CHAPTER 52. INVENTION DEVELOPMENT SERVICES
BUSINESS AND COMMERCE CODE
TITLE 4. BUSINESS OPPORTUNITIES AND AGREEMENTS
CHAPTER 52. INVENTION DEVELOPMENT SERVICES
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 52.001. SHORT TITLE. This chapter may be cited as the
Regulation of Invention Development Services Act.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.002. DEFINITIONS. In this chapter:
(1) "Customer" means:
(A) an individual who enters into a contract with an invention
developer for invention development services; or
(B) a firm, partnership, corporation, or other entity that
enters into a contract with an invention developer for invention
development services and is not purchasing those services as an
adjunct to the traditional commercial enterprises in which the
entity engages as a business.
(2) "Invention" means a discovery, process, machine, design,
formulation, product, concept, idea, or any combination of these,
regardless of whether patentable.
(3) "Invention developer" means an individual, firm,
partnership, or corporation, or an agent, employee, officer,
partner, or independent contractor of one of those entities, who:
(A) performs or offers to perform invention development services
for a customer; and
(B) is not:
(i) a federal, state, or local government department or agency;
(ii) a nonprofit, charitable, scientific, or educational
organization organized under the Texas Non-Profit Corporation Act
(Article 1396-1.01 et seq., Vernon's Texas Civil Statutes) or
formed under Title 1 and Chapter 22, Business Organizations Code,
or described by Section 170(b)(1)(A), Internal Revenue Code of
1986, as amended;
(iii) an attorney acting within the scope of the attorney's
professional license;
(iv) a person registered to practice before the United States
Patent and Trademark Office and acting within the scope of that
person's professional license; or
(v) a person, firm, corporation, association, or other entity
that does not charge a fee, including reimbursement for
expenditures made or costs incurred by the entity, for invention
development services other than payment made from a portion of
the income a customer received by virtue of an act performed by
the entity.
(4) "Invention development services" means an act done by or for
an invention developer for the invention developer's procurement
or attempted procurement of a licensee or buyer of an
intellectual property right in an invention, including:
(A) evaluating, perfecting, marketing, or brokering an
invention;
(B) performing a patent search; and
(C) preparing or prosecuting a patent application by a person
not registered to practice before the United States Patent and
Trademark Office.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.003. APPLICABILITY OF CHAPTER TO CONTRACT FOR INVENTION
DEVELOPMENT SERVICES. This chapter applies to each contract
under which an invention developer agrees to perform invention
development services for a customer.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.004. WAIVER BY CUSTOMER PROHIBITED. A waiver by a
customer of a provision of this chapter is void.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
SUBCHAPTER B. FINANCIAL REQUIREMENTS OF INVENTION DEVELOPERS
Sec. 52.051. BOND REQUIRED. (a) Except as provided by Section
52.053, an invention developer performing or offering to perform
invention development services in this state shall maintain a
bond issued by a surety company authorized to transact business
in this state.
(b) The principal amount of the bond must equal at least the
greater of:
(1) five percent of the invention developer's gross income from
the invention development business in this state during the
invention developer's last fiscal year; or
(2) $25,000.
(c) The invention developer must file a copy of the bond with
the secretary of state before the date the invention developer
begins business in this state.
(d) Before the 91st day after the last day of the invention
developer's fiscal year, the invention developer shall change the
amount of the bond if necessary to conform with this section and
Section 52.052.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.052. BENEFICIARY OF BOND; CLAIM AGAINST BOND. (a) The
bond required by Section 52.051 must be:
(1) in favor of this state; and
(2) for the benefit of any person who, after entering into a
contract for invention development services with the invention
developer, is damaged by fraud, dishonesty, or failure to provide
the invention developer's services in performance of the
contract.
(b) A person making a claim against the bond may bring an action
against the invention developer and the surety. The aggregate
liability of the surety to all persons for all breaches of
conditions of the bond required by this section is limited to the
amount of the bond.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.053. CASH DEPOSIT INSTEAD OF BOND. Instead of
furnishing the bond required by Section 52.051, the invention
developer may provide for, in an amount equal to the amount of
the bond required:
(1) cash deposited with the secretary of state;
(2) a certificate of deposit payable to the secretary of state
and issued by a bank that is:
(A) transacting business in this state; and
(B) insured by the Federal Deposit Insurance Corporation;
(3) an investment certificate of a share account assigned to the
secretary of state and issued by a savings and loan association
that is:
(A) transacting business in this state; and
(B) insured by the Federal Deposit Insurance Corporation; or
(4) a bearer bond issued by the United States government or this
state.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
SUBCHAPTER C. INVENTION DEVELOPMENT SERVICES CONTRACT
Sec. 52.101. WRITTEN CONTRACT REQUIRED; CUSTOMER COPY. (a) A
contract for invention development services must be in writing.
(b) The invention developer shall give a copy of the contract to
the customer at the time the customer signs the contract.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.102. MANDATORY CONTRACT TERMS. (a) A contract for
invention development services must contain in boldfaced type of
not less than 10-point size:
(1) the payment terms;
(2) the contract termination rights required by Section 52.104;
(3) a full, clear, and concise description of the specific acts
or services that the invention developer agrees to perform for
the customer;
(4) a statement of whether the invention developer agrees to
construct, sell, or distribute one or more prototypes, models, or
devices embodying the customer's invention;
(5) the full name and principal place of business of the
invention developer;
(6) the name and principal place of business of any parent,
subsidiary, or affiliated company that may engage in performing
any of the invention development services;
(7) if the invention developer makes an oral or written
representation of estimated or projected customer earnings, a
statement of estimated or projected customer earnings and a
description of the data on which the estimation or projection is
based;
(8) the name and address of the custodian of all records and
correspondence pertaining to the invention development services
described by the contract;
(9) a statement that the invention developer:
(A) is required to maintain all records and correspondence
relating to performance of the invention development services for
the customer until the second anniversary of the date the
contract expires; and
(B) on seven days' written notice will make the invention
development services records and correspondence available to the
customer or the customer's representative for review and copying
at the customer's reasonable expense on the invention developer's
premises during normal business hours; and
(10) a time schedule for performance of the invention
development services, including an estimated date by which
performance is expected to be completed.
(b) An invention developer is a fiduciary to the extent that the
description of specific acts or services required by Subsection
(a)(3) gives the invention developer discretion in determining
which acts or services will be performed.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.103. MULTIPLE CONTRACTS. If it is the invention
developer's normal practice to seek more than one contract in
connection with an invention or if the invention developer
normally seeks to perform services in connection with an
invention in more than one phase with the performance of each
phase covered in one or more subsequent contracts, the invention
developer shall give to the customer at the time the customer
signs the first contract:
(1) a written statement describing that practice; and
(2) a written summary of the developer's normal terms, if any,
for subsequent contracts, including the approximate amount of the
developer's normal fees or other consideration that the developer
may require from the customer.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.104. PAYMENT FOR SERVICES; OPTION TO TERMINATE CONTRACT.
(a) For purposes of this section, delivery of a promissory
note, bill of exchange, or negotiable instrument of any kind to
the invention developer or to a third party for the benefit of
the invention developer is payment, regardless of the date or
dates appearing on the instrument.
(b) Notwithstanding any contractual provision to the contrary,
payment for invention development services may not be required,
made, or received before the fourth working day after the date
the customer receives a copy of the contract for invention
development services signed by the invention developer and the
customer.
(c) Until the payment for invention development services is
made, the parties to the contract have the option to terminate
the contract. The customer may exercise the option to terminate
by refraining from making payment to the invention developer.
The invention developer may exercise the option to terminate by
giving to the customer a written notice of the invention
developer's exercise of the option. The written notice becomes
effective when the customer receives the notice.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.105. COVER NOTICE REQUIRED. (a) A contract for
invention development services must have attached a conspicuous
and legible cover sheet that contains:
(1) the name, home address, office address, and local office
address of the invention developer; and
(2) the following notice in boldfaced type of not less than
10-point size:
THIS CONTRACT BETWEEN YOU AND AN INVENTION DEVELOPER IS REGULATED
BY THE STATE OF TEXAS' REGULATION OF INVENTION DEVELOPMENT
SERVICES ACT. YOU ARE NOT PERMITTED OR REQUIRED TO MAKE ANY
PAYMENTS UNDER THIS CONTRACT UNTIL FOUR (4) WORKING DAYS AFTER
YOU SIGN THIS CONTRACT AND RECEIVE A COMPLETED COPY OF IT.
IF YOU ASSIGN EVEN A PARTIAL INTEREST IN THE INVENTION TO THE
INVENTION DEVELOPER, THE INVENTION DEVELOPER MAY HAVE THE RIGHT
TO SELL OR DISPOSE OF THE INVENTION WITHOUT YOUR CONSENT AND MAY
NOT HAVE TO SHARE THE PROFITS WITH YOU.
THE TOTAL NUMBER OF CUSTOMERS WHO HAVE CONTRACTED WITH THE
INVENTION DEVELOPER SINCE (year) IS (number). THE TOTAL NUMBER
OF CUSTOMERS KNOWN BY THIS INVENTION DEVELOPER TO HAVE RECEIVED,
BY VIRTUE OF THIS INVENTION DEVELOPER'S PERFORMANCE, AN AMOUNT OF
MONEY IN EXCESS OF THE AMOUNT PAID BY THE CUSTOMER TO THIS
INVENTION DEVELOPER IS (number).
YOU ARE ENCOURAGED TO CONSULT WITH A QUALIFIED ATTORNEY BEFORE
SIGNING THIS CONTRACT. BY PROCEEDING WITHOUT THE ADVICE OF A
QUALIFIED ATTORNEY, YOU COULD LOSE ANY RIGHTS YOU MIGHT HAVE IN
YOUR IDEA OR INVENTION.
(b) The invention developer shall complete the cover sheet by
providing the proper information in the blanks of the cover
sheet. In the first blank the invention developer shall enter
the later of the year that the invention developer began to
transact business or May 7, 1981. The invention developer may
round the numbers the invention developer enters in the last two
blanks to the nearest 100 and, in computing the numbers, may
exclude persons who have contracted with the invention developer
during the three calendar months preceding the date of the
contract. If the number to be inserted in the third blank is
zero, the invention developer shall enter a zero in the blank.
(c) The cover sheet may not contain anything other than the
information required by Subsection (a).
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.106. QUARTERLY REPORTS TO CUSTOMER REQUIRED. At least
once each calendar quarter during the term of a contract for
invention development services, the invention developer shall
deliver to the customer at the address specified in the contract
a written report that identifies the contract and contains:
(1) a full, clear, and concise description of the services
performed up to the date of the report and of the services to be
performed; and
(2) the name and address of each person to whom the subject
matter of the contract has been disclosed, the reason for each
disclosure, the nature of the disclosure, and copies of all
responses received as a result of those disclosures.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
SUBCHAPTER D. ENFORCEMENT
Sec. 52.151. CONTRACT VOIDABLE. A contract for invention
development services is voidable at the option of the customer if
the contract:
(1) does not substantially comply with this chapter; or
(2) was entered into in reliance on any false, fraudulent, or
misleading information, representation, notice, or advertisement
of the invention developer.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.152. PRIVATE CAUSE OF ACTION. (a) This section applies
only to a customer who is injured by an invention developer's:
(1) violation of this chapter;
(2) false or fraudulent statement, representation, or omission
of material fact; or
(3) failure to make all disclosures required by this chapter.
(b) A customer to whom this section applies may recover in a
civil action against the invention developer:
(1) the greater of:
(A) the amount of any actual damages sustained by the customer;
or
(B) $1,000;
(2) court costs; and
(3) attorney's fees.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.153. DECEPTIVE TRADE PRACTICE. The following acts,
omissions, or failures by an invention developer constitute a
deceptive trade practice under Chapter 17:
(1) a violation of this chapter;
(2) an omission of material fact; or
(3) a failure to make a disclosure required by this chapter.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.154. MUTUALLY EXCLUSIVE REMEDIES. Remedies available
under Sections 52.152 and 52.153 are mutually exclusive.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.155. PRESUMPTION OF INJURY. For purposes of Sections
52.152 and 52.153, a rebuttable presumption of injury is
established by:
(1) a substantial violation of this chapter by an invention
developer; or
(2) a customer's execution of a contract for invention
development services in reliance on a false or fraudulent
statement, representation, or an omission of material fact.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.156. ENFORCEMENT BY ATTORNEY GENERAL. (a) The attorney
general shall enforce this chapter.
(b) The attorney general may:
(1) recover a civil penalty not to exceed $2,000 for each
violation of this chapter; and
(2) seek equitable relief to restrain a violation of this
chapter.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.
Sec. 52.157. APPLICATION OF OTHER LAWS. This chapter does not
nullify or limit any obligation, right, or remedy that is
applicable or available under the law of this state.
Amended by:
Acts 2007, 80th Leg., R.S., Ch.
885, Sec. 2.01, eff. April 1, 2009.