Why You Should Consider Contingent Fee Representation
In my last post, The Importance of Patent Enforcement to a Patent Owner, I mentioned one pitfall that patent owners often face is lacking the resources to enforce their patents. I also said that one solution to this is contingent fee patent representation.
What is contingent fee patent representation? Some attorneys will work on a "contingent fee." This means that the client only pays out of funds that are recovered from a patent licensing or enforcement effort. If there is no recovery, there is no fee due to the lawyer. While common in other areas of the law, it is relatively rare in the patent field.
Generally, the patent law field contains three different types of work:
Patent Prosecution - Corresponding with the Patent Office to obtain a patent;
Patent Licensing - Corresponding with companies or alleged infringers to license or sell a patent; and,
Patent Litigation - Enforcing a patent against an alleged infringer in a federal court.
It is not common for contingent fee patent lawyers to take "patent prosecution" matters on a contingent fee. Once a potential client has built a patent portfolio, lawyers may consider taking the right "patent licensing" and "patent litigation" matters on a contingent fee. Furthermore, for these matters, the lawyer may consider assisting with the prosecution of the patents related to the licensing and enforcement on a contingent fee.
Why consider a contingent fee patent representation? It has been reported that the typical patent case costs more than several million dollars. If you are a small company or independent inventor, this is probably not how you want to spend your hard-earned or hard-raised money. For the right cases, a skilled attorney is able to justify working on a contingent fee basis.
In a contingent fee representation, the client and attorney incentives are more closely aligned to reach the client's desired outcome. For example:
The lawyer takes on the risk that all work on the case will be unpaid, and is therefore incentivized to take only the most meritorious cases where the desired outcome is possible within a reasonable time. Thus, the client can be confident that their case has merit and they are not chasing an expensive and unlikely result.
The client typically remains responsible for out of pocket expenses and is therefore incentivized to stay reasonable as the case moves forward.
The client and the lawyer are incentivized to be efficient and practical and to get to the desired outcome as quickly as possible.
The overall fee paid to the lawyer may end up being more than if paid at an hourly rate, but the fee is only paid if the outcome desired by the patent owner is obtained or surpassed. Any excess amount accounts for the increased risk to the lawyer.
If a lawyer doesn't take your case on a contingent fee basis, you should look closely at the legal issues of concern to the lawyer to determine whether the case is worth paying lawyers hourly to pursue. See http://dilbert.com/strip/2009-09-09.
In my next post, I will talk about why it's essential to create a patent portfolio that is of the specific nature appropriate for contingent fee patent representation.