IP Owners! Avoid These 3 Fixed-Fee Agreement Pitfalls

With year-end approaching, many IP owners are about to begin the annual vendor review and fee schedule analysis ritual. Over the years, fixed-fee agreements have emerged as the silver bullet to control costs and improve predictability. Still, we’ve seen several cautionary tales about fixed-fee arrangements worth exploring.

So, this week, we cover three caution areas you should consider while creating or evaluating your fixed-fee arrangements.

Fixed-fee Agreements And Currency Conversion Aren’t Good Partners

Fixed Fee Agreement

Currencies increase and decrease regularly, making any fixed fee arrangement with embedded currency costs risky.

The fee to file a trademark application? A great candidate for a fixed-fee agreement. The PTO trademark application fee in Brazil? Not so great.

What’s the problem? Your foreign associate is going to include their exchange rate in the conversion. Sometimes, they don’t even disclose the FX rate (see our next topic on transparency). You benefit from predictability but may pay substantially more as the currency fluctuates.

The solution?  Avoid flat fees for international PTO fees and ask your associate to bill you the real PTO costs and the actual currency rates used for conversion.

Fixed-fee Arrangements Can Hinder Transparency If Not Done Properly

The goal of predictability and simplicity with fixed fee arrangements is laudable. Still, intellectual property is complicated, sometimes leading to fixed fees that include the proverbial “kitchen sink” of possible costs.

It’s important to know (and approve) everything inside the fixed fee; otherwise, you risk paying excessive charges.

What to do? Break complex fees into multiple fixed-fee components.

Fixed-fee Arrangements Can Give A False Sense Of Security

Fixed Fee Agreement

Many IP owners have negotiated fixed fees for their professional services and even set up e-billing systems to monitor compliance. All is good, right? Unfortunately, the answer is probably no.

We won’t name any names, but some vendors and international associates know how the system (and its controls work). We continue to see additional costs added to invoices in the form of unnecessary PTO fees and inflated currency – all of which pass under the radar of e-billing systems.

The answer? Regularly spot-check a random sampling of invoices or leverage one of the commercial IP invoice review solutions if you have a large volume of transactions.

The Bottom Line

Fixed fee arrangements are extremely valuable tools for IP owners but require careful planning and regular evaluation. Keep our recommendations in mind as you review or create your fixed fee agreements this year, and you’ll be able to save money and improve transparency in your spending – a win/win!

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