New Jersey Invention Promotion Firm Settles FTC Charges Defendants to Pay Three-quarters of a Million Dollars in Redress

National Invention Services, Inc. (NISI), an invention promotion firm out of Cranford, New Jersey, and its president and CEO, John F. Lee, have agreed to pay approximately $745,000 in consumer redress under a proposed settlement announced today by the Federal Trade Commission. The settlement also requires the defendants, during any contact with consumers at which payment for any of NISI's services is sought, to furnish a written notice to each prospective client which discloses: the existing number of NISI clients; and of those clients, the number who have made more money from their inventions as a result of using NISI's services than they paid to NISI. Currently, according to the FTC, none of well over one thousand NISI clients who have paid several thousand dollars each to utilize NISI's services has made more money as a result of using NISI's services than they have paid to NISI.

The settlement requires the defendants to obtain and retain a signed copy of the court-ordered disclosure statement from each new customer, as well as from each current customer solicited by NISI for any further services. The FTC negotiated the settlement to resolve a complaint it filed in U.S. District Court in Newark, New Jersey in July 1997, as part of "Project Mousetrap" -- a law-enforcement sweep during which the FTC brought five actions against invention-promotion schemes in three states, charging the various defendants with violating federal law prohibiting unfair or deceptive trade practices against consumers.

The complaint against NISI alleged that the defendants misrepresented the likelihood of financial gain to consumers who purchased their invention promotion services. The settlement prohibits the defendants from making false statements about, or failing to disclose, any material aspect of their invention-promotion services. It specifically prohibits the defendants from making misrepresentations about the likelihood that clients will realize financial gain as a result of using NISI's services, or falsely representing that the defendants have successfully assisted customers in marketing their invention or ideas. In addition, the order prohibits the defendants from misrepresenting that the FTC has endorsed or approved the sales materials or sales practices of the defendants. The settlement also contains record keeping requirements by the defendants which are designed to assist the FTC in monitoring the defendants' compliance with the order.

The Civil Division of the Office of the United States Attorney in Newark, New Jersey provided the FTC with invaluable assistance during the investigation and prosecution phases of the case. The Newark office of the Attorney General of New Jersey's Department of Law & Public Safety, Division of Consumer Affairs, which obtained an Administrative Action Order against NISI on March 23, 1998, also provided significant assistance to the FTC during the case.

The Commission vote to approve the settlement for filing was 4-0.

The FTC filed the stipulated order in the U.S. District Court, District of New Jersey, in Newark on July 13, 1998. The settlement is subject to approval by the court.

NOTE: This stipulated order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Court settlements have the force of law when signed by the judge.

Copies of the settlement and other documents associated with "Project Mousetrap," are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. X970063)
(Civil Action No. 97-3459 (MTB)