. §§ 41, 45(a), 53(b).

         Cooper is the founder and owner of WPM and Desa Industries. Plaintiff's Exhibit (“PX”) 30, ¶¶ 61-64. WPM was incorporated in Florida on September 16, 2014. PX 30, ¶ 64. Desa Industries was incorporated in Delaware on February 5, 2010, and filed as a foreign for-profit corporation with the State of Florida on February 28, 2014, and with the State of New York on April 21, 2014. PX 30, ¶¶ 61-63. WPM and Desa Industries have shared ownership, office space, and marketing materials, as well as commingled funds. See PX 26, ¶ 10; PX 30, ¶¶ 72(a), 75-77.[2]

         Since 2014, Defendants have marketed and sold research, patenting, and invention-promotion services to consumers. See RR ¶¶ 97-98, 100-01, 103. Cooper's financial disclosures show that WPM's gross revenue from November 1, 2014, through January 31, 2017, totaled $25, 987, 192. RR ¶ 87.

         B. Defendants' Business Model

         Defendants operated under their first business model from March or June 2014 to October 2016. RR ¶ 97. Under this model, potential customers learned about WPM after seeing WPM's television or internet advertisements. See Hearing Transcript (“HT”) at 24, 87-88. Potential customers who visited WPM's website would find success stories, testimonials, logos of major retailers in which customers' products were sold, and a listing of WPM's Advisory Board. See HT at 57, 117; PX 27, Atts. B-C, E, J-Z, AA, BB, CC. Potential customers relied on the content of WPM's website-which contained a series of misrepresentations-in deciding whether to contact WPM. See PX 4, ¶ 37; PX 7, ¶ 3; PX 10 ¶¶ 2, 7-8; PX 11, ¶ 2; PX 12, ¶ 3; PX 13, ¶ 5; PX 16, ¶ 4; PX 17, ¶¶ 6, 19.

         Upon contacting WPM, potential customers would receive calls from WPM salespeople who directed them to submit their ideas in writing through WPM's website. See HT at 24-25. After potential customers submitted their ideas online, WPM salespeople would call the potential customers to tell them that WPM's review team was taking time researching their proposed ideas because “[t]he company is so selective with the ideas they choose to work with.” PX 53, Att. B, p. 3735. After that call, WPM salespeople would follow-up with potential customers and recite the following sales script:

We had our final meeting with the Review Team regarding your idea. And basically from all the research that's been done on (your idea), the research tells us there's definitely potential to patent your idea. Because of that, I have the green light from the company to let you know that WPM wants to be a part of your new product idea and help you to protect it and bring it to the commercial marketplace. So, first of all congratulations! . . . First of all, let me tell you that, the company loved your idea! They think it has a lot of potential. Especially the Sr. Product Director, who is in charge of which ideas are considered for the upcoming trade show. He sees some good opportunities ahead.

PX 53, Att. B, p. 3740. As detailed below, there is no evidence WPM ever had a review team or rejected a large number of ideas.

         After informing potential customers that WPM's review team had approved their ideas, WPM salespeople would pitch the potential customers to spend up to $2, 000 to purchase WPM's first service, which they called the Global Invention Royalty Analysis (“GIRA”). See PX 4, ¶ 4; PX 9, ¶¶ 8, 10; PX 29, Att. A, ¶ 14. The GIRA included a preliminary patent drawing, a patent search report that searched for prior art, a market demographic psychographic report that highlighted industry challenges, and a “score” that signified the extent to which a customer's idea was patentable and marketable. WPM salespeople told customers that the GIRA contained a marketability study created by their “Harvard University & MIT Research Team, ” which assessed business risk factors, market demand, acceptance for the product, and competition. PX 1, Att. A, pp. 58-62.[3] While waiting for their GIRA reports, customers received calls from WPM salespeople who told them that the “University” had given WPM “the green light to continue with [their] invention[s].” PX 53, Att. B, p. 3746. As detailed below, there is no evidence WPM had any relationships with Harvard, MIT, or any other universities.

         After customers received their GIRA reports, WPM salespeople encouraged customers to purchase one of WPM's patent application packages, which were detailed in a “10 Point Patent Protection & Publicity Commitment” (“PPPC”) brochure and ranged from $8, 995 to $64, 995. See HT at 38, 94-95; PX 8, ¶¶ 6-7; PX 16, ¶ 15, Att. C, pp. 1800-01. In addition to detailing different types of patent applications, the PPPC brochure listed promotional services for customer products including 3D models, press releases, webpages, and other marketing materials. See PX 1, pp. 63-79. WPM salespeople encouraged customers to purchase one of their pricier packages-the “Global Patent Application”-which they claimed would enable customers to obtain a “global patent” that would be valid in the United States and in hundreds of other countries without paying any additional fees. See PX 1, ¶¶ 6-7; PX 2, ¶ 7; PX 4, ¶ 9; PX 16, ¶¶ 15-16, 22; PX 53, App. B, pp. 3748-49. As detailed below, a global patent does not exist.

         Once customers purchased patent application packages, Defendants referred the customers' ideas to Marina Mikhailova-a contract patent agent-who submitted applications to the U.S. Patent and Trademark Office (“PTO”) on behalf of the customers. See PX 19, ¶¶ 5-6. The customers provided their powers of attorney to Mikhailova who communicated directly with the PTO. Id. at 6. Defendants directed Mikhailova not to speak with, or write to, her clients, and Defendants' general practice was to withhold Mikhailova's contact information from customers. PX 19, ¶ 6. As a result, Mikhailova typically submitted deficient applications or applications for which she did not receive prior customer consent. See PX 6, ¶ 14; PX 7, ¶ 10; PX 11, ¶ 14; PX 23, ¶ 12. When the PTO rejected the applications, Defendants failed to make changes or made changes that did not alter the deficiency of the applications, and the PTO either rejected the applications or considered them abandoned. See PX 9, ¶¶ 76, 78; PX 17, ¶¶ 73, 81-82, 95, 98; PX 19, Att. B, pp. 2111-12; PX 23, ¶¶ 18-19. When WPM customers asked for updates on the status of their patent applications, they were often given optimistic news or marketing materials to string them along. See PX 4, ¶ 44; PX 5, ¶¶ 57-59; PX 6, ¶¶ 17, 25-26, 32; PX 7, ¶¶ 14-16, 18-40; PX 10, ¶¶ 19-26; PX 16, ¶¶ 35, 37, 40.

         C. Modified Business Model

         In September 2016, Defendants shifted from their first business model, which focused on patent acquisition, to their second business model, which focused on product development and marketing. RR ¶¶ 83, 101, 104. The second business model provided two main services or products: (1) a Patent Invention and Intelligence Report (“PIIR”) and (2) Smart Product Building (“SPB”). Id. ¶ 101. The PIIR cost between $675 and $1, 695, depending on the invention and amount of research involved. PX 30, ¶ 38. Unlike the GIRA, the PIIR did not advise customers on the likelihood of obtaining patents. See Defendants' Exhibit (“DX”) J-K. However, the emails accompanying the PIIRs sent to customers contained congratulatory language and an estimated range of the value of their patents. RR ¶ 120. From January 2017 to March 2017, WPM salespeople sent approximately 100 congratulatory emails, which provided patent valuations ranging from $1.05 million to $4 million. RR ¶¶ 120, 123; see also Receiver's Exhibit (“RX”) U.

         The SPB Reports were similar to the PPPC, but Defendants allege that the reports did not offer any patent application services. RR ¶ 103. The SPB Reports purportedly offered press releases and licensing outreach, as well as separate packages for branding services, digital marketing, e-commerce services, prototype building, manufacturing products with WPM China, and patent referral services. See DX L; RR ¶ 103.

         D. Defendants' Misrepresentations

         Defendants made a series of misrepresentations to potential customers to induce them to purchase WPM services. Even after customers made initial investments, Defendants continued making misrepresentations to induce them to purchase more services and to make larger investments.

         1. Misrepresentations regarding Major Retailers

         WPM was started between February 2014 and June 2014, yet WPM's homepage from April 2014 displayed logos of Target, Walmart, and Home Depot, and represented that these retailers sold WPM's customers' products. HT at 261-62; RR ¶ 97; PX 53, Att. J, p. 4726. At the show cause hearing, Defendants' counsel conceded that the representation was false but argued that the April 2014 version of WPM's website was taken down nearly two years ago. HT at 317- 18. However, a more recent version of the homepage that was live until at least February 2017 also displayed the logos of Target, Walmart, Home Depot, Walgreens, Best Buy, and others and represented that “[s]ome of the world's most respected brands trust World Patent Marketing.” See PX 27, Att. B, pp. 2269-71. A lead paralegal for Target Corporate Services, Inc., stated that neither WPM nor Desa Industries has had a relationship with Target and she was unable to locate any information about either entity in Target's database. PX 51, ¶ 3.

         2. Misrepresentations regarding the History Channel

         WPM salespeople sent marketing emails to customers, which stated that the History Channel did a special episode on WPM. See PX 9, ¶¶ 38, 48-49; PX 11, Att. E, p. 1150. When Reeve Tyndall, the undercover FTC investigator, contacted WPM in January 2017, a WPM salesperson told him that the History Channel did a “whole segment” on WPM and invited him to watch the video. PX 30, ¶ 15. In reality, however, Defendants paid $17, 170 to air their own commercial on the History Channel, and it aired only once-at 6:00 a.m. on January 29, 2015. PX 18, ¶¶ 2-5. Defendants' counsel conceded at the hearing that the History Channel did not do a special episode on WPM. HT at 319.

         3. Misrepresentations regarding WPM's Relationship with the Snuggie

         From August 2016 to February 2017, WPM salespeople disseminated a press release, which stated that WPM had “[j]oin[ed] [f]orces” and “partner[ed] up with” the developer of the Snuggie. See PX 30, ¶ 60(b), Att. P, p. 2874. However, Allstar Marketing Group, LLC, the developer of the “Snuggie, ” stated in a sworn declaration that Allstar has never had a business relationship with WPM but had only discussed the possibility of doing business with WPM. PX 28, ¶¶ 2-3, 5. In February 2017, Allstar learned that WPM was touting a relationship with it, and as a result, Allstar asked WPM to cease making any claims that it has a business relationship with Allstar or the Snuggie. See PX 28, ¶¶ 4, 6.

         Defendants argue that their representation that they had partnered with Allstar Marketing is accurate because an August 2016 email from Allstar's Marketing Director introduced Cooper as a “valued partner.” See DX U. This is consistent with Allstar's statement that they explored a partnership with WPM in or around August 2016. See PX 28, ¶ 5.

         4. Misrepresentations regarding WPM's Relationship with Harvard, Baylor, and MIT

         In marketing materials and telephonic communications, Defendants told customers that the market analysis portion of the GIRA was performed by “researchers” from well-known universities such as Harvard, Baylor, and MIT. See PX 10, ¶ 4; PX 12, ¶ 22; PX 14, ¶ 5, Att. B, pp. 1517-21. Although Professor David Allen from Baylor University prepared the market analyses for a short period of time, those evaluations were not prepared by or authorized by Baylor University. RR ¶ 131. Defendants replaced Professor Allen with Rohit Goyal, a graduate student at Harvard University, to perform the market analysis. According to his resume, Goyal did not attend MIT. See DX E. In July 2015, an attorney representing Harvard University in intellectual property matters wrote to Cooper and asked him to revise his press releases to remove references to Harvard. PX 59. There is no evidence that Harvard, Baylor, or MIT ever maintained a relationship with WPM.

         5. Misrepresentations regarding Success Stories and Customer Reviews

         WPM's website has a section for “success stories, ” where Defendants list inventions that purportedly have become successful with WPM's assistance, and it contains testimonials of inventors who praise WPM and Cooper. See PX 27, Atts. E, J-Z, AA, BB, CC. WPM salespeople also relayed success stories to customers through telephonic communications. See PX 3, ¶¶ 6-7; PX 8, ¶ 4; PX 10, ¶ 7. However, many inventors listed as “success stories”-including the inventors of Supreme Diva Jeans, Live Expert Chat, Teddy's Ballie Bumpers, the Bimini Top Push Mower, Smart Net, and Green Leaf-did not receive patents, bring their products to market, or realize financial gain as a result of working with Defendants. See PX 5, ¶ 60; PX 7, ¶¶ 38-40, 43; PX 9, ¶¶ 84-86; PX 10, ¶¶ 27, 30; PX 31, ¶ 31; PX 38, ¶¶ 24-27.

         For example, Teddy's Ballie Bumpers' success story represented that “World Patent Marketing secured a U.S. Utility Patent for [Steven Harris's] pet patent, ” and that “online sales [had] started” for the product. See PX 27, Att. P, p. 2516. In another article, Defendants stated that “[t]hey helped [Harris] refine the idea and arranged for a licensing deal to provide [Harris] with the capital he needed to pursue his dream. And in less than a year, [Harris] went from average guy to World Patent Marketing Success Story, with a nationally known televised product that is poised to take-off big time!” PX 27, Att. P, p. 2530. Harris's testimony at the show cause hearing belied Defendants' “success story.” HT at 104-05. He testified that Teddy's Ballie Bumpers cannot be patented because there is already a patent for a similar product, but that fact did not show up in WPM's analysis of the product. Id. at 103-05; see also PX 9, ¶¶ 80, 83. Despite paying Defendants nearly $20, 000, Harris has not made any money from his invention, and Defendants did not fulfill any of their promises such as acquiring a patent for Harris, making him a commercial, negotiating a manufacturing deal, showcasing his product at trade shows, or selling his product. PX 9, ¶¶ 83-84. Customers like Crystal Carlson, Betty Forsythe, and Michael Trew relied on Harris's success story when deciding to reach out to WPM to purchase their services. See PX 4, ¶ 2; PX 5, ¶ 4; PX 13, ¶ 5.

         Defendants also listed Supreme Diva Jeans as a success story and implied that they procured a “jeans patent” for the inventor. See PX 27, Att. N, p. 2475. In an article about Supreme Diva Jeans, Cooper stated that WPM “transformed this product and helped the inventor to refine it” by “spen[ding] months in the final design stages, working with numerous design experts and testing multiple facilities, fabrics, and details.” Id. at p. 2493. However, a year after the success story was published, the Supreme Diva Jeans inventor learned that the PTO contacted WPM because there was information missing in her utility patent application; but because no one from WPM responded with the missing information, the PTO rejected her application. PX 5, ¶¶ 26, 28, 42. After two-and-a-half years of working with Defendants, the inventor spent nearly $40, 000 but received only a prototype, some samples, and a press release in return. PX 5, ¶¶ 60- 61.

         Like Teddy's Ballie Bumpers and Supreme Diva Jeans, Live Expert Chat's success story stated that the inventor's product was a “patented technology” and that Defendants “provided vital seed money and resources in exchange for a 50% percentage in the company.” PX 27, Att. S, pp. 2553-54; see also PX 27, Att. S, p. 2575 (referring to Live Expert Chat as a “software patent” and a “social media patent”). Although Defendants told the inventor that they filed a utility patent application for him, they actually filed a provisional patent and let it expire. PX 7, ¶ 36. After spending thousands of dollars over two-and-a-half years, Live Expert Chat's inventor received some marketing materials, but never received a patent, a prototype, money, or a 50/50 deal with Cooper as a result of working with Defendants. PX 7, ¶¶ 38, 39, 43.

         WPM's website also had a section that displayed positive customer reviews. See PX 27, Att. E. However, Defendants asked customers to write positive reviews and create video testimonials at the beginning of the process, before they could properly evaluate Defendants' services. See PX 5, ¶ 7; PX 7, ¶ 18; PX 10 ¶ 9. In sworn declarations, WPM customers stated that they relied on these positive reviews when deciding to purchase WPM's patent services. See PX 3, ¶¶ 6-7, 9; PX 7, ¶ 3; PX 10, ¶ 2; PX 11, ¶¶ 2, 9; PX 16, ¶ 4; PX 17, ¶¶ 6, 19.

         6.Misrepresentations regarding a Review Team and Rejecting a Large Number of Ideas

         WPM salespeople told customers that a “review team” approved invention ideas before moving forward. See PX 13, ¶ 7; PX 14, ¶ 3; PX 16, ¶ 8; PX 30, ¶ 21; PX 53, Att. B, pp. 3719, 3721, 3727. However, there is no evidence that a “board” or “review team” reviewed invention ideas before customers were told their idea had been approved. See PX 43, ¶ 9; PX 44, ¶ 6; RR ¶ 26. For example, Johnny Graham (“Graham”), who heads WPM's Chicago office, revealed that salespeople were trained to tell prospective customers that their ideas must first be approved by a nonexistent “board” of experts at WPM. RR ¶ 26. The salespeople would then wait a few days before calling again to “congratulate” the customers, because the (non-existent) board had approved their ideas. Id. When Graham started, he believed there must be a review team, and he only later learned this to be untrue. Graham stated that this practice continued through March 2017. Id.; see also PX 43, ¶ 9 (Declaration of WPM salesperson stating “there was no actual approval process for ideas-it was just me deciding whether something was too crazy or not. I was trained to tell people their inventions were great, regardless of what the inventions were and whether they were actually good or not.”).

         Sales scripts instructed WPM salespeople to tell potential customers that that a review team rejected a large number of ideas and that WPM was selective with the ideas with which they chose to work. PX 53, Att. B, pp. 3723, 3730, 3735; see also PX 3, ¶ 3; PX 4, ¶ 4; PX 30, ¶ 20. However, there is no evidence that Defendants had a sales script for rejecting ideas. See PX 44, ¶ 8. Indeed, Graham stated that salespeople were trained to tell prospective customers that their ideas were approved in every situation unless an idea was so outlandish that the customer could be an undercover government agent. RR ¶ 27; see also PX 43, ¶ 9 (WPM salesperson stated that “[t]he managers were worried about a government agency calling in to test WPM. Other than that, it didn't matter what a person's invention idea was.”).

         At the hearing, counsel for Defendants conceded that a large number of ideas were not rejected, but argued that some ideas were rejected. HT at 29, 317. However, Defendants failed to provide evidence establishing that any ideas were rejected. At the hearing, counsel for Defendants also claimed that they submitted every customer idea to TGK & Associates-a customer service company-for “concept review” and that there was a “cursory” review as to whether ideas had “some level of potential.” See HT at 22, 315. Although the evidence indicates that TGK & Associates prepared GIRAs, there is no evidence that TGK & Associates reviewed ideas when customers first contacted WPM. See RR ¶ 99. Furthermore, Defendants did not start paying TGK & Associates for services until October 21, 2015, long after WPM's salespeople started telling customers that its review team approved their ideas. See PX 26, Att. A, p. 2249. Defendants fail to account for the company's review of customer ideas prior to retaining TGK & Associates.

         7. Misrepresentations regarding the Invention Team Advisory Board

         Until at least February 2017, WPM's website, marketing materials, and telephonic communications represented that WPM had an advisory board. See PX 32, ¶ 6; PX 33, ¶ 5; PX 27, Att. D, pp. 2285-93; PX 42, Att. A, p. 3498; PX 53, Att. B, pp. 3721-22. For example, one sales script instructed WPM salespeople to tell consumers about the advisory board in order to “[b]uild credibility”:

Have you had an opportunity to see who is on our advisory board? Build credibility take them to the website if you can send them an email with links. VERY IMPORTANT…Oh by the way I'm sending you a link to our World Patent Marketing Advisory Board. You will quickly see we are head and shoulder above our competition [omitted link to youtube video].

PX 53, Att. B, pp. 3721-22. Customers relied on this information in deciding whether to purchase WPM services. For example, one WPM customer indicated in a sworn declaration that he “looked at [the list of WPM's Board of Directors] and thought this is legitimate; otherwise why would these people allow [Cooper] to list them if he was not actually doing things for people.” PX 32, ¶ 6; see also PX 33, ¶ 5 (“I thought, these famous [board members] wouldn't recommend the company if the company was not legitimate.”). However, at least six Advisory Board members did not advise the company and were not asked to review consumers' inventions. See PX 31, ¶ 25; PX 41, ¶¶ 7-9; PX 48, ¶¶ 6-8; PX 50, ¶¶ 8-9; PX 56, ¶¶ 2-5; RR ¶ 135.

         8. Misrepresentations regarding Trade Shows

         WPM salespeople represented to consumers that they would showcase their inventions at trade shows. See PX 15, ¶ 13; PX 16, ¶ 18. One sales script, for example, states that WPM would “attend[ ] between 6 and 8 tradeshows every 12 months representing [the customer's] product” and that the tradeshows would be both domestic and international. PX 53, Att. B, p. 3747. Another script states that the WPM salesperson and the “marketing team are 95 percent of the time traveling worldwide to different trade shows.” PX 53, Att. C, p. 3758; see also PX 53, Att. C, p. 3757 (“My team also attends tradeshows every three weeks to make connections and start relationships with manufacturers.”). However, Graham stated that a division manager at WPM told him that “WPM didn't actually go to trade shows.” PX 55, ¶ B6. The record reflects that at least one customer indicated that WPM's commitment to market his product at trade shows was one of the reasons he decided to work with WPM. PX 14 ¶ 3 (“I chose to work with World Patent Marketing due to their commitments to me, saying they would run a study with two major colleges to tell whether my invention was feasible, their commitment to fulfill my patent, and their commitment to market my product at trade shows and on websites.”).

         9. Misrepresentations regarding Financial Gain and Success

         The record reveals that Defendants' sales scripts instructed WPM salespeople to tell consumers that the review team loved their ideas and that they saw potential in patenting and licensing their ideas. PX 53, Att. B, p. 3740. Another sales script instructs salespeople to tell consumers that the success rate of receiving a patent filed by WPM “will be higher than 80%.” PX 53, Att. C, p. 3762. In sworn declarations, WPM customers stated that in telephonic communications, WPM salespeople told them that they could make millions and billions of dollars from their inventions if they worked with WPM. See PX 1, ¶ 6; PX 4, ¶ 12; PX 5, ¶ 55.

         Under Defendants' original business model, the GIRA assigned a “score” to consumers' ideas, and WPM salespeople almost always told consumers their inventions scored well and that their ideas were marketable. See PX 1, ¶¶ 5-6; PX 3, ¶ 5; PX 4, ¶ 8; PX 9, ¶ 12. And under Defendants' modified business model, Defendants sent approximately 100 emails to consumers relaying the “great news” that their patents were valued from $2.5 million to $4.05 million. RR ¶¶ 120, 122-23; RX U. In his First Interim Report, the Receiver stated that he viewed the value range in the emails to be a direct communication to consumers regarding the value of their patents and that the emails' congratulatory language was a misrepresentation to consumers. Id. ¶ 122.

         Defendants argue that their website and marketing materials provided disclaimers that warned consumers of the low probability of financial success and of the risks involved in commercializing inventions. For example, Defendants contend the following message on WPM's website homepage serves as a disclaimer: “There are no guarantees. Most inventions fail. Those are the facts. Inventions, patents and product development is [sic] not for everybody. It's right for World Patent Marketing. Is it right for you?” DX W. Defendants also point to similar disclaimers in articles published on WPM's website, such as “Why Most Product Ideas and Inventions Fail, ” “What are my chances of getting rich off a new invention? NOT GOOD!”, and “The Patent Bubble.” DX A-B, F. Defendants also maintain that the following language contained in the contract to purchase a GIRA is evidence of a disclaimer:

The purpose of the Global Invention Royalty Analysis is to enable the inventor to professionally prepare and present their invention so it will get the exposure and support that it needs. You never get a second chance to make a first impression. Prematurely presenting an invention will lower your chance of success. No clients have received a net financial profit or licensing agreement solely as a direct result of this Global Invention Royalty Analysis through World Patent Marketing. This is only one piece of the puzzle. Inventors who intend to proceed with a patent application must also present a convincing case for their idea.

         PX 17 at 1866. However, as set forth below, Defendants' disclaimers were insufficient and did not correct the misrepresentations made by Defendants.

         Further, it is undisputed, and Cooper agrees, that no WPM inventor has ever realized a profit from his or her invention using WPM's services. Id. ¶ 141. Nor has any customer, through WPM, sold a meaningful number of units or entered into a significant licensing agreement with a third party to do so. Id.

         10. Misrepresentations regarding Licensing and Manufacturing Agreements

         In telephonic communications and in marketing materials, Cooper and WPM salespeople told consumers that they had negotiated licensing and manufacturing agreements that resulted in the manufacture and sale of their customers' inventions. See PX 2, ¶ 18; PX 3, ¶¶ 6-7, Att. D, pp. 183-86; PX 31, ¶ 6; PX 32, ¶ 10. WPM salespeople also told consumers they would receive third-party licensing or manufacturing deals. See PX 6, ¶ 6; PX 16, ¶ 27. For example, one sales script states: “Now, regarding manufacturers, as per the USPTO, 2 out of 5 ideas eventually see the marketplace. That is why we take your product to multiple manufacturers so that if one doesn't like your idea there are still hundreds and thousands of other manufacturers that might have an interest in your product.” PX 53, Att. C, p. 3762.

         However, in sworn declarations, WPM customers indicate that they did not receive lucrative licensing deals or any returns on their investments. See PX 1, ¶ 23; PX 2, ¶ 29; PX 4, ¶ 42; PX 31, ¶ 31; PX 32, ¶¶ 31, 34. Indeed, it is undisputed, and Cooper agrees, that no WPM inventor, through WPM, entered into a significant licensing agreement with a third party. RR ¶ 141.

         11. Misrepresentations regarding a Global Patent

         Defendants represented to consumers that WPM's “Global Patent Application” would entitle customers to a global patent for a one-time fee. See PX 1, ¶¶ 6-7; PX 16, ¶¶ 15-16, 22; PX 32, ¶ 10; PX 49, ¶¶ 13-16. However, a global patent does not exist. The PTO offers a Patent Cooperation Treaty (“PCT”) application, which was part of Defendants' Global Patent Application package. See PX 20, ¶ 14; PX 4, Att. C, p. 336. The PCT Application allows inventors to file one application as a placeholder for separate applications in each PCT signatory country; however, inventors then have thirty months to directly request patents from the national patent offices of each country, and they must pay national filing fees and translation fees. PX 20, ¶¶ 14-17. Defendants did not tell customers that the PCT application was only a temporary placeholder, and that customers would need to file separate applications in each country or risk having their applications abandoned. See PX 32, ¶¶ 10, 24; PX 46, ¶ 8. Defendants also did not tell customers about any additional fees associated with the PCT application, and neither the PPPC brochure nor the PPPC contract disclosed additional fees associated with the PCT application. See, e.g., PX 32, ¶¶ 10, 24 (Declaration of a WPM customer stating that Cooper “did not explain to [him] that [he] would have to apply to each country individually or pay more money for each additional country”); PX 44, ¶ 11. Instead, a sales script reveals that WPM salespeople were instructed to affirmatively tell consumers that there would be no additional fees. PX 53, App. B, pp. 3748-49.

         12. Misrepresentations regarding WPM China

         In telephonic communications and in marketing materials, Defendants represented to consumers that WPM has a manufacturing plant in China, and referred to it as “WPM China.” See PX 2, ¶ 7; PX 4, ¶¶ 9-10; PX 10, ¶ 19. WPM China also appeared in sample agreements with consumers. See PX 25, Att. I, p. 2236. Defendants created marketing materials touting licensing deals between “WPM China” and inventors. See PX 10, ¶ 30, Att. D, p. 1060; PX 17, Att. B, pp. 1871-73, 1875-77, 1884-87. For example, in one press release regarding the Bimini Top Push Mower, Defendants stated: “The manufacturer is none other than World Patent Marketing China, World Patent Marketing's manufacturing division. World Patent Marketing has exclusively licensed the Bimini Top Push Mower for ten years and will distribute the product worldwide.” PX 27, Att. U, p. 2627.

         In its marketing materials, Defendants told consumers that WPM had access to a staff on ground in China. PX 3, Att. D, p. 185; PX 6, Att. L, p. 647; PX 7, Att. J, p. 763; PX 17, Att. B, p. 1901; PX 27, Att. P, p. 2517. WPM salespeople also told consumers that in order to take advantage of WPM's manufacturing plant and office in China, they had to purchase the more expensive WPM package for an international patent that included China. See PX 2, ¶ 7; PX 4, ¶ 9.

         Defendants' business records and email communications reveal that WPM never had a division in China; rather, Cooper concedes that WPM merely had contacts at factories in China that could manufacture various products. RR ¶ 125. Counsel for Defendants confirmed at the hearing that “[t]here is no entity named WPM China” and that “there is no World Patent Marketing affiliate in China.” HT at 301-02.

         13. Misrepresentations regarding Additional Fees

         Customers who signed PPPC contracts with WPM paid $8, 995 to $64, 995 for various domestic and international patent applications. PX 16, Att. C, pp. 1800-01. At the time customers signed PPPC contracts with WPM, WPM salespeople used sales scripts to tell customers that they would not have to pay another fee. See PX 8, ¶ 23; PX 10, ¶ 11; PX 16, ¶ 16; PX 17, ¶¶ 18, 23; PX 53, Att. B, p. 3739. WPM's contract also stated, in capital letters: “THE INVENTOR WILL NOT BE HELD RESPONSIBLE FOR ANY ADDITIONAL EXPENSES INCURRED OR ASSESSED BY WORLD PATENT MARKETING, OTHER THAN THOSE DEFINED WITHIN THE SCOPE OF THIS AGREEMENT.” PX 1, Att. B, p. 87. However, the record indicates that there were instances in which Defendants asked customers for additional fees after they paid for their patent packages. PX 1, ¶ 20; PX 5 ¶¶ 18-19, 47-50; PX 31, ¶¶ 8-12; PX 36, ¶¶ 7, 10-12.

         E. Customer Complaints

         Although WPM almost always filed patent applications, customers rarely-if ever- received a patent. See, e.g., PX 1, ¶ 18, 23; PX 4, ¶¶ 40-42; PX 5, ¶ 51; PX 6, ¶ 28; PX 7, ¶ 36; PX 8, ¶¶ 34-36; PX 9, ¶ 76; PX 10, ¶ 27; PX 11, ¶¶ 19, 22-26; PX 15, ¶ 33; PX 19, Att. B, pp. 2111-12; PX 54, ¶ 2. In February 2016, the PTO received a complaint from a WPM customer, which prompted the PTO's Office of Enrollment and Discipline to initiate an investigation into the activities of WPM's patent agent. PX 19, ¶ 6. Defendants concede that in some cases WPM's patent services were flawed, but they attribute the flaws to Mikhailova, and they state that they attempted to remediate problems with patent applications submitted by Mikhailova by transferring her WPM customer files to other patent application vendors. Cooper Decl. ¶ 15. However, Defendants fail to provide evidence that they indeed remediated the problems with the patent applications.

         Defendants also argue that unlike a sham company that leaves consumers emptyhanded, Defendants provided real marketing services to consumers. Although WPM customers did receive some marketing materials for their invention ideas such as brochures, press releases, and banner designs, these materials were of poor quality. See PX 1, ¶ 19; PX 4, ¶ 42; PX 5, ¶ 60; PX 6, ¶¶ 22, 26, Att. L, pp. 632-82; PX 8, ¶ 15; PX 9, ¶¶ 35-36, 40-43; PX 10, ¶ 27; PX 15, ¶¶ 28, 30, 32; PX 16, ¶ 34. For example, when a brother and sister who had each ordered GIRAs for separate inventions noticed that the “Unique Aspects” sections of their GIRAs were identical, the sister contacted Graham about the form language. RR ¶¶ 108-09. Alarmed that the GIRAs appeared fraudulent, Graham emailed Cooper, who responded by calling him a “f--king idiot.” Id. ¶ 115.

         And when Defendants did provide tangible products, they were markedly different from their customers' contracted ideas. For example, Ryan Masti testified that Defendants sent him a “splash page” for a website, with the URL GetSocial.life-despite the fact that Masti's product was called “Socially Accepted, ” and the domain name for “socially accepted” was available. HT at 70-71, 78, 84. It is therefore not surprising that in less than two weeks, the Receiver received over 800 emails from customers, the majority of which contained complaints about WPM. RR ¶ 65.

         Despite the poor quality of Defendants' services, customers reported that when they performed due diligence and researched WPM online, they found only positive reviews. See PX 1, ¶ 3; PX 3, ¶ 3; PX 4, ¶ 2; PX 6, ¶ 2; PX 7, ¶ 3; PX 8, ¶ 2; PX 10, ¶ 2; PX 11, ¶ 2; PX 13, ¶ 5; PX 16, ¶¶ 3-4; PX 17, ¶ 6. When customers became frustrated and complained to Defendants that WPM did not fulfill its promises, many threatened to report WPM's actions to the Better Business Bureau (“BBB”), offices of state attorneys general, the FTC, and other consumer agencies. See PX 1, ¶ 21; PX 3, ¶¶ 20, 33; PX 4, Att. G, pp. 457-58; PX 6, ¶¶ 19-20. In response, Defendants-including Cooper and WPM's head of security-and WPM's lawyers intimidated and threatened customers to prevent them from complaining and to compel them to retract complaints. See PX 1, ¶ 21; PX 3, ¶¶ 23, 28-29, 34-37; PX 4, ¶ 39, Att. H, p. 459; PX 5, ¶ 52; PX 6, ¶¶ 19-20, Att. G, p. 614, Att. H, p. 615; PX 11, ¶ 18, Att. J, pp. 1168-69; PX 53, Att. F, pp. 3957, 4045, 4058.

         One customer, for example, emailed a WPM board member to inquire whether WPM was a fraudulent company. The board member forwarded the email to Cooper, and Cooper replied to the customer, copied his attorneys, and implicitly threatened the customer with legal action. PX 53, Att. F, p. 4142 (“Hey Genius [ ] I understand you emailed one of my board members telling her you think my company lacks integrity and you think we might be a fraud. Just wanted to let you know that is probably going to be the most expensive email you ever sent. I hope it was worth it . . . meet my attorneys Eric Creizman and Andrew Levi [ ] they really enjoy meeting new people.”). When another customer asked for a refund when no work had been done on her invention and mentioned filing a complaint with the BBB, Cooper's lawyer sent her a letter stating that her conduct was “illegal” and she was subject to fines or imprisonment, or both. He told her “you have proceeded far beyond what the law defines as free speech and, instead, have engaged in an unlawful and intentional interruption of World Patent Marketing's business .…World Patent Marketing hereby demands that you immediately cease and desist from making threats to defame it or illegally publish such statements to the Better Business Bureau.” PX 3, ¶¶ 14, 19-38, Att. J, pp. 201-02. After months of trying to receive a refund or services, she filed a complaint with the BBB. She received a letter from a second lawyer who told her that seeking a refund constitutes extortion under Florida law and, “since you used email to make your threats, you would be subject to a federal extortion charge, which carries a term of imprisonment of up to two years and potential criminal fines. See 18 U.S.C. § 875(d).” PX 3, Att. Q, pp. 210-11; see also Id. ¶¶ 14, 19-38, Att. J, pp. 201-02.

         Defendants also sent emails to WPM customers with links to Cooper's blog, which featured posts about his security detail comprised of ex-Israeli soldiers who “knockout first and ask questions later, ” his role in having an ex-employee arrested on extortion charges, and a warning to “say a bad word about him and watch his legal team take action”-“[h]e takes it all personally and keeps grudges filed away.” PX 27, ¶¶ 41-42, Atts. EE-FF, pp. 2752-79; PX 5, Att. M, pp. 527-29. In response to these and other communications, many customers have reported that they were fearful of Cooper and repercussions if they complained. See PX 3, ¶ 33; PX 4, ¶ 39; PX 6, ¶ 19; PX 7, ¶ 37; PX 9, ¶ 79.

         F. Ongoing Misrepresentations

         Defendants contend that because they switched from their first business model to their second business model, a preliminary injunction enjoining them from committing deceptive acts or practices under their first business model is moot. [ECF No. 37 at 4]. However, the record reveals that although Defendants may have changed the names of their services, they continue to provide similar services-and similar misrepresentations-under their second business model. In January 2017, the FTC conducted an undercover investigation, which was led by Investigator Tyndall. Tyndall's ...


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