815 ILCS 620/ Illinois Fair Invention Development Standards Act.

(815 ILCS 620/Art. I heading) ARTICLE I. GENERAL PROVISIONS

(815 ILCS 620/101) (from Ch. 29, par. 101)

Sec. 101. Short title. This Act shall be known and may be cited as the "Illinois Fair Invention Development Standards Act".

(Source: P.A. 81-542.)

(815 ILCS 620/102) (from Ch. 29, par. 102)

Sec. 102. Legislative intent. The purpose of this Act is to safeguard the public against fraud, deceit, imposition of financial hardship, and to foster and encourage competition, fair dealing, and prosperity in the field of idea and invention development services by prohibiting or restricting false and misleading advertising, onerous contract terms, harmful financial practices, and other unfair, dishonest, deceptive, destructive, unscrupulous, fraudulent, and discriminatory practices by which the public has been injured in connection with such development services, but not to interfere with or further regulate by this Act, those persons who provide researching, marketing, surveying, or other kinds of consulting services to professional manufacturers, marketers, publishers or others purchasing such services as an adjunct to the traditional commercial enterprises in which they engage as a livelihood.

Representation of a client by an attorney in connection with the sale or licensing of an invention is not intended to be regulated by this Act.

(Source: P.A. 81-542.)

(815 ILCS 620/103) (from Ch. 29, par. 103)

Sec. 103. Definitions. As used in this Act, unless the context otherwise requires:

(a) "Invention Development Services" shall include at least one of the following: (1) evaluation of the market potential of an invention; and (2) representation of an invention to potential distributors or to potential manufacturers of the invention.

(b) "Contract for invention development services" shall include a contract by which an invention developer undertakes to perform invention development services for a customer.

(c) "Customer" shall include any person, firm, corporation, association, or other entity that is solicited by, inquires about or seeks the services of, or enters into a contract for invention development services with an invention developer.

(d) "Invention" shall mean any discovery, process, method, apparatus, machine, design, formulation, composition, product, concept, idea or any combination thereof.

(e) "Invention developer" shall mean any person, firm, corporation, association or other entity and the agents, employees or representatives of such person, firm, corporation, association, or other entity that performs invention development services, except (1) any department or agency of the federal, state or local government, (2) any charitable, scientific, educational, religious, or other organization qualified under Section 501(c)(3) or described in Section 170(b)(1)(A) of the Internal Revenue Code of 1954, as amended, or (3) any person, firm, corporation, association or other entity that does not charge a fee for invention development services. For the purposes of this paragraph, "fee" shall include any payment made by the customer to such entity including reimbursements for expenditures made or costs incurred by such entity but shall not include any payment made from a portion of the income received by a customer by virtue of invention development services performed by such entity.

(Source: P.A. 81-542.)

(815 ILCS 620/Art. II heading) ARTICLE II. DISCLOSURES MADE PRIOR TO CONTRACT

(815 ILCS 620/201) (from Ch. 29, par. 201)

Sec. 201. Disclosure of fee in advertising. Every invention developer who charges a fee or requires any consideration for his invention development services must clearly and conspicuously disclose such fact in every advertisement of such services.

(Source: P.A. 81-542.)

(815 ILCS 620/202) (from Ch. 29, par. 202)

Sec. 202. Disclosures to customer. In the first oral communication with a customer or in the first written response to an inquiry by a customer; or other than an oral communication or written response the primary purpose of which is to arrange an appointment with the invention developer for presentation of his invention development services, the invention developer shall cause the following disclosures to be made in writing and delivered to each customer:

(a) A statement of the fee charged, if known, or a statement of the approximate range of fees charged; and a statement of the approximate portion of the fee charged, if any, that will be expended for services relating to patent matters.

(b) A statement that the invention developer does not intend to expend more for the invention development services than the fee charged the customer, if, in fact, it does not, and if it does intend to expend more than the fee charged, a statement of the estimated expenditures of the invention developer in excess of the fee received from the customer.

(c) A statement as follows:

"Any contract for invention development services between you and ourselves will be regulated by law. We are not qualified or permitted to advise you whether protection of your invention is available under the patent laws of the United States or any other laws. If your invention is patentable or infringes an existing valid patent, your failure to inquire into these matters may affect your rights to your invention. Disclosure of your invention on a nonconfidential basis may also adversely affect your rights."

(Source: P.A. 81-1509.)

(815 ILCS 620/Art. III heading) ARTICLE III. GENERAL REGULATORY PROVISIONS

(815 ILCS 620/301) (from Ch. 29, par. 301)

Sec. 301. Contracts. Every contract for invention development services shall be in writing and shall be subject to the provisions of this Act. A copy of the written contract shall be given to the customer for him to retain at the time he signs the contract.

(Source: P.A. 81-542.)

(815 ILCS 620/302) (from Ch. 29, par. 302)

Sec. 302. Notice on contract. Each and every contract for invention development services shall carry a distinctive and conspicuous cover sheet with the following notice to the customer printed thereon in boldface type of not less than 10-point size or equivalent size if handwritten:

"The following disclosures are required by law:

You have the right to cancel this contract for any reason at any time within 7 days from the date you receive a copy of it signed by all parties to the contract. To exercise this option you need only mail or deliver to the other party 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 your cancellation, the other party must return by mail, within 5 business days, all money paid and all materials provided by you.

This contract is regulated by law. The other party to this contract is not qualified or permitted to advise you whether protection of your invention is available under the patent laws of the United States or any other laws. If your invention is patentable or infringes an existing patent, your failure to inquire into these matters may affect your rights to your invention. Disclosure of your invention on a nonconfidential basis may also adversely affect your rights."

(Source: P.A. 81-542.)

(815 ILCS 620/303) (from Ch. 29, par. 303)

Sec. 303. Title to invention. No invention developer shall acquire any interest, partial or whole, in the title to the customer's invention as part of a contract for invention development services. Nothing in this Section shall be construed to prohibit an invention developer from contracting with a customer to receive a portion of any proceeds accruing to the customer as a result of performance of invention development services by the invention developer.

(Source: P.A. 81-542.)

(815 ILCS 620/304) (from Ch. 29, par. 304)

Sec. 304. Rights of customer against third parties. No contract for invention development services shall require the execution of any note or series of notes by the customer which, when separately negotiated, will cut off as to third parties any right of action or defense which the customer may have against the invention developer.

(Source: P.A. 81-542.)

(815 ILCS 620/305) (from Ch. 29, par. 305)

Sec. 305. Rights of customer against assignee of invention developer. Any assignee of the invention developer's rights is subject to all equities and defenses of the customer against the invention developer existing in favor of the customer at the time of the assignment.

(Source: P.A. 81-542.)

(815 ILCS 620/Art. IV heading) ARTICLE IV. MANDATORY CONTRACT TERMS

(815 ILCS 620/401) (from Ch. 29, par. 401)

Sec. 401. Contract requirements. Every contract for invention development services shall set forth in at least 10-point boldface type, or equivalent size if handwritten, all of the following:

(a) A full and detailed description of the acts or services that the invention developer undertakes to perform for the customer. To the extent that the description of acts or services grants the invention developer discretion to decide what acts or services are to be performed by the invention developer, the invention developer shall exercise that discretion to promote the best interests of the customer.

(b) A statement whether the invention developer undertakes to construct one or more prototypes, models, or devices embodying the customer's invention.

(c) A statement whether the invention developer undertakes to sell or distribute one or more prototypes, models or devices embodying the customer's invention.

(d) The name of the person or firm contracting to perform the invention development services, the name under which said person or firm is doing business as an invention developer, and the name of any parent, subsidiary or affiliated company that may engage in performing the invention development services.

(e) The invention developer's principal business address and the name and address of its agent in the State of Illinois authorized to receive service of process.

(f) The business form of the invention developer, whether corporate, partnership, or otherwise.

(g) A statement of the fee charged, and a statement of the approximate portion of the fee charged, if any, that will be expended for services relating to patent matters.

(h) A statement that the invention developer does not intend to expend more for the invention development services than the fee charged the customer, if, in fact, it does not, and if it does intend to expend more than the fee charged, a statement of the estimated expenditures of the invention developer in excess of the fee received from the customer.

(i) If any oral or written representation of estimated or projected customer earnings is made, a statement of such estimation or projection.

(j) A statement that the invention developer acts as a fiduciary in respect to the customer and is required to maintain all records and correspondence relating to performance of the invention development services for that customer for a period of not less than three years after expiration of the term of the contract for invention development services.

(k) The name and address of the custodian of all records and correspondence relating to the performance of the invention development services.

(l) A statement that the records and correspondence required to be maintained by subparagraph (j) of this Section will be made available to the customer or his representative for review and copying at the customer's expense on the invention developer's premises during normal business hours upon 7 days' written notice, said time period to begin from the date the notice is placed in the United States mail properly addressed first-class postage prepaid.

(m) A statement of the expected date of completion of the invention development services.

(n) A statement that the invention developer shall deliver to the customer, at the customer's address specified in the contract at quarterly intervals throughout the term of the contract, a written statement of the services performed to date; provided, however, the first such statement need not be delivered until 180 days after the contract is signed and in effect.

(Source: P.A. 81-542.)

(815 ILCS 620/402) (from Ch. 29, par. 402)

Sec. 402. Right of cancellation. Each party's right of cancellation of the contract shall be maintained:

(a) Notwithstanding any contractual provision to the contrary, the invention developer and the customer shall each have the right to cancel a contract for invention development services, for any reason, at the time within 7 days of the date the cancelling party receives a fully executed copy of the contract. Cancellation shall be effected by written notice mailed or delivered to the invention developer or the customer. If said notice is mailed, it must be postmarked by midnight of the last day of the cancellation period unless such last day falls on a Sunday or a holiday recognized in Illinois in which case it must be postmarked by midnight of the next following business day. If the notice is delivered, it must be delivered by the end of the last day of the cancellation period and during normal business hours, unless the last day falls on a Sunday or a holiday recognized in Illinois in which case delivery may be made during the next normal business day. Within 5 business days after mailing or delivery of such notice of cancellation by the invention developer or receipt of such notice of cancellation by the customer, the invention developer shall return to the customer, by mail, all moneys paid and all materials provided by the customer. Within 5 business days after mailing or delivery of such notice of cancellation by the customer or receipt of such notice of cancellation by the invention developer, the invention developer shall return to the customer, by mail, all moneys paid and all materials provided by the customer.

(b) The provisions of subparagraph (a) of Section 402 shall apply to every contract executed between an invention developer and a customer. Each such contract shall contain the following statement in type bolder than that of the surrounding text immediately above the place at which the customer signs the contract: "The 7 day period during which you may cancel this contract for any reason by mailing or delivering written notice to the other party will expire 7 days from the date you receive a fully executed copy of this contract. If you choose to mail your notice, it must be placed in the United States mail properly addressed first-class postage prepaid and postmarked before midnight of that date. If you choose to deliver your notice to the other party directly, it must be delivered by the end of business on that date."

(Source: P.A. 81-542.)

(815 ILCS 620/Art. V heading) ARTICLE V. REMEDIES AND ENFORCEMENT

(815 ILCS 620/501) (from Ch. 29, par. 501)

Sec. 501. Application of other law. The provisions of this Act are not exclusive and do not relieve the parties or the contract subject thereto from compliance with all other applicable provisions of law.

(Source: P.A. 81-542.)

(815 ILCS 620/502) (from Ch. 29, par. 502)

Sec. 502. Unenforceability of contract for noncompliance. Any contract for invention development services which does not comply with the applicable provisions of this Act shall be void and unenforceable as contrary to public policy, provided that no contract shall be void and unenforceable if the invention developer proves that noncompliance was unintentional and resulted from a bona fide error notwithstanding the use of reasonable procedures adopted to avoid any such errors and makes an appropriate correction.

(Source: P.A. 81-542.)

(815 ILCS 620/503) (from Ch. 29, par. 503)

Sec. 503. Unenforceability of contract for fraud. Any contract for invention development services entered into in reliance upon any false, fraudulent, deceptive or misleading opinion, statement or other representation by the invention developer shall be void and unenforceable.

(Source: P.A. 81-542.)

(815 ILCS 620/504) (from Ch. 29, par. 504)

Sec. 504. Nonwaiver of Act by customer. Any waiver by the customer of the provisions of this Act shall be deemed contrary to public policy and shall be void and unenforceable.

(Source: P.A. 81-542.)

(815 ILCS 620/505) (from Ch. 29, par. 505)

Sec. 505. Damages and attorneys fees. Any person who has been injured by a violation of this Act by an invention developer or by any false or fraudulent statement, representation, or omission of material fact by an invention developer, may bring a civil action against the invention developer for the greater of the following amounts:

(1) $3,000, or

(2) Three times the amount of the actual damages, if any, sustained by the customer. In addition to the greater of the preceding amounts, the court may award reasonable attorney's fees to the customer.

(Source: P.A. 81-542.)

(815 ILCS 620/506) (from Ch. 29, par. 506)

Sec. 506. Offenses. Any invention developer who wilfully violates any provision of this Act, or wilfully enters an invention development contract which omits any duty or disclosure required by this Act, is guilty of a Class B misdemeanor.

(Source: P.A. 81-542.)

(815 ILCS 620/507) (from Ch. 29, par. 507)

Sec. 507. Injunction. Any circuit court of this State shall have jurisdiction in equity to restrain and enjoin the violation of any of the provisions of this Act relating to invention development services and contracts therefor.

(Source: P.A. 81-542.)

(815 ILCS 620/508) (from Ch. 29, par. 508)

Sec. 508. Enforcement. The duty to institute actions for violations of this Act, including equity proceedings to restrain and enjoin such violations, is hereby vested in the Attorney General and State's attorneys. The Attorney General or State's attorneys may prosecute misdemeanor actions or institute equity proceedings or both.

This Section shall not be deemed to prohibit the enforcement by any person of any right provided by this or any other law.

(Source: P.A. 81-542.)

(815 ILCS 620/509) (from Ch. 29, par. 509)

Sec. 509. Voidability for failure to comply with disclosure requirements. Failure to make the disclosures required by Article 2 of this Act shall render any contract subsequently entered into between the customer and the invention developer voidable by the customer.

(Source: P.A. 81-542.)

(815 ILCS 620/Art. VI heading) ARTICLE VI. FINANCIAL REQUIREMENTS

(815 ILCS 620/601) (from Ch. 29, par. 601)

Sec. 601. Maintenance of bond. Every invention developer rendering or offering to render invention development services in this State shall maintain a bond issued by a surety company admitted to do business in this State. The principal sum of the bond shall be 5 percent of the invention developer's gross income from the invention development business in this State during the invention developer's last fiscal year, except that the principal sum of the bond shall not be less than $25,000 in the first or any subsequent year of operations. A copy of such bond shall be filed with the Secretary of State prior to the time the invention developer first commences business 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 Section.

(Source: P.A. 81-542.)

(815 ILCS 620/602) (from Ch. 29, par. 602)

Sec. 602. Cash deposit instead of bond. Instead of furnishing the bond required by Section 602 of this Act, the invention developer may deposit with the Secretary of State a cash deposit in the like amount. This cash deposit may be satisfied by any of the following:

(a) Certificates of deposit payable to the Secretary of State issued by banks doing business in this State and insured by the Federal Deposit Insurance Corporation.

(b) Investment certificates of share accounts assigned to the Secretary of State and issued by a savings and loan association doing business in this State and insured by the Federal Savings and Loan Insurance Corporation.

(c) Bearer bonds issued by the United States government or by this State.

(d) Cash deposited with the Secretary of State.

(Source: P.A. 81-542.)

(815 ILCS 620/603) (from Ch. 29, par. 603)

Sec. 603. Forfeiture of bond. The bond required by Section 601 of this Act shall be in favor of the State of Illinois 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 or failure to provide the services of the invention developer in performance of the contract. Any person claiming against the bond may maintain an action at law against the invention developer and the surety.

The aggregate liability of the surety to all persons for all breaches of conditions of the bond provided herein shall in no event exceed the amount of the bond.

(Source: P.A. 81-542.)

(815 ILCS 620/Art. VII heading) ARTICLE VII. MISCELLANEOUS PROVISIONS

(815 ILCS 620/701) (from Ch. 29, par. 701)

Sec. 701. Maintenance of records. Every invention developer shall maintain all records and correspondence relating to performance of each invention development service contract for a period of not less than three years after expiration of the term of each such contract.

(Source: P.A. 81-542.)

(815 ILCS 620/702) (from Ch. 29, par. 702)

Sec. 702. Reference to compliance with Act in advertising. No invention developer shall make, or authorize the making of, any reference to compliance by it with this Act in any advertisement.

(Source: P.A. 81-542.)

(815 ILCS 620/703) (from Ch. 29, par. 703)

Sec. 703. Severability clause. If any provision of this Act or the application thereof to any person or circumstances is held unconstitutional, the remainder of the Act and the application of such provision to other persons and circumstances shall not be affected thereby.

(Source: P.A. 81-542.)

(815 ILCS 620/704) (from Ch. 29, par. 704)

Sec. 704. Application of Act and effective date. This Act shall not apply to any contract entered into prior to the effective date of the Act. This Act takes effect upon its becoming a law.

(Source: P.A. 81-542.)