Why Hourly Rates?

In the field of patent and trademark law, the industry standard seems to be flat-fee billing. You will often find law firms that offer a “menu” such as: “US utility patent application $7,500 … Patent search $1,200 … etc.” These flat fees feel comforting to consumers, who do not want to take a chance with unknown costs. I understand that psychology. However, my standard is to bill hourly. Now I’d like to tell you why.

Patent and trademark cases are not factory work. Every case has its own unique characteristics. One case might turn out to have a quick and easy prior art search but complicated claims. Another case might face a lengthy prior art analysis due to a crowded field, but it might have simple drawings. Usually, I can’t predict half of these idiosyncracies before we get to work on the case. It’s just frankly difficult to predict how long a case will take.

From a customer’s perspective, I know what you’re thinking … “I don’t care how long the lawyer takes. I’m paying for the value of the end result.” But do you suppose that’s how a lawyer thinks? No, of course not. On our side of the transaction, time is our valuable commodity. Every hour we spend on one task is an hour that we can’t bill for another. At a lawyer’s rates, that’s a high opportunity cost.

Think for a moment from the lawyer’s perspective. If an attorney bills $400 / hr and sets a flat fee at $2,000, that divides out to five hours. Do you suppose that the lawyer sets this price because he expects to work exactly five hours on every such case? Or do you suppose he foresees five hours as a reasonable maximum? Of course, it’s the latter. We lawyers set our flat fees on the high side to make sure that our time is duly compensated for most or all cases. Perhaps three hours would be an average for this kind of project. In that case, you’re actually paying $667 / hr!

The advantage of hourly billing is summed up in one word: EFFICIENCY. You don’t pay more than you have to, and I don’t work more than I have to. If your prior art search only takes me three hours, I’ll only charge three hours for it. If it takes six hours to do a good job, I will spend the time to do it right (after you’ve authorized it, of course).

A consumer’s main concern would be “padded” billing. That is, if you pay a lawyer hourly, he has an incentive to bill longer — perhaps by working deliberately slowly or providing services that are not really necessary. This is a legitimate concern. It is addressed in two ways. First, there’s competition and market forces. If I estimate that a case will take me ten hours, but Bob down the street estimates that he can do it in seven hours, then you’ll take your business to Bob. Second, when I give you an estimate, it’s a reasonable range. I might say something like, “This could take me 4 to 8 hours. If I’m not done by 8 hours, I’ll stop to explain what’s going on.” If I reach that 8-hour point, I won’t work further without your authorization. I don’t reach my maximum estimate very often. That’s not good for customer satisfaction. I’d much rather make accurate estimates and beat them.

Because hourly billing is efficient, and also because I have relatively low overhead, I can afford to offer you a competitive rate. I bill only $200 / hr. in a field where many law firms charge 2 – 3 times that much. At such a firm, you are paying a premium for their support staff and downtown skyscraper rents. I can guarantee that you’re also paying more than necessary for the luxury of a flat rate.

After our free initial consultation, I will generally recommend that we break your matter into discrete billable units, or maybe begin with a “starter case”. A starter case is usually around my billing minimum of two hours. This is the phase where I get up to speed on your case so I can strategize and come up with an informed estimate. I might then get back to you with an estimate that looks something like this:

This means, “On an hourly basis, your case will probably cost you in the range of $1,600 – 2,000. I won’t bill beyond $3,000. Or, if you prefer to pay a flat fee, I’d ask $2,500 for a good thorough job.” Note that, again, a flat fee comes at a bit of a premium. You can usually expect to pay less on an hourly basis. The flat fee is your insurance against the outlier case that gets unexpectedly out of hand. That’s why I have to set it high for myself.

What if budget is a real constraint? At this point, some of my clients will say, “My favorite number in that estimate is $1,600. I can only afford to pay you that much. If you can keep it to $1,600, that would be great.” I will accept that case, but of course I will budget my work accordingly. Since you are only able to pay me for eight hours, it’s fair that I limit my time to eight hours. For instance, one of the easiest ways to minimize a patent application is to omit the prior-art patent search. But then we reduce our ability to anticipate the examiner’s objections and to optimize your claims. In law, like anything else, you get what you pay for!

I value my business relationships. It’s important to me that neither my client nor I take advantage of each other. In my decade of experience, I have come to find that a competitive hourly rate and reasonable interval estimates, combined with the guarantee that I only bill the hours you authorize, has proven to be the most constructive billing model.

Trademark Junk Mail

After we file your trademark application, you will probably receive a letter like this, and you might think that it’s a bill.

The fine print at lower right says that this is an optional service for hire, but clients never read it.

There are numerous private companies that search trademark records, obtain your address, and mail you to solicit services.  Some of them offer (overpriced) legal representation, but most of them are just trying to take advantage of you.  Knowing that most of you don’t have trademark experience, their solicitations are crafted to look like bills for legal steps along the path to trademark registration. They usually have “cover our ass” language in fine print, which nobody ever reads. I have emailed one such company to ask for further details about their “publication” services. They didn’t respond.

The USPTO has a helpful page devoted to this type of notice.

At the bottom of the web page is a nice long list of scam-artist companies that the USPTO is aware of.  When you receive such a letter, compare the return address to this list.

I receive all official USPTO notices on your behalf. When I do, I immediately let you know if and when it requires your attention.  I would advise you to just wait for my word.

Any mail that is not from the “United States Patent and Trademark Office” in Alexandria, VA is junk mail. It must be this exact phrase. Some of these services use confusingly similar names like “Patent and Trademark Bureau”, “United States Trademark Registration Office”, etc. Any email that is not from me or the USPTO.gov domain is spam.

Yes, you must pay to talk to your lawyer

I would like to address one of the most misunderstood and potentially contentious issues in the attorney-client relationship: communications and billing. I offer my first half-hour consultation for free — but only the first half hour, ever, for the lifetime of each client. All too frequently, clients get the mistaken impression that all communication will be free. Every time you reach out to me, I will assume that you are authorizing me to properly read or listen to your questions and to properly address them. And for the most part, you should expect that time to be billable.

This is common practice in the legal profession, but I know from my own experience and others’ that the “$40 email shocker” is still one of the most frequent unpleasant surprises between lawyers and clients. Let me offer an explanation and some exceptions.

Why is there this disparity in expectations? Why does a client feel that it should be free to talk to a lawyer? Perhaps it’s because other service providers such as car mechanics and even doctors offer limited communications free of charge. But let’s keep in mind that the mechanic or the doctor bills for physical actions — fixing your car or scanning your organs. By contrast, an attorney’s job is entirely linguistic. Answering legal questions and providing advice is part of what we do for a living! And how else can we answer questions and provide advice but via phone or email?

Another expectation is that a “quick question” should only cost a few dollars. But that’s not possible at lawyers’ rates. I bill $200 – 250 / hr. Many lawyers charge twice that or more. So you will be paying $3 – 8 / minute. Let’s face it, questions never take one minute. We lawyers round off our billable time in increments of at least 0.1 hours (6 minutes). I round to the nearest 1/4 hr (15 minutes). When you multiply the hourly rate by this fraction of an hour, you usually get a minimum bill of $40 – 50 per call or email.

I offer two exceptions to this rule. I do this for the express reason of meeting the client at a reasonable middle-ground. Giving up a few dollars or minutes here or there is worth it to me to prevent shocking and angering clients.

(1) I do not bill for contract negotiations involved in large cases (over $1,000). When there’s a lot at stake, I want to make sure we get it right and express our expectations clearly up front.

(2) I will grant each pre-paid client up to 15 minutes of free correspondence weekly.

(3) I bill correspondence of a “secretarial” nature at a 50% discount. This includes questions about scheduling and billing, instructions, and administration of small matters. Many attorneys have an assistant answer basic questions for a low cost, which is built into legal billable hours. As I don’t have that luxury, I personally answer all calls and emails myself; I feel that the discount is a fair compromise.

Small matters are often dominated by client emails. It’s not worth my time to bill for a fraction of an hour of legal work that involves over an hour of client correspondence. For this reason, I set a two-hour minimum. Nevertheless, I will take care to characterize your emails as administrative or substantive, and the administrative emails will be discounted.

As you can probably imagine, I spend a large fraction of every workday answering client emails. It’s very easy for just 5 – 10 messages to turn into 1 – 2 hours of research and response. As much as I like to be helpful, I simply can not offer that time for free. Otherwise, I know from experience that the questions multiply rapidly. I also know from experience that these emails will either involve important questions (for which my time is valuable) or a client’s interest in controlling the case, thereby indirectly controlling my time (for which a charge is necessary to reduce this to a minimum).

I know that my time is expensive. For your sake, I apologize for that. But the solution is simple. Please recognize the costs associated with your phone calls and emails. Then prioritize and economize to make sure that you are spending your money wisely on the most important issues in the most efficient manner possible.

A huge thanks for your understanding!!

Yours sincerely

Scot S. Fagerland, Esq.

Coronavirus update

The coronavirus epidemic affects us all in multiple ways. Some of us are more vulnerable or nervous or skeptical than others. I believe in respecting your choices while explaining mine. My personal choice was to limit all unnecessary interpersonal contact while any locality that I live in has more than a 1% active infection rate. That includes Rancho Park, Los Angeles City, Los Angeles County, California, the United States, and the world. As of July, 2020, the cities and counties of Los Angeles are infected above the 1% rate.

Therefore, my office will be closed to in-office meetings until we get back below that threshold. I am still available at all regular hours for remote services. That includes phone consultations and electronic document exchange.

Why 1%? Admittedly, it’s an arbitrary level. The way I look at it, when an epidemic is growing exponentially, 1% is within striking distance of large percentages. And when you go to a grocery store with more than 100 people in it, chances are the virus is in that store. I choose to play it safe, to protect myself, and to be part of the solution.

Last decade, when I taught math at Mt. St. Mary’s College, I made a video presentation about exponential growth. This lesson might surprise you. I hope you find it interesting and relevant to today’s pandemic.

“Can a licensee work around my patent?”

Most amateur inventors have the same dream:  “Now that I have a patent on my one-handed cocktail party plate, I will arrange a meeting with Solo, license it to them so they can make and sell it, and wait by the mailbox for my royalty checks!”

Then, ten minutes later, most inventors have the same nightmare:  “Uh-oh.  What if Solo likes the idea so much that they just change it up a little bit and ‘work around’ my patent so the license is no longer required?”

What exactly does it mean to “work around” a patent?

A patent is defined by its claims.  Your patents will usually have 10 – 20 claims.  Each claim provides an alternative definition of the invention.  Example (you’ll pardon my colloquial claim language):

“Claim 1:  I claim a plastic plate / cup combination, comprising (a) a plastic plate, (b) a plastic cup holder molded into the center of the plate , and (c) a plastic cup that fits into the cup holder.”  (So that a party-goer can walk around a cocktail party holding his food and drink all with one hand, freeing the other hand for handshakes, grabbing more food, or opening doors.  Brilliant!)

If Solo wants to “work around” this patent, the way I see it, they have three options:  they can add something to it, they can remove something, or they can modify something.

Option 1:  The add-on.

Example:  Solo makes a product that is just like yours, but they add (d) a lid on the cup.

Good news.  This product still infringes your patent because it has everything in your claim!  You don’t need to envision everything that competitors could add on.  They are prohibited from making a product that has all of your claimed elements, no matter what else is on it.

A variation of the add-on is the “special case”.  For instance, Solo might make their product out of polypropylene (PP) plastic, which you didn’t specify.  But this is really just “adding” a detail.  If it’s a combination plastic plate / cup holder / cup, it still infringes your patent and would require a license.  This is still true even if Solo gets a new patent on their own device!

Option 2:  The removal. 

Example:  Solo makes a device comprising (a) A plastic plate and (b) a plastic cup holder molded into the center of the plate, but without the plastic cup to go in the holder.

In this case, they are no longer infringing your patent because their product does not have all the required elements of your claim.  They are free and clear to make this device without licensing it from you, because you haven’t claimed ownership of this broader invention.

How do we respond to this?  Competition!  Solo isn’t the only plastics company in the world!  You’re still free to pursue Glad or Tupperware and go into competition against Solo.  Therefore, you have to agree that Solo does not have an incentive to do this if it believes in your product.  Solo would realize that your product is incomplete without a cup, and would prefer to sell the more convenient full-kit version.

You potentially could have prevented this removal problem with a broader claim that had features (a) and (b) only.  However, it would have been harder to get a patent on that broader invention.

Option 3:  The tweak. 

Example:  Solo makes a product with (a) A plastic plate, (b’) A cup holder molded into the rim of the plate (not the center), and (c) a plastic cup to go into the cup holder.  Solo will be able to do this free and clear, because your claims specified that the cup holder must be situated at the center of the plate.  It’s like Solo has “removed” the detail that the cup holder must be centered.

So what’s the solution to this scenario?  I hope you recognize that you and I are to blame, for writing an overly-specific claim.  It’s not too hard to avoid this situation by improving your own claim to define (b) as:  “a cup holder molded into the plate,” without specifying where in the plate.  (By now, you’re probably recognizing that patents are really tricky for low-tech inventions.)

If it’s any further consolation, Solo would not be able to get their own patent for add-ons or tweaks to your invention if they were minor, obvious changes.  In that case, you’d be free to adopt their improvements when you take your product to Glad and try competing against Solo.

If Solo makes a major change (a bamboo serving tray with 12 cup holders and 12 cups) then they might be able to get their own patent.  But hey, they are perfectly entitled to do so if they thought of this particular improvement before you did.  That would still have no effect on your ability to make / sell / license your own patented product.  You should still be able to anticipate this kind of tweak with smart claim language.  You could have claimed (a) A serving platter with (b) at least one cup holder fashioned into the platter and (c) one cup for each cup holder.  Of course, this has its limits.  You could not broaden your claims so far as (a) A first object and (b) a second object that goes into the first object.

The moral of this story is that your patented invention is defined by words, not by products, prototypes, drawings, or intentions.  It’s up to you and me to claim your invention wisely by following these principles:

  1. Claim only the features that are indispensable to your invention, so that if a competitor takes any one of them away, their version will lose value.
  2. Try to anticipate how competitors might make slight variations of your product.
  3. Define your indispensable features (from step 1) abstractly enough to cover the variations (in step 2).  Also remember that we get a chance to write numerous alternative claims.
  4. Accept the fact that you can’t keep others from inventing.  But remember that even if someone improves your product, it still might depend on yours and require a license from you — and you might even be able to use their improvements!
  5. Leave the claim language up to me!  I’m biased, but no, really.  Claims are legalese.  It’s hard to get them just right, and inventors shoot themselves in the foot by writing bad ones.

By the way, I have to be straight with you.  99% of the time, you’ll have the opposite problem.  The company won’t believe in your product and won’t bother making its own version.  Nobody will care about your baby like you do.  Keep pitching!

 

 

 

Patentability – the “Dennis the Designer” standard

Is your product, or your idea for a product, patentable?  Not every idea is.  Getting a patent requires us to jump through four legal hoops.  By name and number, they are (101) Statutory subject matter, (102) Novelty, (103) Non-obviousness, and (112) Enablement.  For purposes of today’s post, I want to discuss the 103 and 112 issues as opposite ends of a spectrum.  I have come up with a nice role-playing scenario that will help you assess your likelihood of patentability.

103.  Non-obviousness

Your invention can be patented only if it is “non-obvious.”  This means, legally, that it cannot be a simple combination of previously existing prior art that would be obvious to a person of ordinary skill in making similar products, if he had knowledge of all prior art at the time the invention was made.  In other words, your invention must involve something new and / or improved over previously existing ideas, and even simple combinations of those ideas.  You could accomplish this by adding, removing, modifying, or combining features of previous inventions, especially in ways that give rise to “unexpected results”.

Obviousness is (obviously) related to the complexity of the invention.  Simply combining two unrelated ideas into a single product (say, a “blender lamp”) is usually considered obvious.  A non-obvious invention might  combine two related ideas with synergy (a Breathalyzer car key), three or more elements (a blender lamp clock), or two elements that nobody thought could be combined (square wheels).  The more specifically your product is defined, the more unique and non-obvious (and hence patentable) it is, but the harder it is to protect.

The simpler your invention is, the more obviousness becomes an issue.  Many simple inventions end up being so narrowly defined that it does not justify the cost of the patent procedure.

112.  Enablement

You must be able to describe not only what your invention does, but how it does it.  An unsupported idea about an invention’s purpose is not enough to earn a patent.  We need to disclose enough details to enable someone who is skilled in the art of making similar products to bring your plans into practice.  The more high-tech your invention is, the more enablement becomes an issue.  It is very easy to fully enable a designer to make a spatula.  It takes much more work to enable the design of a complex app or something with many moving parts.  The bar would be extremely high for “revolutionary” or “magic” products like Star Trek transporters or mind-reading helmets.  The ideal inventions are those right at the outer envelope of current technology.

The “Dennis the Designer” test

To summarize patentability, think of your target audience as Dennis the Designer.  He is a skilled worker in your field of art.  Which conversation are you having with Dennis?

Take 1

You:  “Dennis, please build me a device (or app) that does ______________________”

(summarize the purpose of your invention in one sentence).

Dennis:  “No problem; I have just the solution for that.”

Problem:  Oops, your invention is too obvious and fails under 103.

Take 2

You:  “Dennis, please build me a device (or app) that does ______________________”

(summarize the purpose of your invention in one sentence).

Dennis:  “Wow, that would be a challenge.  I wouldn’t know how to accomplish that.  Can you give me some more details about how it works?”

You:  (Provide your specification)

Dennis:  “I don’t know, that sounds pretty vague and I’m still not sure how I’d put that together.  I think I’d have to do a lot of experimentation.”

Problem:  Oops, you have not yet properly enabled your invention, and it fails under 112.

Take 3

You:  “Dennis, please build me a device (or app) that does ____________________________”

(summarize the purpose of your invention in one sentence).

Dennis:  “Wow, that would be a challenge.  I wouldn’t know how to accomplish that.  Can you give me some more details about how it works?”

You:  (Provide your specification)

Dennis:  “Oh wow, that’s a great way to achieve your solution!  I’ll put one together right away.”

Congratulations!  Your invention is patentable!

(Well, assuming that you pass the 101 and 102 tests).  It’s never simple.  When in doubt, call me and ask!