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(Message started by: BlairTech on Jun 3rd, 2007, 12:18am)

Title: What is the fair cut when you work for a firm
Post by BlairTech on Jun 3rd, 2007, 12:18am
I am thinking whether to become a Solo patent agent or to work for a firm.  I heard patent law firms charge a high hourly rate.  However, the patent agent only get a small cut (less than 50%).  Any one has an idea about what is the fair cut for the patent agent (say, 20 year engineering experience, but just turned into an agent)?  DO you get more of the cut if you work for a small firm (say just 2-3 lawyers/agents)?

Appreciate your input.  Thanks ahead. ::) ::)

Title: Re: What is the fair cut when you work for a firm
Post by Bill Richards on Jun 5th, 2007, 5:41pm
The general rule of thumb is an associate receives one-third of his billings/billing rate.  I would suspect it's similar with patent agents.  One-third goes to the partnership and the other one-third goes to overhead/benefits, etc.
Working for a small firm is no guarantee of a bigger "cut".  A small, well-established botique might take a larger portion than a small one with less cache and experience.

Title: Re: What is the fair cut when you work for a firm
Post by smgsmc on Jun 16th, 2007, 3:05pm
Looking over previous posts (a couple of which were mine), Iím still very confused about billable hours.  Looking down the road, this is the situation Iíd like to evaluate.  Agent and associate both have several years experience and work at the same pace.  Strictly patent prosecution.  No litigation.  In round numbers (just for example), agentís billable rate is $180/hr; associateís is  $240/hr.  Job takes 40 billable hrs.  The total comes out to $7200 if the agent does the work; $9600 if the associate does the work.  

From previous posts, I gathered the following info, which still doesnít make sense to me:

(1)      If there is no flat rate agreement, then the client gets billed $7200 if the agent does the work; $9600 if the associate does the work.  So, if a client gets billed $7200 for application #1 because it was done by an agent, he is happy and comes back with application #2 (comparable level of difficulty).  He now gets hit with a $9600 bill because it was done by an associate.  Client now is ticked off.  How is this situation resolved?  Can a client ask for an experienced agent to be assigned to his cases?

(2)      Using the rule of thirds, the agent gets paid $2400; the associate, $3200. I accept the fact that an associate might get paid more for the same work.  Just like a PhD chemist would get paid 5X a lab tech if they were washing bottles side by side.  But whatís in it for the firm?  The firm gets $4800 if the agent does the work, $6400 if the associate does the work.  Assuming that the agent and associate both incur the same overhead (i.e., agent also gets an office, and not a cubicle), the firm makes a larger profit if the associate does the work.  In which case, why would a firm hire an agent instead of an associate?  

(3)      I understand why 2 hours actual work may result in only 1 hour billable.  Otherwise, the slower you work, the more you get paid.  What about the flip side?  If youíre a real hot shot, and work blazingly fast, could Ĺ hour actual work result in 1 hour billable?  That is, for previous comparable cases, other experienced people in the firm took twice as long for the same work.  


I'd really appreciate clarification so I have the straight scoop on which to base future plans.  Thanks.

Title: Re: What is the fair cut when you work for a firm
Post by pentazole on Jun 19th, 2007, 2:18pm
while these billable hour rates are averages, in the end, you are evaluated according to your efficiency, ie, average hours you spend on a patent application or amendment.  It doesn't matter if you are an agent or an attorney, your billable rate doesn't increase if your efficiency isn't increasing.  So in the end, no matter how high your billable rate is, given two jobs that are exactly the same, an associate with a billable rate of 180 and an associate with a billable rate of 240 are *expected* to produce the application at a very similar cost, because the guy with the 240 billable hour rate is expected to be more efficient.  In the end, whether your an agent or an attorney, your billable rate is going to increase as much as you can increase your efficiency.  So if you are an agent billing at 180, yet still you are billing out all your required hours, and all your allowed bonus hours before the year is over, then your billable rate is going to increase until you can't do that any more.

Title: Re: What is the fair cut when you work for a firm
Post by biopico on Jun 19th, 2007, 5:13pm

on 06/19/07 at 14:18:15, pentazole wrote:
while these billable hour rates are averages, in the end, you are evaluated according to your efficiency, ie, average hours you spend on a patent application or amendment.  It doesn't matter if you are an agent or an attorney, your billable rate doesn't increase if your efficiency isn't increasing.  So in the end, no matter how high your billable rate is, given two jobs that are exactly the same, an associate with a billable rate of 180 and an associate with a billable rate of 240 are *expected* to produce the application at a very similar cost, because the guy with the 240 billable hour rate is expected to be more efficient.  In the end, whether your an agent or an attorney, your billable rate is going to increase as much as you can increase your efficiency.  So if you are an agent billing at 180, yet still you are billing out all your required hours, and all your allowed bonus hours before the year is over, then your billable rate is going to increase until you can't do that any more.


I agree in general that:

A partner ($300/hr) is 3 times more efficient than an agent ($100/hr) to get the same work done.  At the end, the cost to client is the same.

But I have seen an agent who is even more efficient and effective than a partner for a patent drafting.  

The agent makes a lot less money than the partner.  


Title: Re: What is the fair cut when you work for a firm
Post by smgsmc on Jun 19th, 2007, 6:11pm
Iím getting even more confused, because the responses Iím getting arenít comparing apples to apples.  Maybe my premises are totally wrong.

(1)      After X years of experience, an agent or associate will reach  peak efficiency.  That is, after X years, the incremental efficiency with additional years of experience will be small.  When I was interviewing, three firms told me that  an agent or associate will reach ~99% efficiency after ~3 yr.  That is, if after 3 yr experience I take 100 hr to process an application, Iíll be able to knock it down to only ~99 hr with additional yrs of experience.  I think thereís truth to this because most posts Iíve seen require 3 yrs experience.  But regardless of whether X is 3 or X is 5, at some point your efficiency saturates.  This is true for many other fields.


(2)      In response to a previous post, I was told that a client is to be billed at the rate of the person actually doing the work.  That is, if an agent does the work, the client gets billed at the agentís rate.  And if an associate does the work, the client gets billed at the associateís rate, which usually is higher than the agentís rate.  Do others agree with this premise?

(3)      At my firm, it is my understanding (and Iím likely confused here), that if an agent and an associate work at the same efficiency (that is, if they were both to finish the same project in 100 hr), the associate would get paid more than the agent.  Now is this a common practice?  But, what Iím hearing from the last two replies is that two people working at the same efficiency, regardless of whether they are agent or associate, should be billing at the same rate.  I still need clarification on this point.  Thanks.



Title: Re: What is the fair cut when you work for a firm
Post by tehe on Jun 19th, 2007, 8:54pm
Some firms pay attorneys more.  For instance, agents might take 1/4-1/3 of billing rate whereas attorneys might take 1/3-1/2 of billing rate.  Other firms pay agents and attorneys equally.  There is no concrete rule; it depends on the firm.  Your firm may be one that differentiates between agents and attorneys.  Why don't you just ask your managing partner?

Title: Re: What is the fair cut when you work for a firm
Post by JohnDoe on Jun 20th, 2007, 10:57pm
Another thing to consider is that agents, unlike attorneys, are not permitted to provide legal advice.  Many times during invention disclosure meetings, topics of IP strategy, possible infringing activities (by either the client or competitors), trade secret options, licensing, etc. are raised and discussed.  During these times, an agent would have to tread very carefully.

As to merely drafting applications or prosecuting files, agents and attorneys may be on roughly equal ground.  There may be some advantage as an attorney having attended law school when faced with understanding and incorporating the latest rulings (e.g., KSR) into responses and appeals.  Also, many attorneys have attended a multitude of CLEs or classes during law school that cover basic legal principles, which some agents may not have had exposure to.  However, a good agent will probably come up to speed on these types of legal arguments in time as well.

At my firm, attorneys take between 33% and 40% depending on seniority and billing rate.  It's odd, but the higher you bill, the more you retain.  And typically, you won't be allowed to raise your billing rate above a certain level related to your seniority.

Interestingly, we only have one full-time agent.  We have several agents who are law clerks, but they were not and will not be retained merely for their agent status.

As far as budgets go, yes, sometimes one attorney or agent will be able to complete a project at a lower cost than another attorney or agent.  That's life.  If a $500/hr partner tries to draft an app versus a $150/hr associate, guess who will draft a longer app for the same money.  Then again, guess who will draft more comprehensive claims for the same money.

Typically, clients enter into an agreement with a firm that places a budget expectation or a cap on each project (e.g., $2000 for prosecution responses, $2500 for appeals, $9000 for applications, $1000 for foreign filing).  If you come in under, then the client is happy.  If you come in high, then the billing attorney will probably truncate your time down to the cap and bill the cap to the client.

However, some clients may also be set up with flat fee costs.  This may help their budgeting for quarterly or annual projections.  Firms usually like it because then there's no "penalty" for being efficient and finishing a project quickly.  But fixed fee projects need to be set accordingly - I've worked on many that were set too low and that's not fun.

Title: Re: What is the fair cut when you work for a firm
Post by MrSneed on Jun 21st, 2007, 9:41am

on 06/19/07 at 18:11:12, smgsmc wrote:
Iím getting even more confused, because the responses Iím getting arenít comparing apples to apples.  Maybe my premises are totally wrong.

(1)      After X years of experience, an agent or associate will reach  peak efficiency.  That is, after X years, the incremental efficiency with additional years of experience will be small.  When I was interviewing, three firms told me that  an agent or associate will reach ~99% efficiency after ~3 yr.  That is, if after 3 yr experience I take 100 hr to process an application, Iíll be able to knock it down to only ~99 hr with additional yrs of experience.  I think thereís truth to this because most posts Iíve seen require 3 yrs experience.  But regardless of whether X is 3 or X is 5, at some point your efficiency saturates.  This is true for many other fields.


In my experience, when law firms talk about efficiency, they are talking about how close a person comes to maximizing the ratio between hours billed and hours credited.  If you bill 100 hours for a job that only has a budget of 50 hours, then you are not efficient.  You could conceptualize it with dollars too.  If you bill $10k for a job that has a cap of $5k, you are not efficient.  Either way, you'll get hours cut (you work those for free in a sense).

To get to 100% efficiency, an attorney (or agent) needs to work within their budgets every time.  If you get credited every hour you bill, then you're working at 100% efficiency.

As an aside, billing practices may be different at different firms.  At my firm, you record your hours worked, the billing attorney reviews those hours, and if you're over budget, then your hours may be cut to conform with a pre-existing client agreement or some notion of fair billing for a particular project or type of project.

So, using your scenario.  After X years, if both the agent and the attorney are at 100% efficiency (that is, they both can complete the job within budget), but one works faster than the other, then the faster worker will be able to bill higher and get paid more in salary or bonus.


on 06/19/07 at 18:11:12, smgsmc wrote:
(2)      In response to a previous post, I was told that a client is to be billed at the rate of the person actually doing the work.  That is, if an agent does the work, the client gets billed at the agentís rate.  And if an associate does the work, the client gets billed at the associateís rate, which usually is higher than the agentís rate.  Do others agree with this premise?

(3)      At my firm, it is my understanding (and Iím likely confused here), that if an agent and an associate work at the same efficiency (that is, if they were both to finish the same project in 100 hr), the associate would get paid more than the agent.  Now is this a common practice?  But, what Iím hearing from the last two replies is that two people working at the same efficiency, regardless of whether they are agent or associate, should be billing at the same rate.  I still need clarification on this point.


The same comparison could be made between a first and fourth year attorney.  However, the bottom line is usually a budget cap, which neither one can exceed.

In the scenario here, if both the attorney and the agent worked for 100 hours and the attorney was billing at $200/hr while the agent was billing at $150/hr, you have to look at the budget available.  Assuming a $15k budget, the attorney will have hours cut ($5k/200=25 hours).  Because salaries are based on billable rate, the attorney is getting paid more during that time, but having 1/4 of the work cut on a consistent basis will not look good at review time.  On the other hand, the agent is at 100% efficiency ($150/hr * 100 = 15k) and may get a bonus or a raise (which may mean that next year, he'll have to complete the 100 hour project in 95 hours instead to remain at 100% efficiency).


I hope this is clear.



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