Print

Please login or register.
1 Hour 1 Day 1 Week 1 Month Forever
Login with username, password and session length

[Robert K S]

What are the ethical implications of accepting stock shares instead of cash as remuneration for patent prosecution services?  It seems to me that obviously some conflict of interest will be created since the value of the remuneration could depend on the success of the patent prosecution.  Are the rules different for attorneys and agents?

[JimIvey]

It seems to me that obviously some conflict of interest will be created since the value of the remuneration could depend on the success of the patent prosecution. 

Yes, but the interests are aligned.  If the practitioner subsequently sells options on the stocks in a manner that the practitioner profits more if the prosecution fails (or even if just the claims are particularly narrow), then the interests are adverse and you have a problem.

Some of my agreement letters include language from a form used by a Silicon Valley firm that took stock routinely in the 1990s.  It informs them of the possibility of a conflict of interest and states that they explicitly consent to the conflict and encourages them to take all the time they need to consult other counsel to evaluate the agreement letter. 

Of course, the other counsel would want stock too and then the client would need a 3rd counsel to evaluate that letter.  Then, by mathematical induction, all corporate counsel in California get stock or the client has to find some cash somewhere.

Regards.

[NJ Patent1]

I know it is done and I don't know of any ethics desicions that condem it (not that I read any outside my jurisdictions).  The only potential (hyper-hypothetical ?) issue I might see, and not already discussed, is "proprtionality"  You spend 40 hrs on an app, bill +/- $425 an hr, and have earned a fee of ca. 20K.  The stock takes-off and you pocket 1 million.  Not bad for 40 hrs work.  On the surface, it roughly looks like a "contingency fee" to me.  But there may be a wrinkle.

I've been going back-and-forth w/ the previous poster on a completely different thread.  One topic that came-up was "zealous representation" (if that is the standard in ur jurisdiction).  You see a good opportunity to get claims of "decent" scope allowed by narrowing the claims, but might/could zealously push for yet broader scope.  Would you have a motivation to take the facially narrower claims to get a claim allowed (and maybe finally see some $$$) instead of fighting to the bitter end?  That could be percieved as a conflict.  Maybe the same could come-up in a contingency situation - push the client to settle for a million so I get something to pay my kid's orthodontist with.  To cut to the chase, contigency fees are "capped" (at least in NY and NJ), so you might consider a "fee cap" in that engagement letter.

[Isaac]

Yes, but the interests are aligned.  If the practitioner subsequently sells options on the stocks in a manner that the practitioner profits more if the prosecution fails (or even if just the claims are particularly narrow), then the interests are adverse and you have a problem.

How about the situation where the client wants to cut his loses and bail on a patent and the invention, while the attorney wants to pursue a small chance of getting some claims issued?   That sounds pretty adverse to me.

As long as the attorney advises the client properly, which quite possibly might involve recommending that the client seek advice from yet another attorney, just as you suggested, I don't think there is an ethical problem with merely taking shares for pay.   But you might encounter some sticky situations.

Of course, the other counsel would want stock too and then the client would need a 3rd counsel to evaluate that letter.  Then, by mathematical induction, all corporate counsel in California get stock or the client has to find some cash somewhere.

Regards.

Yep.  So make sure you treat your clients ethically, and don't rely on the fiction that their other attorney is looking out for them.