It's rare that you hear about a criminal conviction for fraud in the offering of intellectual property services, but that is precisely the subject of R. v. Varin, 2022 QCCQ 6675, a sentencing decision from Québec Provincial Court that issued on Sept. 21, 2022.
The facts surrounding the fraudulent scheme have at their core an individual, with no prior criminal record, who managed to persuade hundreds of innocent victims to pay for intellectual property services that they never received. How the accused, Christian Varin, kept this up for a few years without being exposed is remarkable and brings to mind the Russian-born con artist Anna Sorokin, also known as Delvey, whose case has been the subject of books and a mini-series in 2022.
Christian Varin set up an alleged non-profit, "Federation for Inventors in Quebec" [translation], for which he developed a website that drew customers for his purported patent and trademark agency services. Unfortunately, Varin was wholly unqualified to perform these services, having no trademark or patent agency experience or credentials. From inception, the goal of Varin was to create a pretext to defraud inventors and startup businesses by offering to perform intellectual property services. In order to pull this off, Varin learned sufficient legal jargon to bamboozle inventors. Varin also tapped into a lucrative niche that is clearly underserviced: low cost intellectual property services.
The criminal trial resulted in a fraud conviction that exposed that the so-called services offered by Varin for substantial fees were nothing more than lies and false assurances to pretend that services were being performed, presumably for the registration of trademarks and granting of patents, when nothing of the sort was actually taking place.
Varin was at the time of sentencing 65 years of age and had been married for 25 years. His past work experience was spotty and disclosed no prior knowledge of intellectual property. To the victims, Varin represented himself as being independently wealthy and having attained past success in business ventures. He claimed to have inherited money that he was living off, but this was never proven in court. Varin was nothing more than a grifter, but he falsely represented himself as an "expert" in the protection of intellectual property.
Up to 1,000 victims fell for the falsehoods of Varin thanks to clever website marketing and copying from legitimate websites of law firms offering similar services, which created the illusion of a legitimate enterprise. The court described the hook as a goldmine for Varin, which one victim described in the following terms: "When a person has an invention in mind, it's a dream. Few people have faith that we can realize the dream. When someone tells you exactly what you want to hear, you are vulnerable to manipulation, abuse and fraud" [translated from French language decision].
Varin was able to collect approximately $3 million from customers using this fraudulent scheme. Meanwhile, he used most of the money to construct and furnish a vacation property on land owned by his spouse that has an estimated valuation of $2 million. He also engaged in a form of money laundering to place the title to the vacation property in the name of his spouse. Following the conviction of Varin he consented to its confiscation as proceeds of crime and agreed to the proceeds of sale to be used to pay for restitution to the fraud victims.
A total of 36 victims came forward at trial with affidavit evidence in support of the charges against Varin, some of whom also testified live at trial. The victims were mainly inventors, entrepreneurs and young people looking to launch businesses. Some of the victims included persons with fragile mental health or ideas that would never be capable of being patented, but who were taken advantage of by Varin who took their money with false promises of success.
The sentencing court noted that true professionals would have turned down retainers from such vulnerable customers, if they had any conscience or integrity. Among intended patent filers, some of the losses are in the tens of thousands of dollars, but, more importantly, many of these proposed patents have now passed the grace period of public disclosure and there is no ability to revive the potential patent rights. These parties were more seriously prejudiced in respect of their investment, since the losses could greatly exceed the value of the amounts paid for filings. No restitution was contemplated in sentencing for these losses.
At the sentencing hearing, Varin cried while reading out a prepared statement to the victims in court. The sentencing court noted, however, that the accused appeared to cry "crocodile tears," since there was so little credibility in anything Varin had previously said. During the several years during which the fraud took place, Varin never hired a single person to offer the services for which he took fees, while claiming to victims that a team of competent people were engaged in working for the non-profit federation.
Varin has been sentenced to five years in prison, taking into account the aggravating factors, such as the large number of victims, and balancing this against the remorse shown that included restitution of $300,000 paid to victims to date plus the sale of the property to be used for further restitution. Varin has also been forbidden in perpetuity from taking any future employment that would include volunteer work for any organization where he could be entrusted with property or money belonging to third parties. This perpetual ban has little impact given the retirement age of Varin.
The case really underscores the vulnerability of customers of legal services who entrust lawyers and agents with money to protect their intellectual property. The fraud took place in Québec, but a similar scam could easily have happened in Ontario, where the Law Society of Ontario (the LSO) is now in the process of shuttering the Certified Specialist Program.
The Certified Specialist Program has been around for decades and allows qualified lawyers to seek special permission to refer to themselves as "specialists" through a rigorous accreditation process. Accreditation was available for a variety of legal fields including: litigation, family law, wills and estates, intellectual property law, among others. More recently, the accreditation had been extended to Indigenous law and tax.
The accreditation program included a requirement for qualifying lawyers who had received accreditation to pay additional annual dues and undertake qualifying CPD. The decision to terminate the program was made by the benchers of the LSO without notice to the volunteer board members who helped the LSO administer the program. While the initial decision of the LSO appeared to include continued use of the designation by those who had sought to obtain it, that decision was modified to simply toss out the designations altogether at the end of 2022, so that even those who previously were accredited can no longer refer to the designation. This will also dismantle the dedicated pages on the LSO website that allow the public to identify qualified certified specialists in the various fields, which frankly serves as the best form of consumer protection.
At a time when consumer protection measures should be increased instead of eliminated, too little emphasis is being placed on the value of consumer protection, which has just defrauded inventors and startup businesses in Québec of over $3 million. An ounce of prevention could save a pound of cure.
This article was originally published in The Lawyer's Daily, part of LexisNexis Canada.
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