Now that the UK patent and trademark agents amongst us have heard from our regulator that there will be no suspension in the introduction of the new rules on client money that will commence on 1 January 2015, many of you will be polishing up your procedures manual.
The purpose of this post is to explain how Agreed Fees work. I mentioned them in my February 2014 post here.
The example I have in mind is that you have undertaken to do a piece of work for a client that involves substantial disbursements. This could be a foreign filing program for a trademark or a national phase entry program on a PCT application. You have carefully worked out what you expect the disbursements to be because it's highly unlikely that the client will instruct you without knowing what he is in for.
Some of these disbursements will be in overseas currencies so you've done the sums on today's exchange rate. Your terms of business will have explained your client how you bill disbursements, which might for example include adding a percentage to cover the administrative costs.
If you want the money in advance then the simplest way forward to is to use an Agreed Fee. An "agreed fee" is one that is fixed - not a fee that can be varied upwards, nor a fee that is dependent on the transaction being completed. An agreed fee must be evidenced in writing. This definition comes from Rule 17.5 of the Solicitor's Accounts Rules. I see no reason why IPREG would not follow this example and when operating under those rules (which I did for many years, my firms relied on it a lot). You issue your VAT invoice (The best possible evidence in writing) for the agreed fee and when it's paid, its office money. It never touches your client account. Simples. Even if your client can only afford to part pay the invoice that's fine, the part he can pay goes into your office account and stays there (SRA Rule 12.7 (c) (iv) is your authority if you need it).
The downside of an agreed fee is that it is fixed. If exchange rates move against you, tough. Therefore, you might say to your client that you will do the work and bill it when you have complete certainty. This is fine if you have a lot of working capital. Again, you don't need to use a client account.
If however, you want to ask the client for a sum on account of costs generally, you can and must stash any such payment into your client account. You need to make it clear on what terms this sum of money is paid and what interest will be paid to them on it. I am a big fan of 0%. When the time comes to issue an invoice for the work, you transfer payment from the client account into your office account. The downside of this is that it makes life awkward if you don't have very much working capital and need to use the clients money to pay the disbursements as you go along so that you are forever dipping into the client account. This really does need a good bookkeeper, so its not a plan for a solo. The best approach then would be to pay all the disbursements out of client account at the same time as you issue your invoice to the client. Do remember to make it clear on the invoice that you wish you exactly how much he now needs to pay you. If you end up being overpaid then you have to put the overpayment into your client account or send it straight back.
Now that you can fix a renewal fee budget with a supplier like Envoy or get Valipat to help you manage the costs of a PCT national phase, the agreed fee is relatively risk free.