Discussion: Patent Prosecution Rates

A Patently-O Reader e-mailed with the hope of starting a discussion on the topic of patent attorney and agent fees for patent prosecution. 

He writes “large clients have … pushed down their rates, some in 2009 and some in 2010. In at least two cases, these are clients flush with incredible amounts of cash. Thus, this is not a problem of client-liquidity.” His clients have created rules that would block both a partner and an associate from billing on the same response. “To some clients, this appears to be two attorneys doing work that can be finished by a single attorney.” In addition, his clients are “unwilling to allow their prosecution to be used as a type of training exercise. They want the work done quickly, at the lowest cost. Being part of a training exercise does not achieve this purpose.”  In the background is the reality that there are “many unemployed or underemployed patent attorneys willing to do this work and do it effectively, at [under 2007] rates.”

48 thoughts on “Discussion: Patent Prosecution Rates

  1. If you are an in-house department, you face an inevitable tradeoff of internal costs, external costs, and quality. Internal costs include search costs for vendors and policing quality. External costs deal with the quality of the application and the use of prestige as a substitute (legitimate or otherwise) for policing quality.

    Certain companies and institutions (mostly universities) do not mind the costs of managing low-overhead solos. They often will have pinpoint expertise and a good price. But the search costs may be prohibitive. Prestige and size tend to go hand-in-hand, as may well a floor on quality.

    Obviously, certain name-redacted companies lower their search costs and quality monitoring costs to zero, while having vendors self-select for low overhead. I can’t say what they get for it.

  2. desired quality of the application.

    and what would be the tiers of desired quality? Was the “ethics” of providing “lower” quality considered, Happy?

  3. patentgrrl corrects my mis-perception, that claiming in chemistry is relatively simple. Thanks for that.

    I’m left thinking that, if they can’t even claim molecule X, what chance do they have, when a client puts a prototype machine on their desk and it is their task to extract from it, and claim, the underlying inventive concept.

    In the USA, you might be able to leave defining the inventive concept till you are prosecuting the n’th in a series of continuing applications. Not anywhere else though. Perhaps that is why drafting proficiency is so under-valued in the USA.

    Or is it because competence in claim drafting is not something examined in the USA before setting patent attorneys loose, to practice on the public?

  4. To address some of the concerns raised here, we have negotiated a tiered fixed price approach based on the complexity and desired quality of the application.

  5. Don’t forget that the Big D awhile back published some stats about which art units put out crrppy work.

    Most notably from that data was the pss poor work from a certain art unit – Sunshine Malcolm’s – which really points out how bad that art unit is since Malcolm’s self-professed near perfection drags the averages up to what D done shown.

  6. “curious as to the difference in “Quality” between sophisticated and unsophisticated drafting, in the three broad fields of 1) Chem/Bio 2) EE and 3) MechE. Just to be provocative, I am going to suggest that only in sector 3) can one readily see the difference between sophisticated and unsophisticated drafting…how many different ways are there, to claim Molecule X?”

    If you really think this, you obviously haven’t read the pile of badly drafted generic chemical claims out there. Not only are many of them completely overbroad and likely invalid for a multitude of reasons, but a certain number of them are either indefinite or just flat-out wrong. Or they are drafted with one completely ridiculously broad claim and some species claims with nothing in between. Granted, you are going to be enforcing the species claim in many cases, but it doesn’t do much for the value of your portfolio for licensing purposes. But hey, you saved a buck. Yay, you.

  7. They’re obviously overpaying

    Aint no such correlation.

    The ability to command a profit – which cna be realized in the fancy digs and bling – is sustained by the value that accompanies that price.

    C’mon IANAE – you of all people should realize that the great work of the patent professional should be highly rewarded. If “the big firm” captures more of that professionall talent and can have more of the bling, don’t diss them just because they have it.

    It’s time to divorce the class warfare and actually focus on results peoples.

    If ya be good and can charge a premium, then that’s what you do.

    Client’s pushing back? Sure, expect it – but when your work is good, like mine always is, clients fight to pay me more. Expect that too when you are the most interesting patent professional in the world.

    Oh, and Andre, “The future in this profession lies in-house, not in firms with unscrupulous partners.” – there be no shortage of “unscrupulous partners” types inhouse – no panacea there my friend.

  8. Pushback is the obvious consequence of the outrageous abuse consolidated in the partner-oriented structure. As said above, the top Clients already know what the game is. The future in this profession lies in-house, not in firms with unscrupulous partners. The good side is that they’ve been “managing” for so long that once confronted with the need to actually do the work, they will likely retire with their fortunes and leave the field for more reasonable folks.

  9. I saw the best minds of my generation destroyed by the economy,
    Stark raving hysterical naked unemployed

    At least patent attorneys are finding work. Top 25 law school, and I have classmates that graduated top 1/4 back in May still gunning hard for doc review work. All of us with patent credentials are, at the very least, underemployed by this point.

    Law seems to suffer superstar effect similar to sports, entertainment, or drug dealing. A few top attorneys making rain has led to a seething mass of hopefuls at the bottom, sinking into six-figure debt and working 80 hour weeks in a desperate and almost certainly futile attempt to make it. The situation will continue to deteriorate, as large clients are learning to do more with less as far as legal counsel and as law school enrollments continue to swell.

  10. the clients know what the game is… most of the larger ones have somebody in-house that bailed from the large firm carrot chase.

    give them a fair price and exceed their expectations – and they will bury you with more work.

    simple.

  11. The rates at which big-city firms are willing to bill out their first and second year associates, let alone their partners with experience comparable to my own, are routinely higher than what I charge for my own services.

    Go visit their fancy big-city offices sometime, and as soon as you walk into reception you’ll see what the difference in hourly rates is paying for. You’ll see a bit more of it in the parking lot, too.

    So, yeah, clients will push back. They’re obviously overpaying for legal services if so much of their money goes into the firm’s huge overhead that any regular business (such as the client) would have cut to the bone to eke out more margin. Even if some of the overhead in the parking lot is retractable. How much office do you really need to work at a desk, anyway?

  12. “In at least two cases, these are clients flush with incredible amounts of cash.”

    Why would the profitability of the company have anything to do with the price charged for filing patents? I thought that a business attempts to reduce all overhead to maintain profitability or increase it.

  13. nothin really new here – ya get what ya pay and

    I saw her today at the reception
    In her glass was a bleeding man
    She was practiced at the art of deception
    Well I could tell by her blood-stained hands

  14. It’s foolish of a client to make a strict rule that discourages discussion between the client’s attorneys. Often, discussing a matter with someone else can lead to a better result. But if the client only wants to pay for one mind to deal with a matter, then the client should get what it pays for.

  15. I’ve been in this business for over 15 years, I went to top tier undergrad and law schools, and I practice in a small office that’s not in one of the big cities. The rates at which big-city firms are willing to bill out their first and second year associates, let alone their partners with experience comparable to my own, are routinely higher than what I charge for my own services. I’m not surprised that those firms get this kind of pushback from their corporate clients. The high fees the clients pay aren’t a guarantee of good work. They’re a guarantee that the equity partners will be able to afford vacation homes in Aspen or along Lake Michigan. Get used to it: you can make a good living (6 figures annually) doing prep & pros, but you shouldn’t plan on getting rich (8 figures) from it. Try satisfying yourself with the fact that you’re doing a good job, and if you don’t like the big firm structure, get out. Also keep in mind that for many big firms, prep & proc is a high risk venture with relatively small payouts that’s just a way to (hopefully) get some of that much more lucrative litigation business from those same clients. If you get out, you may be able to bill at a lower rate but keep more of what you bill, since you won’t be giving 2/3 or more of your billings to the partners and to the landlord.

  16. note how small a percentage of the patents of large companies are ever litigated so that their quality problems are exposed.
    + = + + + + + =
    This is my understanding also, but are there any studies on this available? Or some type of statistics published somewhere?

  17. Thanks everyone. I am the person who originally had the inquiry. I feel like all of the responses had at least some merit, so I definitely got something out of this. Thanks also to Dennis for setting up and formatting the post to be clearer than I had originally expressed it.

  18. Takers?

    Ask and answered – defacto already there with the bleedingpen post.

  19. “If you draft my first 20 applications for free, you can charge me $10,000 each for the next 20 that I request.”

    Takers?

  20. Many companies are catching on to what [name redacted] and a few other big corporates were doing a long time ago – forcing the attorneys to compete with each other for the work.

    It wasn’t that long ago that said redacted named corporation was paying 8-10k for an app and then instituted an auction system amongst patent attorneys to drive the price down to 4-5k an app. Sure, the quality of those apps generally sucks big time, but the quality wasn’t all that great at 8-10k per app. If the ultimate goal of the corporation is to collect patent numbers, then this system works just fine.

  21. you could pull a Kobayashi Maru and change your rates so they are acceptable to clients.

    “If none of your clients are complaining about the bills, then you are leaving money on the table.” — Lombardi, Landry & Lamprey LLP

  22. find new clients wiling to pay your rates, or retire.

    Or you could pull a Kobayashi Maru and change your rates so they are acceptable to clients.

  23. Every profession has its problems, find new clients wiling to pay your rates, or retire. The days of open ended billing are no more…

  24. How many different ways are there, to claim Molecule X?

    Just the one, if all you want is molecule X. However, I would say based on pure speculation that chem/bio claiming gets way harder than mechanical claiming once you want to claim a suitably described and enabled, yet suitably broad, genus containing molecule X and as many other molecules as possible that work kind of like molecule X.

    In mechanical, you can always take the lazy way out and functionally claim a method. Whatever that means. What’s my invention? It’s a lump of material such that it does what I thought of when you operatively connect it to some unclaimed thing.

  25. I’m curious as to the difference in “Quality” between sophisticated and unsophisticated drafting, in the three broad fields of 1) Chem/Bio 2) EE and 3) MechE. Just to be provocative, I am going to suggest that only in sector 3) can one readily see the difference between sophisticated and unsophisticated drafting, and sector 3) is (generally speaking) not where the high value litigation cases are found. More important, in sectors 1) and 2) is high level understanding of the abstruse technical content of the invention. How many different ways are there, to claim Molecule X? How many apps does a typical EE applicant have on one product item? So long as the drafter is up at that technical level, the resulting draft should be fit for purpose.

    Thus it is, that no corporation can justify paying top dollar for sophisticated drafting.

  26. but note how small a percentage of the patents of large companies are ever litigated

    Ya mean that there isn’t an explosion of troll-fiends whippin everyone into court??

    Well, just shockers.

  27. As noted above, application prep and prosecution attorney fees are increasingly being squeezed by many large companies as if they were Walmart suppliers. Not surprisingly, law firms with lower overhead, often in smaller locales, become advantaged. Also, of course, application quality can suffer, but note how small a percentage of the patents of large companies are ever litigated so that their quality problems are exposed.

  28. For a good associate, partner review is 0.1 to 0.2 hours. If it is more than that for a good associate, then the partner should have spent more time with the associate in developing the plan of attack for the work, probably 0.2 to 0.3 of partner time if the associate is properly prepared for the meeting.

    First, 0.3 to 0.5 of supervision on a response is quite reasonable. But if the client won’t pay for it, I guess the firm has to put it down to mentoring and give that full credit as billable. Many firms basically make clients pay for the firm’s malpractice insurance by the hour (partner supervision time that does not advance the ball) on so many matters that pushback is inevitable.

    Oh, and yes, partners want to bill clients for the indulgence of their personal foibles sometimes. Changing things non-substantively because it reflects that partner’s “voice” better is really not a good use of client money.

  29. it should be pointed out to them that artificially restraining costs will not get them the product they desire.

    That’s true, but at the same time a company can be expected to try to squeeze all the “waste” out of spending on even high-quality patents. Because they also want high-quality billing.

  30. Obviously, the writer of the e-mail is outside counsel for a company that does not need high-quality patent applications, but only needs patents to add to the pile for swagger purposes. Here costs are the most important thing, and the patent attorney or patent firm should be willing to deliver what the client wants – simple, concise, and cheap patents.

    If however, the client wants high-quality patent applications that are intended to be enforced, it should be pointed out to them that artificially restraining costs will not get them the product they desire.

  31. Some companies are still farming out some prep and pros work to local outside counsel, but doing more instructing of EPO counsel from in house. So, how can a poor US patent law firm make enough to survive? All this talk of “partnering” with outside counsel, is it sincere?

  32. are you aware of any published reliable surveys on patent prosecution billing rates? If not, perhaps you can set up an anonymous poll here to get a semi-random sampling?

    The AIPLA Economic Survey reports, among other things, patent prosecution rates broken down into various categories. It might be called ‘reliable but not necessarily scientific.’ The actual report is not freely available, but this paper cites a few major statistics from it:

    link to aipla.org

  33. I saw a patent prosecution partner from a world-famous law firm drinking from a puddle by the curb.

    Every once in a while, Mooney cracks me up.

  34. Dennis – are you aware of any published reliable surveys on patent prosecution billing rates? If not, perhaps you can set up an anonymous poll here to get a semi-random sampling?

  35. There is no reason you can’t use an office action to train new associates on. But maybe you’ll not be able to bill for it.

    You shouldn’t have been billing for training before, either. Training your employees is never a cost you should be passing on to your customers. It doesn’t inspire confidence that the client is getting quality work from experienced people, and it’s one of those routine costs of doing business that should be included in the hourly (or flat) rate.

  36. Not sure why this is a surprise. Its supply and demand. The company has many options and can thus make demands.

    There is no reason you can’t use an office action to train new associates on. But maybe you’ll not be able to bill for it. You could have the senior draft the true response and have the junior draft a mock response.

    Bottom line is if you don’t like it then fire the client. This is hardly unique to patent law or law in general. This is called capitalism. You were happy reaping the benefits pre-2007 when the industry was flipped but now you seem to have a problem with it.

  37. In every profession, there are people willing to rush to the bottom in terms of how they value and bill for their work product. Demand, supply, and op expenses being what they are, these same people typically try to make up in volume what they lose on margin.

    A predictable intermediate result: financially-stressed practitioners, locked into barely sustainable fee arrangements, hating the clients whom they lured aboard chiefly on the basis of those same discounted fees.

    A potential end result: outsourcing the clients’ work to further-discounted sources, perhaps in foreign locations, without regard to ethical or legal restrictions.

    Worth remembering, but not news to anyone with business sense. Just another variation on “you get what you paid for”.

  38. Every profession would like to go back to 2007, especially those in real estate. What is there to talk about?

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