Dear IPWatchdog: New Patent Attorney Seeks Fee Advice

Editorial Note: The following inquiry was submitted via contact form. I communicated with the person who submitted, giving my advice. I was given permission to post the question here to solicit the collective wisdom of our readers.

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Dear IPWatchdog:

I’m a fairly new/young patent attorney. I work at a firm where I am the only patent attorney, of several attorneys. I am trying to figure out how to set my fees and fee structure for patent prosecution and trademark registration work. Friends from law school in the Dallas area suggested using a flat-fee for prosecution, rather than an hourly rate. My concerns are, because I’m relatively new to prosecution, I’m not sure how to accurately estimate the time involved from an inventor’s initial disclosure so I set a flat-fee that won’t grossly under predict the amount of time required. Of course, I also want to set my fee to be market competitive. I’m located in the Greater Nashville Area.

Second fee structure question would be similar: How to structure fees (flat-fee for initial filing, and hourly for office action responses/amendments?) How would I structure fees for a continuation application or an RCE?

Would love some guidance on this “administrative” aspect of patent law practice that I seem to be unable to find in the resources available commercially.

— New Patent Attorney

Gene Quinn Gene Quinn is a patent attorney and a leading commentator on patent law and innovation policy. Mr. Quinn has twice been named one of the top 50 most influential people [...see more]

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author as of the time of publication and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com.

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19 comments so far.

Anon
July 18, 2013 07:01 am
I would be interested in feedback on the “unreasonably low” fee charge as an ethical question.

Charging less than what it takes to do the work is a perfectly rational business move, but as we all should know, the business of law is constrained by the fiduciary nature and the close tie of legal work to the court and government agency systems.

We are ethically bound NOT to always act in perfectly rational business model. We are not allowed to optimize our business by making our cost centers into profit centers, for example.

I understand the natural driver to lower costs as a function of the fiduciary relationship and as a natural by-product of rational business, and I understand the emphasis typically given in CLE’s and the like about unethical practice of charging too high.

But in my mind, the ethical rules also apply to charging too low. While the immediate danger to the client is not evident, the end result should be evident to those with a business background. Either you ‘get what you pay for’ – and the client suffers with lower quality work product, or the actual work product is subsidized – which means that only larger more diverse firms can survive, and that means that the client suffers through a loss of meaningful options. Competing by low prices –> forestalls competition.

Lawyers cannot act like business men on the high side – can they act like business men on the low side?
David Rosenblum
July 15, 2013 06:59 pm
Okay, so I guessed wrong on what set you off. I apologize, and apologize if you have taken offense at anything I have said. It looks like you have come to the conclusion that I am not one of what you term the “lazy” practitioners, and I appreciate that. Although quite frankly I think the reason why a lot of those patent applications have around that many claims is because they are part of an established company’s portfolio and because clients, of all kind, are reluctant to mount up too much in excess claim fees. I guess like any component lazy practitioners will figure in there somewhere. I won’t speculate, and will not disagree with you on that. I agree with you that we should keep these postings tactful.
Anon
July 15, 2013 05:31 pm
David, when you ask “Is it the 20/3 figure that set you off? A lot of patent applications do have around that number of claims” the answer is a qualified yes.

I qualify not just on the numbers chosen – but on ANY predetermined numbers chosen. The reason why “a lot” have those numbers is because too many practitioners are too lazy and simply ‘accept’ those numbers (as driven by the cost breakpoints of the Office) without regard to the invention.

That is what sets me off – and to reflect on what Rich Goldstein posted, to me, this smacks of a lack of professionalism.

And no, your comment of “oh wait a minute, I got it now. You bill hourly” is not appreciated. If you want me to post with smack, I can – is that what you want?
David Rosenblum
July 15, 2013 04:53 pm
Anon, I do not have a set price for a patent application. I make a quote based on what I know at the time, and then write up the retainer agreement. The agreement specifies how many claims I anticipate will be needed, a guestimate based on what I know. “Extra” means anything beyond that number. This could be over 100 claims — no problem. The number of independent claims will generally correspond to the number of invention categories and settings you want protection for, subject to client preference, budget, etc. I can, on my own, suggest, at any stage, that more claims would be appropriate, and this is generally OK and provided for in the retainer agreement.

When you say “My client may decide what to do based on government charges”, I assume you indeed have checked with the client first, either explicitly or through your prior experience with the client. So, you are, at least at times, on somewhat of a claim budget, and the “The invention takes as many claims (of whatever type) that it takes” is not simply some pure, unadulterated determination of the “right” number of claims. So then it does in fact have a significant influence on the application, inasmuch as the application is based on the claims.

Is it the 20/3 figure that set you off? A lot of patent applications do have around that number of claims.

It sounds to me that you decide how much to charge at the outset, then you use a pure, unadulterated determination of how many claims the invention warrants (if its 150 your wouldn’t blink an eye), but maybe just maybe you remember how much you charged and you know in your heart of hearts that no way it will be 150 or anywhere close, correct? But my method is flawed, right?

Oh wait a minute, wait a minute, I got it now. You bill hourly (I hope the new attorney who we are advising on tthis post has that luxury).
Anon
July 15, 2013 03:32 pm
Thanks David,

Still thinking about my response – but what determines “extra” in your post at 14?

I suspect that you have a “you get predetermined” claims mindset, regardless of the invention. I (personally) see this as a fundamental flaw in any patent work. Probably why I am still thinking about tact.

The invention takes as many claims (of whatever type) that it takes. My client may decide what to do based on government charges, but I do not advocate letting such dictate the application per se.
David Rosenblum
July 15, 2013 02:50 pm
You can keep both provisions in the retainer agreement, and almost never use the hourly provision.
“Any post-interview major revisions/updates at x per hour. For example, y indp; z dep for an extra attorney fee of j for k hours of extra work. Normally, extra indp clms @ m each; extra dep clms @ n each.” {Here, the numbers work out in the example to exactly the same hourly or flat}.

Keeping the billing arrangements separate from how you go about drafting the application, you let the chips fall where they may in flat fee fashion.
Anon
July 15, 2013 11:20 am
David,

I scrubbed my comment – based in part on how it came across as ‘too condenscending,’ and this thread deserves better.

As I contemplate how to answer with more tact, can you clarify how you decide to charge based on claims in a flat fee arrangement? It appears that you have mixed in some ‘hourly’ arrangement, as well, but I am more or less struggling with my perception that you are ‘drafting by the claim’ as opposed to drafting the invention (and the claims become what they need to become).

Thanks
David Rosenblum
July 13, 2013 09:30 am
Anon, how exactly does your “segregated IMMEDIATELY into a different project” work? Let’s take a scenario. You have written a first draft. You go over it with the inventor. He/she brings up a second (major) embodiment. You realize that an additional independent claim would be appropriate and perhaps some dependent claims. You will need one or more additional figures and additional disclosure. You also realize that you could have included all of this among the multitude of variations you put it for just about everything throughout the draft. How do you sell the “different project” at that point without creating hard feelings?
Also, what do you mean by “fee’s I do not control”? You recommend to that client that claims 21-24 would be beneficial. The client can refer to the retainer to see how much this means in USPTO fees and in attorney fees. You have written the retainer and “control” what is happening. The client will say OK, and if not that is another story. The ultimate control is hourly, which we have come down from somewhat already by even discussing flat fees.
There are patents with only 12 claims, so you make it 12/3 or whatever. You can take into account what you presently know about the particular invention. I cannot remember providing less than 20. If at the end it’s 20/2, it’s OK and if not that is another story – so you make it 20/3.
Very often, you will not know that a dependent claim should be upgraded to a somewhat broader independent claim until the inventor sees your draft and comments on how important that particular feature is. At that precise moment, you do not want to still be in the selling mode with a potential back and forth on who should have done what. The retainer already says that the attorney fee on an independent claim is x which is considerably more than y for a dependent claim. So you spend time refining that independent claim, and possible dependents, and you go back into the disclosure and develop the support for those claims.
Under your scenario, it seems to me that you have to defer the retainer agreement until you have a firm understanding of the invention and the entire claim set you will ultimately wind up with to avoid potentially weakening your relationship with the client. Under my scenario, the client sees you as up front and reasonable. If you ask your mechanic to do that extra job, he/she may throw it in as a courtesy if you are a regular customer, but you understand if appears as a separate charge on your bill especially if the exact price is posted in the storefront (I am not saying that there is not a strong analogy between what a patent practitioner does and what a mechanic does). My scenario appears to be more practical in keeping the new attorney out of trouble than your scenario.
Anon
July 12, 2013 12:12 pm
Bravo Rich Goldstein, I appreciate both your sharing and the manner of your sharing.

Thank you.
Gene Quinn
July 12, 2013 11:25 am
patent leather-

I agree with you completely and this is something I also raised with the attorney who submitted the question. That is also one of the reasons I suggested Walsh IP. Not only do they do patent searches, but they offer docket managing services, calendaring and all the clerical support necessary, which can be particularly helpful for someone practicing on their own or building a new practice.

Along the lines of mentoring, I’d also consider joining the National Association of Patent Practitioners. They have a very active forum where members can post questions and hypotheticals that others help answer. Not the same as a mentor who can review, but a helpful resource. Joining also makes available malpractice insurance, which is quite reasonably priced.

-Gene
patent leather
July 12, 2013 10:59 am
My biggest concern about this situation is the attorney states that he/she is fairly new but is at a firm without any other patent attorneys. This can be a recipe for disaster. It can seem easy to simply prepare and file patent applications, but patent prosecution practice is full of traps for the unwary. I strongly recommend that you find (if you don’t already) a more senior mentor that can review your patent applications and provide advice on how to handle certain situations. Confidentiality can be an issue and I’m not sure how to address that. But I worry that heading up a new practice with little experience could one day get you in some sticky situations. Anyway, good luck!
Anon
July 12, 2013 10:36 am
Perhaps a matter of tastes, but I hearily disagree with David Rosenblum’s 20/3 language (plus a few other thoughts):

1) Fee’s for number of claims are treated as a straight pass-through – ‘flat’ would instead refer to my effort – not the fee’s that I do not control.

2) An apriori set number of claims is a poor way of capturing an invention. The invention will be best captured in the number of claims that are needed – no more and no less. Once that number is figured out – THEN – discussions concerning trade-offs on cost and coverage may ensue. This methodology should be explained to the client (assuming that this is not a savvy client).

3) I recognize the attempt to control scope creep – but in any ‘flat’ scenario, ANY major new disclosure needs to be segregated IMMEDIATELY into a different project. In this sense, the advocate must be even more strict than the Office on restriction requirement thinking.
David Rosenblum
July 12, 2013 07:34 am
Further as to “no surprises”, you may want to put in your retainer that the patent application flat fee assumes 20 claims total and 3 independent claims if those amounts seem likely at the outset. Also, specify in the retainer a flat fee for each additional independent claim and dependent claim. During preparation, the inventor may come up with new embodiments and potentially “additional” inventions, for example. You can say in the retainer that you will send a copy to the inventor for review and approval before filing, that this back and forth process will be done to a second or third or subsequent draft if needed, and that any major new disclosure by the inventor during preparation will incur an hourly attorney fee of x amount.
Rich Goldstein
July 11, 2013 10:51 pm
After nearly 20 years in patent prosecution, here’s my best advice about fees – and how the fees you set might relate to the quality of the client relationships you have, and overall enjoyment of your practice.

The most important thing I have learned is that where you set you fees will be a major factor in determining the clients that you get. It will have a major effect on the types of client relationships you have – whether they energize or drain your practice. The foundation of a great client relationship is mutual respect. A component of respect in an attorney-client relationship is the extent to which the client values the skill, experience, training, time, and attention of the attorney.

What I have noticed, is that when your fees are somewhat higher, you will tend to attract clients who value their own project more, and ultimately will value (and respect) your services more. For the same reason, with somewhat higher fees, you will tend to get more serious clients – clients who are investing a significant amount of their time and money into other aspects of the project, building a business, etc.

On the other hand, when you charge lower fees, you will get clients who have come to you because they were shopping primarily by price. People shop for commodities by price. You can guarantee that someone who has picked you because you have the lowest price has already deemed you to be a commodity. Also, they likely consider the patent itself to be a commodity. In other words, they they likely have little appreciation for the range of quality possible in patent attorneys or the patent applications they write. When you are deemed a commodity, by definition – the unique value or your own expertise, experience, and skill will not be recognized by the client.

Also here is something counter-intuitive about client expectations: I used to think that when you charge higher fees, clients expect more from you.

What I’ve seen time and time again, however, is that the clients I’ve charged the least – actually are the ones that expect the most in return! These are often the clients who turn a low flat fee into a never-ending nightmare, and expect even new services to be included in the original fee. Typical conversation I’ve had with this type of client: “The patent YOU wrote was rejected, and now you expect ME to pay more to fight the rejection”.

The clients who have paid higher fees, do so because they value your time and the work you are doing for them. They fully understand and even expect that they will need to pay more when more work is required. Typical conversation with this client: “I’ve looked through the PTO rejection you sent me, what do you think? Is it worth proceeding? What are the likely fees if we proceed?”

All I can say, is that my practice has served different ‘market segments’ in different time periods. In the past, I’ve charged low fees and done higher volumes of work to cover my costs. I have to say – it’s a hard way to make a living! Not only is it difficult to turn a profit, but the higher client expectations can be draining. In contrast, more recently, charging higher fees has brought my firm some really great clients, who appreciate what we do – and appreciate that paying us a bit more gives us the ability to spend more time on their case.

Of course this is just my 2 cents. I share it, because it is a point of view I don’t think many colleagues would give openly. I wish you the best of luck as you develop your practice and client relationships.
step back
July 11, 2013 02:40 pm
The “no surprises” approach has to flow both ways.

You have to make it clear to the prospective flat fee client that the amount of work you are going to put in for that fee is a finite limited amount and the client cannot throw the “kitchen sink” (an infinite amount of extra, oh by the ways, did I forget to mentions) in after the project starts.
Mark Nowotarski
July 11, 2013 11:31 am
Probably the most important lesson I’ve learned on fees is “No surprises”. Whether you charge on a flat fee or hourly basis, a client should always know beforehand what’s inside a bill before they open it up.
Mike Brown
July 11, 2013 10:41 am
In our firm we have “flat fees”, “project fees” and hourly billing, depending on the type of work and the client’s preferences.

A “flat fee” is a fixed, predetermined fee for a given type of work. That works well for routinized, predictable things like filing trademark applications or preparing IDS forms or the like. We don’t offer fixed fees for preparing patent applications (other than for a few very large clients who send us lots of work – the 900 pound gorilla sits where he wants).

A “project fee” is fixed in the sense that if the client approves the fee, they will pay that fee regardless of how much (or little) work the task eventually wound up being. It’s variable in the sense that the project fee for preparing a patent application, for example, will differ from application to application, based on how much work the responsible attorney thinks it will take to turn the client’s disclosure into a patent application. We offer project fees for most tasks, once we know what the task is, and we find most of our clients prefer the certainty of a project fee over hourly billing. Of course, if the client insists on hourly billing, we’ll do that, too.

Normally, the choice of hourly billing or project fee is up to the client. There are some cases, though, where we won’t offer a project fee, where you just can’t tell in advance what will need to be done.
Anon
July 11, 2013 10:27 am
Great questions – one other source would be to contact the Tennesee Bar Association. http://www.tba.org/

Fees must be ‘reasonable’ (whatever that means) and a number of rather nebulous factors can affect what ‘reasonable’ means. While I have often heard discussions about fees and this reasonable factor from the standpoint of fees on the high end, I have wondered (mostly just to myself) whether this ethical obligation for lawyers attaches to the low end of fees charged as well.

First off, I am distinguishing pro-bono work, which should be fee-less anyway.

But what about the ‘unsupportable’ low charges that some may ask for? Charges that clearly cannot be considered reasonable for the work itself? The business of law is unlike other businesses (for good AND for bad), and the concept of under-bidding – that is, creating a loss-leader can (and in my mind – should) raise ethical questions. There is nothing in the ethics guidelines that say that being UNreasonably low is not as unethical as being UNreasonably high.

In fact, a colorable argument can be made that being unreasonably low is a tactic to put your competition out of business and thus limit the options to clients. Sure, a cllient may ‘win’ in the short term with artifically low rates, but if those rates are unreasonable, then the question of ethics should very much come into play.

The phrase “fair is fair” has no caveat for ‘unless a race to the bottom is incurred.’
Gene Quinn
July 11, 2013 09:45 am
I think flat fee is the way to go. It gives cost certainty to clients and they seem to like that a lot. So the question is what to charge. Initially it will be a bit of trial and error, and you probably want to come in lower on your quotes to attract work and build a client base, but not try and compete with the bargain basement providers.

For us a fairly standard quote for an Office Action response is between $2,000 to $3,000… although for more simple inventions you may want to try and come in less to attract work. The key is going to be to get some work to develop experience and then adjust prices according to what clients are willing to pay in your geography and based on how much time it actually takes you do do something. So for an RCE you have to charge for the fees and typically the submission will be a response, so I’d be thinking in the $1,500 range as a fairly typical quote initially and adjust up or down depending on complexity of the invention.

For a provisional we charge $2,000 to $5,000 depending on the technology. Software is $5,000. When I first started I was doing provisionals for between $1,000 to $1,500… sometimes $750 if it was particularly simple. Fees and drawings are extra.

Take a look at this page, where I discuss ranges:

https://ipwatchdog.com/2011/01/28/the-cost-of-obtaining-patent/id=14668/

I would also get in touch with Walsh IP. Their searches are comprehensive and they also can offer clerical assistance.

http://www.walsh-ip.com

Best of luck to you.