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Why Patent Attorneys Don’t Work on Contingency

Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog
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Posted: Feb 25, 2012 @ 7:30 am
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Lately I have been getting a lot of inquiries again from inventors who are interested in contingency fee representation.  There is no such thing as contingency representation for purpose of preparing, filing and ultimately obtaining a patent.  Patent attorneys and agents just don’t take contingency clients when the matter is patent procurement.

I write on this topic with some frequency, the last time being the spring of 2011.  Please don’t take offense, this is a “tough love” article that may come across as a lecture.  I have always believed that the overwhelming majority of inventors want to hear it straight and are looking for a road-map to get from point A to point B.  The thing I preach all the time, and the theme of this article, is understanding the industry.  The more you understand about what you should do, when you should do it and the economic realities facing the various players you will come in contact with the better off you will be to safely and successfully navigate the difficult waters of going from invention to money.

Yes, I’m sure you have seen those TV commercials where an attorney talks about them taking cases on contingency and not getting paid unless you get paid a recovery.  If you look carefully at these commercials, however, they are universally from “injury attorneys,” not from attorneys that do transactional work.  The unfortunate aspect of these widespread commercials is that they lead many, including inventors, to believe that attorneys work on a contingency basis regardless of the work to be provided.  That is simply not true.



Having spent time as a litigator I know exactly what goes into taking a case on a contingency basis and you only take cases on a contingency when you know beyond a shadow of a doubt that there WILL be money ACTUALLY recovered.  That is why it is perfect for personal injury attorneys.  They can tell with great certainty, if they are being honest, if money will be recovered.  So you need to be 100% sure when you take the case that money will be obtained because as it turns out cases can and do take on a life of their own and even when you are 100% certain at the outset you make mistakes.  If you are not 100% certain at the beginning you pretty much never recover anything.

Most inventors hate hearing this, but the invention part is the easiest part of the process.  This is true because it is the only part of the process that can be controlled 100%.

When you file a patent application you need to depend on the fact that you will get a fair examination by a fair Patent Examiner, and even if you get a fair Patent Examiner they may just look at the law and your invention from a different point of view.  The patent process cannot be controlled because ultimately you have a patent examiner you need to please, but you have complete ability to define the invention and guide the process to a positive outcome, which can be achieved in a high percentage of cases if the attorney is familiar with the technology and the client is willing to pay enough to do the work actually required.

After the invention and patent process there are all kinds of hurdles to money showing up and being available.  You need to find a licensee and get the licensee to part with money, or you need to build the invention or implement the invention and wait for consumers to start buying.  When it comes time to market your invention you may be told you have exactly what people are looking for, but then wind up getting beaten out by an improvement.  There are costs all along the way, and even if there is an extremely high likelihood the invention will be successful the time horizon to money (i.e., the time it takes for the first dollar of profit) is too far in the future and too speculative for any contingency representation agreement to make sense at all for what is a lot of work required to obtain a patent.

Aside from the fact that there are a great many things that can (and will) go wrong on the way from invention to money, inventors who have no skin in the game typically fold like a pop-tent the first time there is a glitch.  Yes, I do have experience with this in the patent space, foolishly having tried at times earlier in my career to take work on a contingency basis.  I think many patent attorneys and patent agents have foolishly tried to take contingency work, perhaps for a family member or friend.  I have never made a dime and I know of no patent attorney or patent agent who has ever made a dime on a contingency deal.  So you simply cannot realistically expect a patent attorney or patent agent to represent you with respect to your patent work on a contingency basis.

This rationale frequently doesn’t get through or understood because most inventors will think that this all makes sense for the other inventor, but not for them because their invention is going to be worth billions of dollars and everyone is going to want it.  This is typically the inventor who will say, “my invention is better than sliced bread, everyone will want it, and I am willing to let you in on this if you just do the patent work for free.  You will be rich!”

Patent attorneys and patent agents don’t want to be “let in on it,” we want to work and get paid, just like you do.  Everyone thinks their invention is the next grand slam homerun, and that is great.  If you don’t have confidence you likely won’t succeed, but expecting to find reputable professionals who are experienced and talented who will work for free, which is what you are asking, is unrealistic.  Even crazy simple patent application takes 20 hours to draft properly, and something of modest complexity, like a kitchen gadget, can take an entire week to do properly.  How many people can take a week off to work for free in hopes of making money at some yet to be determined distant point in time in the future?



Over my career I have been amazed at how many people are creative in one manner or another.  There are truly wonderful entrepreneurs and highly creative inventors out there, more so than most people would imagine.  Successful inventors and entrepreneurs hire competent patent professionals and pay them so that they devote the necessary time to do a good job.  It is at least somewhat common, however, for inventors to start down the patent path, perhaps with a patent search and provisional patent application filing, and then go out seeking investors.  There are investors who will invest because that is their business.  Patent attorneys and patent agents, on the other hand, are in the business of doing work for a fee.  So asking a patent attorney or patent agent to invest in hopes of recovery is asking someone who is in the fee for service business to buy into your idea without hardly knowing you and without knowing whether you will continue to follow through as life challenges and business challenges mount.

The moral of the story here is this: inventors who spend a lot of time and energy searching out patent attorneys and patent agents who will work on a contingency basis are wasting their time.  The time spent looking for contingency representation, which is the industry equivalent of a unicorn, could be better spent in any number of ways, including working over-time or picking up a second job to make more money so you can pursue at least the critical first steps (i.e., patent search and provisional patent application) before going out to look for help developing the invention and finding investors.

 

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Posted in: Educational Information for Inventors, Inventors Information, IP News, IPWatchdog.com Articles, Patents


About the Author

is a US Patent Attorney, law professor and the founder of IPWatchdog.com. He is also a principal lecturer in the top patent bar review course in the nation, which helps aspiring patent attorneys and patent agents prepare themselves to pass the patent bar exam. Gene started the widely popular intellectual property website IPWatchdog.com in 1999, and since that time the site has had many millions of unique visitors. Gene has been quoted in the Wall Street Journal, the New York Times, the LA Times, USA Today, CNN Money, NPR and various other newspapers and magazines worldwide. He represents individuals, small businesses and start-up corporations. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

 

25 comments
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  1. I suspect only 1 in 1000 inventions pays back it’s cost to invent, including the legal fees, patent filing charges, etc.

    This isn’t unusual. Most movies, music albums, and books published in the “Traditional” manner have the same problem. That doesn’t mean Inventors should give up. Things are changing. Devices like 3D Printers are reducing prototyping and production costs. I know of a young man who invented a new type of MIDI controller, he is using Kickstarter to fund his build and initial production run.

    It does mean you have to think about what you are doing. Would you ask a Dentist to repair your teeth on Contingency?

    Wayne

  2. “I have never made a dime and I know of no patent attorney or patent agent who has ever made a dime on a contingency deal.”

    NTP v. RIM. James Wallace at Wiley Rein handled the case on contingency and they won $612.5 Million. Wiley Rein had highest PPP in the US that year I believe.

  3. Hi Gene

    I agree that 95% of the time it makes no sense for either side (inventor, attorney) to do these kinds of deals. A lot of folks don’t understand the process or how long it takes to “harvest” even a great idea.

    With that said i have had phenomenal success with a few “experienced” inventors in terms of monetizing their ideas. For the most part I screen for folks who already are familiar with the patent process, and have a track record of innovation in some field of technology for which they are recognized. I had the pleasure of working with some incredible guys, including:

    Richard Belgard, microprocessor guru: http://goo.gl/Oc74y
    Dr. David Liu, non-volatile memory whiz: http://goo.gl/kgYJc
    Dr. Mak Johnson, spin transistors: http://goo.gl/PjDRd
    Timothy Knight: electronic interfaces: http://goo.gl/mykkH
    Dr. Ian Bennett: speech recognition: http://goo.gl/4s0FX

    These are but a few – all of these inventors made out handsomely when we sold/licensed their IP assets to third parties, and I can’t say it was a mistake to take on those cases. Maybe I’ve been lucky – I think it is important to be selective and realistic but it can be very lucrative, much more so than straight hourly billing. So I wouldn’t discourage all inventors and all patent attorneys from looking at this type of arrangement.

    Thanks for the thought provoking posts!

  4. Very well said Gene-

    Oft times the *inventor* decides that the attorney or agent is trying to lead them astray and charge them too much, for wildly variable reasons. When a responsible practitioner tries to explain the real facts of life to the inventor, they might often experience the backlash of the inventors’ frustrations.

    Does that mean that the inventor is dumb, or the practitioner is less than responsible? I tend to think neither, wherein the concepts just passed in the middle of a very dark night.

    If the inventor thinks a practitioner owes them something or other, they might want to think again or start inventing in a different field. Where I come from, it is possible to earn about $300 per day, so asking me to work for free for over a week won’t really float my boat very well. The inventor either needs to learn what they don’t know quite yet, or become just another red spot on the highway of life. Fear and Loathing near Las Vegas for instance. RIP to Hunter S. Thompsen, and check out his book Hell’s Angels if you ever see a copy of it.

    Stan~

  5. True, but the huge patent troll litigation business has been built almost entirely on attorneys [some of whom are not patent attorneys] very willing to engage in patent litigation on a contingent fee and/or part ownership basis in issued patents issued with sufficiently broad and/or ambiguous claims.

  6. M. O’Hara-

    You obviously missed the entire point of the article.

    This article is about work done to obtain a patent, which is why it NEVER mentions litigation whatsoever. The article time and time again mentions ONLY obtaining a patent. In fact, I say this in the last sentence of the first paragraph:

    “Patent attorneys and agents just don’t take contingency clients when the matter is patent procurement.”

    My guess is that you didn’t read the article and instead wanted to attempt to prove me wrong based on your interpretation of the title of the article.

    -Gene

  7. Paul-

    Absolutely. Troll litigation is largely contingency based, or there are companies that will take partial ownership or ownership of a revenue stream. Litigation is so different. That is why I wrote about knowing well the contingency model as a litigator. I try and explain to inventors that taking a case on contingency only makes sense if you know you are going to recover something. That is how the personal injury attorneys survive. The troll attorneys are no different. They take a case and then beat up on small and mid-size companies who can’t even afford the retainer for a patent litigator and rack up licensing fees along the way to what will be a big payout.

    -Gene

  8. but the huge patent troll litigation business

    Enough already with the “Troll” scare tactics.

    It’s time to put that boogeyman to rest. There have been several articles that actually show that litigation is on the decrease, as properly looked at on a per live patent basis.

    Let’s at least diffuse the situation and get the premise correct. We can still discuss contingency fee based arrangements without the bogus “scare” thrown in.

  9. Sorry Gene, skimmed your article quickly on my phone yesterday.

    Having said that though, most large clients these days are looking for alternative billing arrangements, i.e. flat rates for handling all of their prosecution work. Perhaps you have some insight into this?

  10. M. O’Hara-

    As an independent I have considered a few options as regards getting a really good application written and filed. What I selected was a fixed quote from a very experienced patent agent, that has quite a bit of experience with somewhat similar sort of inventions, which was wonderful! A very funny guy also, which I especially appreciate rather a lot.

    We came up with two seemingly very solid independent claims, and 16 dependent claims that look pretty unassailable to me. I supplied Dave with a search that was very extensive, so hopefully no surprises. The fixed price is a good idea in my position, as my invention is still just a very expensive Hobby so far.

    As Gene alluded to before though, if the inventor doesn’t think their invention is the best thing since the advent of toasted bread, why would they continue to persist? Probably not.

  11. Now for the flip side of the coin…. I once had a client *hire* me to fix a cracked plank on his 40-foot sailboat, that had been built circa 1911 down in Olympia, Washington, by the Hall Brothers’ yard. He insisted that I had to work on a fixed bid basis, so I submitted a bid from what I was able to discern, which was really not a lot since the whole area was planked inside and out.

    Once I had removed the cracked plank, I found that about 6 of the oak frames behind it had been broken- Bummer! His reaction was that I should magically fix Everything for the originally quoted fixed bid, wherein he Knew that fixing the frames would take at least four times as long. We had the concommitent ugly discussion, and I eventually got paid at about a half rate, which was not fun at all for me at the time. I was 50 miles away from home fixing His boat, and he wants to get all salty about it? My opinion of my *pal* Corey was never quite the same after that.

    Stan the Boat man~

  12. Gene,

    Good article as always. I think Stan the boat man mixes up a result based assignment with the typical effort based assignment of patent drafting. I think you can perfectly well set a fixed price for patent drafting.
    The formalities of the paten will be in order, but that should be the only result you can garantee.
    The rest is up to your drating capabilities and the opinion of the examiner.
    If you would be paid only when the patent is granted, then as a drafter you do not have an incentive to get an as broad as possible patent, but instead you may choose for a narrowed down claimset which has much less commercial value, but bigger chance of becoming a patent. In the end I do not think that is of interest to the inventor, unless this stratgey is agreed.

  13. Gene writes –

    >> the invention part is the easiest part of the process. This is true because it is
    >> the only part of the process that can be controlled 100%.

    Not exactly — invention is as uncontrollable as anything else. It’s just that once an inventor and invention walk in through the outside counsel patent attorney’s door, most of the uncertainty is past.

    We see it much more realistically in-house.

    (It’s kind of like the 102(a) grace period — because it runs outside patent attorneys’ view, nobody realized how crucial it has been, and the bar failed to stand up for it.)

    David

  14. David,

    It is not only in-house that sees this. Having experience in other facets of life before joining the patent world (including both engineering and management), understanding the mindset of the inventor and the legal pitfalls of the patent game combine for at least some of us in the firm practice world. Some of us have a wider view.

  15. understanding the mindset of the inventor

    This is where you run into problems. I’ve dealt with inventors in the past. They find it hard to believe that what they have invented:

    1) Already has been invented
    2) Offers no discernible improvement
    3) Costs too much to be practical
    4) Doesn’t work the way they say it does

    I worked in the emission control business. We had a wonderful bunch of dreamers, who came up with theoretical solutions. Some of those solution, well, let’s just say that it took a sharp eye to see what was really happening.

    That’s why I tend to be such a cynic. I’ve seen lots of inventions that were theoretical winners but real world failures. Some of them even won patents. But they didn’t win any sales, so if the Patent Attorney had worked on contingency he or she would have lost money.

    Wayne

  16. BD-

    Both management AND engineering? I think I am beginning to understand your lack of tolerence for all of those bobbies out there in the world a little more clearly.

    Have a tall glass of Persistent Pineapple, and put it in my tab!

    Stan~

  17. Or otherwise on my Bill, so to speak…

  18. Nice article that I can refer to when discussing contingency fees with the few potential clients who ask about it. I have never done a pure contingency fee patent prosecution, but I have experimented with taking stock in lieu of some fees. It has not panned out, and I don’t expect it to, but it has provided an education in how start-ups are funded. I think that when an inventor/start-up offers contingency or stock, they are telling me that they think the project is not worth much to them, but maybe I am dumb enough to bite. But sometimes it makes sense (to me, anyway) to bite. Sometimes a couple of years in I realize that I am the only one putting anything into the project. Sometimes they come back to me a year later and say “wouldn’t you rather have cash?” That’s when I know the project is a success, and they decided they would like to get the stock back, and hope I am dumb enough to bite.
    Overall, my contingency fee experiments support your point that contingency fees are a bad idea for patent attorneys.
    But cutting any sort of break for a solo inventor/start-up has also been a bad idea. Whatever good will you extend to these guys eventually inures to investors with whom you have no relationship. So, I need to find a way to avoid that problem, when a purportedly well funded solo/start-up balks at a fair bill, essentially demanding a alteration of the fee agreement after the work is done.

  19. Have never met a attorney /patent /or other wise that is not in for himself ! Over paid and under worked!!!

  20. Let me take a wild guess: would you be the Terry Howley that sued the PTO and your lawfirm for $50 MILLION dollars?
    http://law.justia.com/cases/federal/district-courts/michigan/miedce/1:2008cv13976/233499/6
    You wouldn’t be a LITTLE biased would you?

  21. Terry-

    Spoken like a true ignorant inventor!

    Inventors who don’t understand the value of having a patent attorney ALWAYS get far more narrow protection than they deserve. The only exception being those who work with the known industry scams, but if you are going to work with someone known to be a scam at some level you get what you deserve.

    -Gene

  22. Sorry to respond so late for this but I did want to add something to the conversation.
    What you say is true for All service providers, engineers, designers, programmers, etc.. Inventors feel everyone should see the value of their invention and jump through hoops for 10%. They should count their blessings that nobody does.
    I warn inventors and I have been proven right time after time, should a service provider agree to work on contingency they usually do so when they have ABSOLUTELY nothing else better to do, including sorting out their sock draw.

  23. Hello to all.

    Sory for the tardines of this mesage, but I had some health problems that delayed the introduction of a product I invented. In working with many companys to expain their product to the patent attorney I picked up some tricks of the trade so I started to write my own patent. All went well and it was granted. There were and still is that nobody new in what class it belongs. It seemed that I invented somethin not existing yet (sic).
    This happend 5 Years ago. At the beggining I got many inquires from fly-by-night companies willing to “market” my patent, but at closer examination it boiled down that all were just bogus “representatives”.

    Recently I read in New York Times about a company that makes a similar product but mutch watered down.
    From all functionality of the product they retained only the basic one ignoring all others.

    I have contacted some Patent Infringement Lawyers and was surprised by the diferent opinion they all had.

    To make a long storry short, it seems that my patent is considered to “narow” in other words has to much detail.
    Its enough for sombody not to use one of the user functions and they have a new patent!

    For me this seems irational as the inventor has described a new object with new functionalities and as such he must be protected by the law. But the system is geared towards making making and not to protect the inventor.

    Here is an example from the PTO : “assuming that I invented a carburator made of aluminium somebody else can just copy my design and make’it out of brass.” This, in my opinion, is just unfair. What is the use of a patent then, I will ask? Just for the Guverment and The Lawyers to make money? to be totaly candid the Patent system is made by the lawyers for the lawyers.
    I have attempted to hire a Patent Atorney but all of them had wery liitle understanding ofthe underlaying technoly ( one of the asked me – “what is an AND gate?”. and he wanted &50000 to write the patent :):):)
    All others were exibiting similar behavior.
    I am not advocating that lawyers to work for free. But I think that ther fees are exagerated, their field of knoweledge is very limited and they think that we, the inventors MUST use them! They forget there is allways an alternative.

    So here you have it. I spent about $2000 for a nice printed piece of useless paper!

    Please forgive my spelling as English is not my first laguage among the other 4 I know!

    Thank you
    And Happy New Year for the 2013.

    Alex

  24. Isn’t this exactly what Lambert & Lambert say they do?

  25. What?

    Lambert & Lambert are not patent attorneys.

    -Gene