As good as it gets II: the patent retainer agreement

My last article addressed the initial consultation with a patent attorney whom you retain to prosecute a patent application in the United States Patent Office. However, this consultation is not the “end of the line,” and so today we will begin our discussion of the retainer agreement and the conflict of interest questionnaire.

Preferably your retainer agreement is approximately seven typewritten pages in length and begins by identifying the parties to this agreement. This may seem an obvious point, but the situation becomes tricky when the business entity, such as corporation or partnership, is small and the principle shareholder or partner is an individual inventor. In these situations, it is very important to confirm whether the client is (i) the inventor’s company, or (ii) exclusively the inventor as an individual person. In my practice I often encounter an individual inventor who submits fee checks that are written upon his corporation’s account. If this is the case, then the attorney must clearly inform the individual inventor that the company is the client.

If the individual requests to be the true client “in interest” then the payments must be made from that individual’s personal account, and not from a company account. For example, what if a small corporation may have three equal shareholders, and the fee checks are from the company account? Without a shareholder agreement to the contrary, the patent attorney should inform, and obtain authorization from, all three shareholders for prosecution of the patent application.

Even if the individual inventor is the true client, his affiliated business entity may nevertheless possess what is known as a shop right. In other words if (i) the inventor used the company’s resources, money, employees, expertise, premises and/or time to create and perfect the invention, then (ii) the company has the non-exclusive right to use the invention without paying a royalty to the individual inventor. For larger business entities, standard business signature practice is also very important for the retainer agreement. For example, if the CEO signs the retainer agreement on the company’s behalf, then the signature line must very clearly state that the signature is in the capacity as a representative pf that company, not in an individual capacity as a single independent person.

In addition to identifying the true client in interest at the onset of the attorney-client relationship, the client’s identity is important for the submission of patent office non-attorney government fees. If a corporation or partnership with more than five hundred employees is the client, then the government fees become twice the amount they would be for an individual inventor without these employees. However, the individual must be careful even if he or she pays the fees from a personal account: if the employer or company otherwise (i) has a shop right to the invention, and (ii) has more than five hundred employees, then the individual must also pay the higher fees. There was actually a client in my practice in my practice with this unfortunate situation for four patents!

The retainer agreement must next immediately notify the client that the filing of a patent application in the United States may immediately prohibit filing of a patent application, or its counterpart, in another country. Unfortunately, many businesses are unaware that certain practices have irreversible consequences, and so they should become aware of them as soon as possible.
©2012 Adrienne B. Naumann
Ms. Naumann does not endorse or sponsor the advertisements at or any linked-in site.


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