Alternative fee arrangements: why 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 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 is 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 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.

RPL’s Alternate Fixed Rate Billing Model

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

When a potential client contacts us to inquire about protecting an invention, we arrange a meeting by phone or in person to speak about the matter. We 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 our conversations with the potential client, and any information collected through the invention disclosure form, we are able to evaluate the scope of the invention and provide various strategies for protecting the invention. At this point, the potential client is able to choose the course of action most appropriate for the circumstances. All of RPL’s services through this stage are without charge and without obligation.

When a client is interested in moving forward, we then provide our engagement letter and a corresponding fee agreement. Our 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. Our fee includes all of our time for the matter as well as all anticipated fees. In the case of a patent application, the fixed fee includes all of our 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.

We begin working on the matter once we 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 we have received payment in full, we are able to eliminate the costs of unpaid services that would otherwise be shared by our paying clients and keep our 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. Our clients are protected from cost overruns and are provided highly predictable total fees. This helps our 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. In our experience, one of the biggest structural barriers impeding the attorney-client relationship in an hourly billing model is the disincentive to communicate. Using a fixed fee legal services model helps to eliminate that hurdle.

For example, under an hourly billing model, the client has a financial disincentive to communicate with us throughout the process or to instruct us to make edits or additions to the patent application. Any time the client spends improving our understanding of the invention or providing feedback to improve the work product makes our services more expensive. Anytime we go to the client with questions, the client may wonder whether we am continuing the process, at least in part, to increase the 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 us in the patent process, to make another round of edits, to call us with any questions, to do the things necessary for us to prepare the best work product possible. Knowing that the patent won’t be filed until the client signs off on the application, we have every incentive to provide the best work product possible. Without the fear of spiraling costs, the client has every reason to help us 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. Feedback from our clients on our model has been universally positive. Our clients’ excitement for this alternative structure encourages us 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.

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