Alternative fee arrangements: why do I offer fixed fee, or flat rate, patent services?

Traditional Hourly Rate Billing Model

The traditional legal services model doesn’t have many fans.  Billing by the hour is inherently problematic.  Hourly rates incentivize inefficiencies and, in my experience, are one of the primary driving forces in what seem to be ever growing legal costs.  The traditional law firm model is to charge clients at an hourly rate for work performed on their matters while adding any expenses incurred in those matters to the hourly fees.  In a typical patent application, a client in charged for the time spent preparing the application, including any meetings, phone conversations, emails, reviewing of the files, directing or managing the preparation of the patent drawings, etc.  In addition to these hourly fees, a client is also charged for the filing fees required by the United States Patent and Trademark Office, any fees required to prepare drawings that meet the requirements of the United States Patent and Trademark Office, any long distance phone charges, copying charges, postage, etc.  A bill is typically sent at the end of each month for the total charges incurred to date.  As many purchasers of legal services may recognize, once the monthly bills start, they seem to never end.

Clients have been requesting lawyers and law firms to offer alternative billing arrangements for years.  As a result, various alternative billing models and alternative fee arrangements have been implemented including  blended rates, fixed fees, flat fees, fee caps, monthly retainers, contingency fees, success fees, retrospective value fees, volume discounts,  etc.  These alternative arrangements have met some success, but have failed to gain widespread traction. It is not entirely the fault of the legal service providers, as the successful implementation of many of these alternatives requires the complete re-imagining of law firms’ structures, partnership agreements, mentor-mentee relationships, etc.  The hourly rate is still king.

My Alternate Fixed Rate Billing Model

Richards Patent Law specializes in providing alternative fee arrangements for patent services.  It is the basis of my billing structure.  The primary arrangement for my legal services is a fixed fee agreement, a.k.a., a flat rate agreement.  For example, I routinely prepare and file patent applications for fixed fees.  The following is an example of how such an agreement works and how it benefits me and my clients.

When a potential client contacts me to inquire about protecting an invention, I arrange a meeting by phone or in person to speak about the matter.  I often provide the potential client with an invention disclosure form to assist the inventor in collecting his or her thoughts and notes regarding the invention.  Through my conversation with the potential client, and any information collected through the invention disclosure form, I am able to evaluate the scope of the invention and provide various strategies for protecting the invention.  At this point, the potential client and I are able to choose the course of action most appropriate for the circumstances.  All my services through this stage are without charge and without obligation.

When a client is interested in moving forward, I then provide my engagement letter and a corresponding fee agreement.  My fee agreement is a fixed fee, or flat rate, agreement that specifically identifies the scope of the matter and the fees due for the matter.  The fee is determined based on the complexity of the project and the amount of time I estimate it will take me to complete the matter to the best of my abilities.  My fee includes all my time for the matter as well as all anticipated fees.  In the case of a patent application, the fixed fee includes all of my time for preparing and filing the application as well as any meetings, phone calls, emails, etc. related to the preparation and filing of the application; there are no hidden fees.

I begin working on the matter once I receive the signed engagement letter and the payment of the fee required in the fee agreement.  By not starting any work on the matter until I have received payment in full, I am able to eliminate the costs of unpaid services that would otherwise be shared by my paying clients and keep my fees lower for every paying client.  Further, having the fixed fee agreement upfront, before any commitment is made, the client is provided the opportunity to evaluate the costs and benefits with at least one side of the equation fixed.  My clients are protected from cost overruns and are provided highly predictable total fees.  This helps my clients make more informed decisions as to whether to proceed with their patent matters before any investment is made.

Improving Attorney-Client Communications and Relationships

As described above, the fixed fee model helps to reduce many of the structural barriers present when providing legal services.  For me, one of the biggest structural barriers impeding the attorney-client relationship is the disincentive to communicate.  Moving to a fixed fee legal services model helps to eliminate that hurdle.

If I charge by the hour for my services, the client has a financial disincentive to communicate with me throughout the process or to instruct me to make edits or additions to the patent application.  Any time the client spends improving my understanding of the invention or providing feedback to improve the work product makes my services more expensive.  Anytime I go to the client with questions, the client may wonder whether I am continuing the process to increase my bill.

When working for a flat fee that has been agreed in advance, there is no disincentive to communicate.  In fact, there is a great incentive for the client to assist me in the patent process, to make another round of edits, to call me with any questions, to do the things necessary for me to prepare the best work product possible.  Knowing that the patent won’t be filed until the client signs off on the application, I have every incentive to provide the best work product possible.  Without the fear of spiraling costs, the client has every reason to help me do just that.

Alternative fee arrangements require your lawyer to be flexible and creative, but these alternative arrangements can be a benefit for both the client and attorney.  Since moving to a fixed fee structure, feedback from my clients has been universally positive.  My clients’ and my excitement for this alternative structure encourages me to look for other alternative arrangements that reduce structural limitations that may impede the attorney-client relationship while maintaining my ability to provide the highest quality legal services.

If you would like to discuss your patent matters with an experienced patent attorney, contact me to schedule a free initial consultation.