Do you really know what things your patent attorney is charging you for? I mean, do you really know? There are some surprising instances where low value work is charged at very high fees when it should be a lot cheaper, or even free. I discuss 3 examples below and you might be surprised how much it’s costing you.
Let’s face it, saying that fees in the legal sector are opaque is a monumental understatement, and the situation is really bad in the IP sector. As research for this post, I trawled websites looking for price lists and hourly rates and, of the firms I looked at, I turned up nothing! Nothing, that is, except some broad estimates of the costs you ‘might’ incur when filing patents and, if you’re lucky enough to find it buried on page 5 of their Terms of Business, a description of some of their charges, albeit with practically no numbers.
This in itself is a big headache for clients but it also means that your attorneys might be charging you significant fees for stuff that I think ought to be free.
There are 3 main areas where this might be happening to you.
· Service fees for reporting
· Service fees for filing documents at a patent office
· Fees added to third party invoices
Once you’ve read through below what these fees are, you should contact your patent attorney to check whether they are being applied to your invoices. You might find you’re paying large amounts for routine tasks, that is probably eating up around 30% of your overall budget.
Service fees for reporting
These are standard fees that most attorney firms charge you for receiving a communication from a patent office, possibly putting a date in their system and then sending the communication to you. Fair enough that they charge something for that, right?
Often, the charge can be hundreds of pounds, perhaps up to £300! Still seem fair enough?
The truth is that these tasks are routine and there is very little value in them for you. Personally, I don’t think there should be any charge for them at all, but a nominal fee to cover expenses is the most that seems acceptable. If you ask your attorney (and you should!) why these fees are being charged, I’ll bet you get some mealy-mouthed response about having robust back-office systems to make sure deadlines are not missed. But surely that is their problem and a cost of doing business, not something that should be charged to their clients. They might also say that the task is done by non-attorney staff at a lower rate so that you’re not charged too much, but any cost in the hundreds of pounds for these task seems way too much, no matter who is doing the work.
I once worked with a US attorney who was shocked by these fees and just refused to pay them, saying that “many firms are now not charging for this.” I agree with him.
Service fees for filing documents
These fees are charged for filling out a form (often online)…oh, and pushing a button to send it to the patent office. It might be requesting some action (e.g. requesting a search or examination), paying a fee or even filing a patent application. Again, charging something for that seems fair enough, right?
But, again, the fee is in the hundreds of pounds. In an extreme case, the fee for filing a new patent application, which is filling out the form and sending it to the patent office, can be £1,000 or even more! I ask again, does that still seem fair enough?
Despite them being way too much, another issue with the service fees for reporting communications and filing documents is that they take away the amount of patent attorney ‘brain time’ (the stuff you should be paying for) that can be applied to a job because the fee for the routine task must be included in the invoice. For example, if a firm charges £6,000 to prepare and file a new patent application including a £1,000 filing service fee then only £5,000 of attorney time is actually spent preparing the document itself. The other £1,000 is for filling out the form! Reduce or remove the service fee and you’re getting a lot more high value bang for your buck.
Fees added to third party invoices
In my view, this is the fee that is most difficult for firms to justify. When your attorney firm engages a third party on your behalf, say a US patent attorney, the third party issues their own invoice to your attorney. If that invoice is in a foreign currency, your attorney converts it into Pound Sterling using an exchange rate that is favourable for them (i.e. they make a bit on that conversion). After that, they send the invoice to you, but not before they add a percentage as a ‘handling’ or ‘mark up’ fee. That percentage can be anywhere from 10%-15%! Simply for passing on an invoice! And bear in mind that third party invoices are routinely in the thousands of pounds.
The level of this fee is sometimes included in a firm’s Terms of Business buried in amongst a lot of legal jargon, but you’re unlikely to see it published anywhere else. It should be said that one large firm that I looked at does not charge this fee, but many others say in their Terms that they do.
If you ask your patent attorney (and you should!) then you’ll probably get more mealy-mouthed talk of covering themselves against currency fluctuations, but to me this simply does not hold water. Currency fluctuations are practically never of the order of 10%-15% in the very stable currencies of the US Dollar and Pound Sterling. They might also call it a ‘handling fee’, but 10%-15%? Really? And why does a handling fee need to be a percentage at all? Surely a fixed cost would be more appropriate.
The reality is that any client of a UK patent firm is probably paying at least one and often all of the above charges. You might be reading this thinking that a few hundred pounds here or there is not a big deal to you in the context of your overall spend on patents. However, a quick calculation shows that these routine fees can amount to around 30% of all the fees you pay your attorney. That would mean if you pay £50,000 per year, £15,000 per year is for routine tasks that take no attorney brain power.
For the attorneys, it looks like money for old rope. For clients, it seems reminiscent of the way the banking sector used to be before it began to modernise with the new start-ups, like Monzo and Starling.
You shouldn’t have to pay these fees, in my opinion. I would encourage you all to demand greater clarity from your attorneys at the very least, and to demand fairer fees too. Email your attorney asking:
· For a full breakdown and justification of the service fees they charge you;
· What level of mark-up they apply to third party invoices;
· What exchange rates they use on foreign currency invoices; and
· What amount you paid them in service fees and third party invoice mark-up last year.
After that, you can decide whether you’re happy to pay them. I suspect many of you won’t be.