It’s a new year, so you know what that means – it’s time to review your Fee Agreements and Outside Counsel Guidelines! Every year, the focus is on driving down costs, which is important but only part of the story.
So, this week, we cover three caution areas you should consider while reviewing your fixed-fee arrangements.
Fixed-fee Agreements and Currency Conversion Aren’t Good Partners
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 disclose the FX rate (see our next topic on transparency). You benefit from predictability but may pay substantially more as the currency fluctuates over the life of your fixed-fee agreement.
Fixed-fee Arrangements Can Hinder Transparency If Not Done Properly
The goal of predictability and simplicity with fixed fee arrangements is laudable, but simplicity can cost you a lot if you aren’t careful. IP is complex, and it isn’t unusual for the proverbial “kitchen sink” of possible costs to be loaded into a fee for a service.
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. Break out translation costs, currency costs, official fees, and any other expenses into discreet components that can be monitored closely.
Fixed-fee Arrangements Can Give A False Sense Of Security
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) works. 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 for currency, PTO, and professional services fees. Even if you just check one transaction, that is a start!
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!