Continued from Negotiating Legal Fee Billing Models (August 10, 2012).
The following are examples of different types of alternative fee arrangements that are not the "billable hour" model. With these model types you do not need to be worried about surprises from your law firm when the bill arrives.
Flat fees. There is a lot of work that can be done on a flat fee basis. This is when an attorney tells you that the project they are working on for you will be done for $X amount. So, regardless of how often you call or how many times you email, you can count on and budget for one amount. This lends itself well to estate planning, intellectual property work, corporate formation, collections, boiler plate agreements, etc.
Contingency fee. This is when you do not pay an attorney anything at all and if they win damages, they get a percentage (usually 30% or more) of those damages to pay for their time and fees expended on your behalf. This only works if you are a plaintiff who stands to win a good amount of money and the merits are strongly on the plaintiff’s side. No attorney will risk taking a case if the merits are not strong.
Not to exceed. This is a lot like a flat fee but you get a range and an attorney knows that you will not pay more than $X for this service.
Monthly Retainers. Sometimes you are not at a point where you need a full-time in-house counsel but you definitely spend within a certain amount every month. You want to be able to budget and rely on something and so this is a good arrangement. The attorney knows that some months they will more than earn their retainer and some months the hours may be lighter but the client is able to budget that monthly retainer and rely on a set amount. Usually, the attorney will bill at a lower rate for this monthly retainer because they know that this retainer will be coming in consistently. Essentially, you get a break for being a consistent client.
Hybrids. There are, of course, combinations of the above. For example, a contingency type bonus if an hourly rate or flat fee matter is handled in a certain amount of time or with a certain monetary result.
I personally really like flat fee work and try to use that model as much as possible. I have found that clients are happier when there are “no surprises”. Sometimes, they are surprised that I have not surprised them and I get questions like, “Wait, is that it? Any extra fees?” “No, that’s it. I will let you know when your trademark registers or if anything comes up!”
Every attorney and firm is a little bit different but by and large, we want to help you be successful and these days, being successful usually means working within a budget. This is a good way to approach attorney’s fees and still get the high quality work your business needs to grow and thrive.
Tina Loza is an IP attorney and the Managing Partner of Loza & Loza, LLP, a specialized legal practice with offices throughout Southern California, that supports clients worldwide with patent, trademark, copyright, and internet law needs. For a free consultation or more information, contact Loza & Loza, LLP.