Many inventors often experience a bit of sticker shock when they learn what it costs to navigate the patent process—filing a patent application, requesting continued examination, paying maintenance fees, and so on. And then there’s the cost of having a patent attorney help you do it all correctly.
So, it’s no surprise that inventors frequently ask if I can waive my fees in exchange for equity in the invention or a company that will hold the patent.
I am always happy to assist with any and all patent matters—you can reach me at my office here—but unfortunately, I cannot work for equity. This response sometimes prompts a follow-up question: “Can you work for free?” The answer here is “no” as well.
This isn’t due to greed or other profit-driven motives. There are specific legal reasons for not performing legal work pro bono or in exchange for equity.
Taking equity in exchange for legal patent work can trigger legal restrictions against ‘unreasonable fees.’
The whole point of offering equity in lieu of an up-front payment is the belief that the equity will ultimately be worth much more than the cash fee. But even in the rare instances where this proves to be the case (for every financial success, there are a thousand failures), this ultimately presents a problem for the attorney.
State bars require that their member attorneys charge a reasonable fee for their services. Obviously, the range of acceptable fees for a given service varies widely, depending on whether you’re represented by a young, inexperienced attorney, or someone who’s a nationally recognized expert in their field. Thus, there are many variables that have to be considered.
But there are guidelines that help to define what is reasonable. For instance, a few years ago the New York Court of Appeals issued a ruling a few years ago in a case involving alleged misconduct by a patent attorney. The court stated that if a patent lawyer charges a fee well above the typical fees described in the AIPLA Report of the Economic Survey—AIPLA is the premier intellectual property law organization in the U.S.—such fees could be considered unreasonable.
So, here’s the problem. I charge fees that fall well within the spectrum defined by AIPLA as being typical. But, let’s say I’m approached by an inventor who’s short on cash and has a story that pulls at my heartstrings, and I accept equity in exchange for assisting him with a patent application. My generosity subsequently pays off, as the invention is a success, and the equity I received for work that should have cost $10,000 is eventually valued at more than $1 million.
But the client can then turn around and sue me for charging an unreasonable fee. And they will likely win, requiring me to return all the equity I received. In addition, my actions would almost certainly invoke the wrath of the California State Bar. In such a situation, I would have effectively worked for free, while subsequently racking up legal fees and losing my license to practice.
You can understand why that isn’t an enticing prospect.
Working pro bono doesn’t present the same legal risks as accepting equity—instead, it’s insurance that presents a problem.
As I noted above, I’m also prohibited from working for free. But in this case, it’s because of the requirements governing malpractice insurance coverage.
In California, lawyers are required to disclose if they don’t have carry a malpractice policy. And there are very good reasons why the public should only work with insured lawyers. There have been many cases in which former clients sued their representation, only for it to turn out that the lawyers in question were not insured, and subsequently declared bankruptcy. Malpractice insurance ensures that lawyers have the means to defend themselves, while clients know that they can be made financially whole if they have a case.
The problem is that insurance policies for attorneys specifically forbid pro bono work. Instead, they require that all work be paid, and carefully outlined through written agreements between attorney and client. The only way to actually do pro bono work is to work within a group or organization that will insure you to do so. Independent attorneys and legal offices don’t have a means of offering free legal work.
But there are pro bono legal assistance programs available for inventors.
Thankfully, the USPTO does recognize that some inventors don’t have the financial means to obtain assistance with securing patent protection. This is why they promote the Patent Pro Bono program, under which individuals and small businesses that meet certain requirements are eligible for free legal assistance from a participating local organization.
There are two ways to apply for pro bono assistance. First, you can visit the website of your regional Patent Pro Bono program administrator. In California, that is the California Inventors Assistance Program (CIAP). Be sure to view the informational video linked to from that page—it is required viewing prior to applying.
Alternatively, you can submit an application through the National Clearinghouse. The National Clearinghouse serves to transfer legal assistance requests to the appropriate regional program, based upon the information provided in the application.
I hope that the above resources prove to be useful for aspiring inventors in the local Sacramento community, and I wish you the best of luck.