For a legitimate operation, a modest upfront payment is reasonable if it's clear how the money will be used and the prices seem appropriate. An example of this would be $100 to $500 for the creation and duplication of a marketing packet, with which you should be provided copies. A legitimate company is compensated on its performance and results, usually in the form of a percentage of future revenues.
Even if they don't charge a lot out of the gate, more upfront fees may be coming. These companies have been known to charge a small fee upfront for a "feasibility study" and then come back with, "Great news! Your product can make it big!" This is the hook. They'll then ask for another payment, which typically ranges from $3,000 to $15,000, and which they claim will go toward costs like market research, a preliminary patent search or identifying licensing partners. I have heard from a number of inventors that after paying this money, they never hear from the product submission company again.
5. Use the web to check for complaints about the company. Search "invention" on the U.S. Federal Trade Commission website and the U.S. Patent and Trademark site . These sites also have instructions on how to file a complaint.
6. Refer to the American Inventors Protection Act of 1999 . The law requires a firm to present certain provisions to you prior to contracting. These provisions include the number of inventions the firm has evaluated over the prior five years, the number of customers the firm has contracted with, the number of customers who have made money, and the names and phone numbers of other invention companies with whom the principals of the firm have been previously affiliated. Click here for a full copy of the act.
7. Be sure your agreement contains clear timelines . These timelines should state when the company should achieve certain benchmarks and when it will communicate progress to you. It should also contain a clause that permits you to terminate the agreement if you are dissatisfied, without releasing any of the rights to your invention.
8. Some of these companies have offered "guaranteed patents." Understand that anybody can submit and receive a patent if the claim(s) are narrow enough. Few, if any, serious patent attorneys I know would offer a "guarantee" of issuance of a patent if the claims are being written as broadly as possible. Therefore, before accepting any "guaranteed patent" you may want an outside USPTO-registered patent attorney review the documentation.
The bottom line? Be skeptical. Keep your eyes and ears open and your wallet closed until you've completed due diligence on the company with whom you plan to do business.
Tamara Monosoff is the author of Your Million Dollar Dream: Regain Control & Be Your Own Boss and The Mom Inventors Handbook, Secrets of Millionaire Moms, and co-author of The One Page Business Plan for Women in Business. She is also the and CEO of www.MomInvented.com. Connect on Twitter: @mominventors and on Facebook: facebook.com/MomInvented.