Are you a patent attorney or patent agent setting up your own firm? Are you presently at a firm but considering splitting off and going it on your own? There are a great many things that you need to consider and have in order, from a docketing system that will let you sleep easy to malpractice insurance to engaging clients and firing clients to how to handle un-earned client funds held in trust. Here are just a few thoughts.
1. Patent Docketing System
Every attorney who has been practicing for any length of time can tell you that it is essential for you to have a patent docketing system of one kind or another. In fact, having a high quality patent docketing system will allow you to sleep much easier and minimize those episodes where all of the sudden something pops into your mind and you break out into a cold sweat wondering whether something fell through the cracks. A patent docketing system is where you (or preferably your staff) will enter due dates and other deadlines so that that nothing falls through those aforementioned cracks.
When teaching the patent bar review course I like to say that there are few things that cannot be undone if you accidentally miss a date, but the truth is that undoing a deadline error is costly. To revive an application that was unintentionally abandoned requires a petition fee of $1,860 (or $930 for small entities), and if the mistake was yours clients don’t like to pay that fee, so the attorney or firm gets stuck picking up the tab, which is still cheaper than a malpractice claim. Of course, there are also those things that cannot be fixed, like a blown statutory bar date or the failure to file a continuation while the parent was still pending.
In my experience there is the docketing system you formerly used, the docketing system you are presently using and then the docketing system that you wish someone would create. You absolutely need some docketing software or system, but you could likely really use more than just a basic docketing system. How are you going to manage billable hours? What is your plan for document management and collaborating with clients remotely?
One top to bottom solution that offers not only docketing but a whole lot more is Anaqua Essential, which is more than a traditional docketing system. Anaqua Essential provides configurable workflows to suit firm practices and improved client collaboration and online services. Also included is a client portal for status and reports, integrated e-mail and document management, and time and expense billing. If you are in the market for a new system given them a look.
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2. Engagement and Disengagement Letters
Not only is it good practice to use engagement and disengagement letters, but your malpractice carrier will likely require you to do so.
An engagement letter is one that sets forth the agreed work to be performed and any payment terms agreed upon by the client. There is no real magic to an engagement letter and there are many different kinds of engagement letters. For the independent inventor, small business or start-up you may enter into discrete engagement letters that define the specific work to be completed, such as a patent search or the preparation and filing of a provisional patent application. You may enter into new engagement letters for each piece of work in the process. That seems laborious, but I find that many clients prefer that so that there are no surprises in terms of work that has been done and unanticipated legal fees. Our typically agreement does, however, mention our hourly rates, primarily for two reasons. First, if the client terminates you in mid project you will be entitled to payment at your hourly rate for the number of hours already worked. Second, if the client asks for work outside the scope of a flat fee arrangement you have an agreement in place already.
Of course, with larger clients you will probably enter into a rather generic agreement that sets forth the nature of the relationship and the process for engaging in future work. Perhaps information will be provided about a project, you will provide a quote via e-mail and if the quote is accepted (also via e-mail) then work progresses with payment to be taken out of an existing retainer or billed and payable within 30 days.
It is always roses and unicorns at the start of a relationship, so the engagement letter is not typically problematic. The disengagement letter, however, is far more important in some ways and at this point things may be less than pleasant. Termination of a relationship can happen for many reasons, but the law is clear — if the client thinks you represent them then you do. Thus, if things have fallen apart you need to be extremely clear and convey the separation in writing. I typically say something like: “Neither I nor anyone at this firm will represent you moving forward. No action of any kind will be taken on your behalf.” I also frequently suggest that the terminated client consider seeking alternative representation and you should always remind the client of any deadlines you know of.
At times some attorneys have said my language is too tough, but then after one particularly strange situation the clear and overt language was a blessing, allowing me to get out of a case where the inventor tried to say that I was the attorney of record.
It is also important to use disengagement letters when you have not heard back from a client you sent an agreement to. You may want to consider putting language in your engagement letter explaining that if the agreement is not returned signed and with the required retainer deposit by some date certain that the offer to represent is rescinded. Following up with a disengagement letter specifically notifying that the offer to represent has been rescinded is a good idea as well. Nothing good can come of a blanket offer to represent that is unsigned and lurking out there to be returned whenever by a client.
3. NAPP and Malpractice Insurance
The National Association of Patent Practitioners (NAPP®) is a 501(c)(6) nonprofit trade association. The organization was founded by patent practitioners, mostly patent agents, who had an interest in forming an organization that is focused on procedure before the USPTO. NAPP supports its members by disseminating information via newsletter and its two e-mail discussion forums: the General Discussion Forum and the Patent Practice Forum™. The General Discussion Forum provides a forum for members to discuss a variety of issues from member-to-member referrals to Patent Law Reform. The Patent Practice Forum™ is focused strictly on patent practice issues and allows for an on-going daily discussion between members on issues related to practice before the USPTO, PCT Practice and Foreign patent practice. These discussion forums are extremely active and members ask for and provide substantive advice on a daily basis. If you have a question someone in the organization will almost certainly be able to point you in the right direction.
I am a member of NAPP and I can’t recommend this organization highly enough. The cost to join is about $200, but what you get is far more valuable than that. For example, it is extremely difficult to find malpractice insurance for patent work, but NAPP has worked together with Dominion Insurance to create affordable (and I really do mean affordable) malpractice insurance. A little over a year ago I was sued by an Invention Promotion Company and this NAPP policy picked up defense costs, so I can tell you first hand this insurance offers real coverage. The only way to get access to this insurance is to join NAPP. Every patent agent, patent attorney or patent firm should join NAPP just for the insurance.
4. Client Trust Accounts — Accepting a Retainer
One thing that virtually every patent attorney and patent agent learns is that if you do not get the money from the client up front you are not likely to get paid without expending large amounts of time chasing clients for payment. At the end of the day you will also simply not be able to collect everything you are owed because clients will sometimes simply refuse to pay, particularly if you opined that their invention is not patentable. It is a sad reality, but the last person in line to be paid always seems to be the lawyer.
This is why most require payment in advance for the services to be rendered. What is critically important to understand, however, is that you MUST have a separate account that you use ONLY for the purpose of holding client money that has not yet been earned. This is called a Client Trust Account. You ABSOLUTELY CANNOT co-mingle business funds with unearned funds and you MUST have a separate account. I cannot stress this enough. If you do not have a separate Client Trust Account you are breaking the Ethics Rules and you very well cold be disbarred. At the very least if you get caught you will be suspended from practice for a very lengthy time (think years).
Some who know this rule go ahead and co-mingle funds anyway, which is really stupid. They must think — how can I get caught? Of course, if you are an attorney the State Supreme Court or their designee may conduct random audits that will find problems as well. If you get brought up on charges by a State then expect reciprocal discipline from the USPTO. Notwithstanding, if you review the discipline cases from the Office of Enrollment & Discipline you see another pattern. It seems clear to me that if you bounce a check to the USPTO an investigation will be opened by OED. It seems that sloppy accounting is one tell-tale sign that there may be other more severe problems.
If you are also an attorney you should consult with the State where you are admitted to find out what particular requirements might exist for maintaining client funds. Generally speaking it is as easy as opening a separate bank account and then placing all unearned money in that account. Once the money has been earned you transfer the funds out of that account and into your general business account, leaving whatever portion of the fee that remains unearned.
5. Patent Searches & Patent Illustrations
Unless you are a new patent attorney or patent agent you probably already have one or more preferred patent search firms and patent illustrators. But I am sometimes asked who I used. For patent searches I use SP Attorney Services. I find their patent searches to be exceptionally comprehensive and their prices are very attractive for the high quality that you get. For patent illustrations I use Autrige Dennis at ASCADEX Drafting Services. Autrige provides excellent drawings for a great price and it is hard to believe how fast he turns drawings around. I highly recommend both SP and Autrige Dennis.