MINNESOTA STATUTES : INVENTION MARKETING COMPANIES

(As of 12/12/98)

Chapter Title: INVENTION SERVICES

Section: 325A.01

Text:

  325A.01 Definitions.
 
     Subdivision 1.  As used in sections 325A.01 to 325A.10, the
  following terms shall have the meanings given:
 
     Subd. 2.  "Contract for invention development services"
  includes a contract by which an invention developer undertakes
  to develop or promote an invention for a customer.
 
     Subd. 3.  "Customer" means any natural person who is
  solicited by, inquires about, seeks the services of or enters
  into a contract with an invention developer for invention
  development services.
 
     Subd. 4.  "Invention" includes a process, machine,
  manufacture, composition of matter, improvement upon the
  foregoing, or a concept.
 
     Subd. 5.  "Invention developer" means any person, firm,
  corporation or association and the agents, employees or
  representatives of the person, firm, corporation or association
  which develops or promotes or offers to develop or promote an
  invention of a customer in order that the customer's invention
  may be patented, licensed or sold for manufacture or
  manufactured in large quantities, except the term does not
  include:
 
     (1) a partnership or corporation when all of its partners,
  stockholders or members are licensed by a state or the United
  States to render legal advice concerning patents and trademarks,
  or a person so licensed,
 
     (2) a department or agency of the federal, state or local
  government,
 
     (3) a charitable, scientific, educational, religious or
  other organization registered under Minnesota Statutes, section
  309.52 or described in section 170 (b) (1) (A) of the Internal
  Revenue Code of 1954, as amended and in effect on January 1,
  1977,
 
     (4) a person, firm, corporation, association or other
  entity that does not charge a fee for invention development
  services, or
 
     (5) any person, firm, corporation, association or other
  entity whose gross receipts from contracts for invention
  development services do not exceed ten percent of its gross
  receipts from all sources during the fiscal year preceding the
  year in which any contract for invention development services is
  signed.
 
     For the purposes of this subdivision, "fee" shall include
  any payment made by the customer to the entity, including
  reimbursements for expenditures made or costs incurred by such
  entity, but shall not include a payment made from a portion of
  the income received by a customer by virtue of invention
  development services performed by the entity.
 
     Subd. 6.  "Invention development services" includes acts
  required or promised to be performed, or actually performed by
  an invention developer for a customer.
 
     Subd. 7.  "Business day" means any day other than a
  Saturday, Sunday or holiday as defined in section 645.44,
  subdivision 5.
 
     HIST: 1977 c 288 s 1




325A.02 Notice to customers.
 
     Subdivision 1.  Every contract for invention development
  services shall be in writing and shall be subject to the
  provisions of sections 325A.01 to 325A.10.  A copy of each fully
  executed, written contract shall be given to the customer at the
  time the customer signs the contract.
 
     Subd. 2.  If one or more contracts are contemplated by the
  invention developer in connection with an invention or if the
  invention developer contemplates performance of services in
  connection with an invention in more than one phase with the
  performance of each phase covered in one or more contracts, the
  invention developer shall so state in a written statement and
  shall supply to the customer the written statement together with
  a copy of each contract or a written summary of the general
  terms of each contract, including the total cost or
  consideration required from the customer, before the customer
  signs the first contract.
 
     HIST: 1977 c 288 s 2; 1986 c 444
 



 325A.03 Right of cancellation.
 
     Subdivision 1.  Notwithstanding any contractual provision
  to the contrary, the customer shall have the unconditional right
  to cancel a contract for invention development services for any
  reason at any time before midnight of the third business day
  following the date the invention developer and the customer sign
  the contract and the customer receives a fully executed copy of
  it.  Written notice of cancellation may be delivered personally
  or by mail.  If given by mail, the notice is effective upon
  deposit in a mailbox, properly addressed and postage prepaid.
  Notice of cancellation need not take a particular form and is
  sufficient if it indicates, by any form of written expression,
  the intention of the customer not to be bound by the contract.
  Within ten business days after receipt of the notice of
  cancellation, the invention developer shall deliver to the
  customer, personally or by mail, all moneys paid, any note or
  other evidence of indebtedness and all materials provided by the
  customer.
 
     Subd. 2.  Every contract for invention development services
  shall contain the following statement in 10-point boldface type
  immediately above the place where the customer signs the
  contract:
 
     "The three business day period during which you may cancel
  this contract for any reason by mailing or delivering written
  notice to the invention developer will expire on (last date to
  mail or deliver notice).  If you choose to mail your notice, it
  must be placed in the United States mail addressed to (Name of
  Invention Developer), at (Address of Invention Developer's Place
  of Business) with first class postage prepaid before midnight of
  this date.  If you choose to personally deliver your notice to
  the invention developer, it must be delivered by the end of the
  developer's normal business day on this date."
 



  325A.04 Mandatory contract form.
 
     Subdivision 1.  A contract for invention development
  services shall set forth the information required in this
  section in at least 10-point type or equivalent size if
  handwritten.
 
     Subd. 2.  The following disclosure statement shall be in
  boldface type and shall be located conspicuously on a cover
  sheet that contains no other writing:
 
     "The following disclosures are required by law and are
  expressly made a part of this contract:  You have the right to
  cancel this contract for any reason at any time within three
  business days from the date you and the invention developer sign
  the contract and you receive a fully executed copy of it.  To
  exercise this option you need only mail or personally deliver to
  this invention developer written notice of your cancellation.
  The method and time for notification is set forth in this
  contract immediately above the place for your signature. Upon
  cancellation, the invention developer must return by mail or
  personal delivery, within ten business days after receipt of the
  cancellation notice, all money paid and all materials provided
  either by you or by another party in your behalf.
 
     An invention developer who is also a lawyer may give you
  legal advice concerning patent, copyright, or trademark law or
  advise you of whether your idea or invention may be patentable
  or may be protected under the patent, copyright, or trademark
  laws of the United States or any other law.  An invention
  developer who is not a lawyer may not give you legal advice on
  these subjects.
 
     No patent, copyright or trademark protection will be
  acquired for you by the invention developer or by this
  contract.  Your failure to inquire into the law governing
  patent, copyright or trademark matters may jeopardize your
  rights in your idea or invention both in the United States and
  in foreign countries.  Your failure to identify and investigate
  existing patents, trademarks or registered copyrights may place
  you in jeopardy of infringing the copyrights, patent or
  trademark rights of other persons if you proceed to make, use,
  distribute or sell your idea or invention."
 
     Subd. 3.  The contract shall describe fully and in detail
  the acts or services that the invention developer contracts to
  perform for the customer.
 
     Subd. 4.  The contract shall state whether the invention
  developer contracts to construct one or more prototypes, models
  or devices embodying the customer's invention, the number of
  such prototypes to be constructed and whether the invention
  developer contracts to sell or distribute such prototypes,
  models or devices.
 
     Subd. 5.  If an oral or written estimate of customer
  earnings is made, the contract shall state the estimate and the
  data upon which it is based.
 
     Subd. 6. In a single statement the contract shall set
  forth both (1) the total number of customers who have contracted
  with the invention developer, except that the number need not
  reflect those customers who have contracted within the last 30
  days, and (2) the number of customers who have received, by
  virtue of the invention developer's performance of invention
  development services, an amount of money in excess of the amount
  of money paid by such customers to the invention developer
  pursuant to a contract for invention development services.
 
     Subd. 7.  The contract shall state the expected date of
  completion of the invention development services.
 
     Subd. 8.  The contract shall state whether and the extent
  to which it effectuates or makes possible the purchase by the
  invention developer of an interest in the title to the
  customer's invention.
 
     Subd. 9.  The contract shall explain 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 not less than three years after
  expiration of the term of the contract for invention development
  services.
 
     Subd. 10.  The contract shall state that the records and
  correspondence required to be maintained pursuant to section
  325A.08 will be made available to the customer or the customer's
  representative for review and copying at the customer's expense
  on the invention developer's premises during normal business
  hours upon seven days' written notice, the time period to begin
  from the date the notice is placed in the United States mail
  properly addressed and first class postage prepaid.
 
     Subd. 11.  The contract shall state the name of the person
  or firm contracting to perform the invention development
  services, all names under which said person or firm is doing or
  has done business as an invention developer during the previous
  ten years, the names of all parent and subsidiary companies to
  the firm and the names of all companies that have a contractual
  obligation to the firm to perform invention development services.
 
     Subd. 12.  The contract shall state the invention
  developer's principal business address and the name and address
  of its agent in this state authorized to receive service of
  process in this state.
 



 
 325A.05 Disclosures made prior to contract.
 
     Subdivision 1.  In either the first written communication
  from the invention developer to a specific customer or at the
  first personal meeting between the invention developer and a
  customer, the invention developer shall make a written
  disclosure to the customer of the information required in this
  section.
 
     Subd. 2.  The disclosure shall state the median fee charged
  to all of the invention developers' customers who have signed
  contracts with the developer in the preceding six months,
  excluding customers who have signed in the preceding 30 days.
 
     Subd. 3.  The disclosure shall include a single statement
  setting forth (1) the total number of customers who have
  contracted with the invention developer, except that the number
  need not reflect those customers who have contracted within the
  preceding 30 days, and (2) the number of customers who have
  received by virtue of the invention developer's performance of
  invention development services an amount of money in excess of
  the amount of money paid by those customers to the invention
  developer pursuant to a contract for invention development
  services.
 
     Subd. 4.  The disclosure shall contain the following
  statement:
 
     "An invention developer who is also a lawyer may give you
  legal advice concerning patent, copyright, or trademark law or
  to advise you of whether your idea or invention may be
  patentable or may be protected under the patent, copyright, or
  trademark laws of the United States or any other law.  An
  invention developer who is not a lawyer may not give you legal
  advice on these subjects.
 
     No patent, copyright or trademark protection will be
  acquired for you by the invention developer.  Your failure to
  inquire into the law governing patent, copyright or trademark
  matters may jeopardize your rights in your idea or invention,
  both in the United States and in foreign countries.  Your
  failure to identify and investigate existing patents, trademarks
  or registered copyrights may place you in jeopardy of infringing
  the copyrights, patent or trademark rights of other persons if
  you proceed to make, use, distribute or sell your idea or
  invention."
 



 325A.06 Financial requirements.
 
     Subdivision 1.  Every invention developer rendering or
  offering to render invention development services in this state
  shall maintain a bond issued by a surety admitted to do business
  in this state, and equal to either ten percent of the invention
  developer's gross income from the invention development business
  in this state during the invention developer's preceding fiscal
  year, or $25,000, whichever is larger.  A copy of the bond shall
  be approved by the attorney general and filed with the secretary
  of state before the invention developer renders or offers to
  render invention development services in this state.  The
  invention developer shall have 90 days after the end of each
  fiscal year within which to change the bond as may be necessary
  to conform to the requirements of this subdivision.
 
     Subd. 2.  The bond required by subdivision 1 shall be in
  favor of the state of Minnesota for the benefit of any person
  who, after entering into a contract for invention development
  services with an invention developer, is damaged by fraud or
  dishonesty of the invention developer in performance of the
  contract, by the insolvency or the cessation of business by the
  invention developer or by the intentional violation of sections
  325A.01 to 325A.10 by the invention developer.  Any person
  claiming against the bond may maintain an action at law against
  the invention developer and the surety company.
 
     The aggregate liability of the surety company to all
  persons for all breaches of conditions of the bond shall in no
  event exceed the amount of the bond.
 
     Subd. 3.  In lieu of the bond required by subdivision 1 the
  invention developer may deposit with the state treasurer a cash
  deposit in the like amount.  The state treasurer shall not
  refund a deposit until 60 days after either the invention
  developer has ceased doing business in the state or a bond has
  been filed which complies with subdivisions 1 and 2.
 



 325A.07 Restriction on use of negotiable instruments.
 
     In connection with a contract for invention development
  services, the invention developer shall not take from a customer
  a negotiable instrument other than a check as evidence of the
  obligation of the customer.  A holder is not a holder in due
  course if the holder takes a negotiable instrument taken from a
  customer in violation of this section.




  325A.08 Records.
 
     Every invention developer shall maintain all records and
  correspondence relating to performance of each invention
  development contract for a period of not less than three years
  after expiration of the term of the contract.




  325A.09 Remedies and enforcement.
 
     Subdivision 1.  The provisions of sections 325A.01 to
  325A.10 are not exclusive and do not relieve the parties or the
  contract from compliance with all other applicable provisions of
  law.
 
     Subd. 2.  Any contract for invention development services
  that does not comply with the applicable provisions of sections
  325A.01 to 325A.10 shall be unenforceable against the customer
  as contrary to public policy, provided that no contract shall be
  unenforceable if the invention developer proves that
  noncompliance was unintentional and resulted from a bona fide
  error in spite of reasonable procedures adopted to avoid any
  such errors, and if the invention developer makes an appropriate
  correction.
 
     Subd. 3.  Any contract for invention development services
  entered into by a customer with an invention developer who has
  used any fraud, false pretense, false promise,
  misrepresentation, misleading statement or deceptive practice in
  respect to that customer with the intent that the customer rely
  thereon, whether or not the customer was in fact misled,
  deceived or damaged, shall be unenforceable against the customer.
 
     Subd. 4.  Any waiver by the customer of the provisions of
  sections 325A.01 to 325A.10 shall be deemed contrary to public
  policy and shall be void and unenforceable.
 
     Subd. 5.  Any person who has been injured by a violation of
  sections 325A.01 to 325A.10 by an invention developer, by any
  false or fraudulent statement, representation or omission of
  material fact by an invention developer or by failure of an
  invention developer to make all the disclosures required by
  sections 325A.01 to 325A.10 may bring a civil action against the
  invention developer for the damages sustained together with
  costs and disbursements, including reasonable attorney's fees.
  The court in its discretion may increase the award of damages to
  an amount not to exceed three times the damages sustained or
  $2,500, whichever is greater.
 
     Subd. 6.  Failure to make the disclosures required by
  section 325A.05 shall render any contract subsequently entered
  into between the customer and the invention developer voidable
  by the customer.
 
     Subd. 7.  In addition to the penalties provided in
  subdivisions 1 to 6, any invention developer who is found to
  have violated sections 325A.01 to 325A.10 shall be deemed in
  violation of section 325F.69, subdivision 1, and the provisions
  of section 8.31 shall apply.
 


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