Managing intellectual property related costs is a top priority for most IP departments. Like other practice areas, the billing methods for intellectual property services have evolved. Corporate IP departments and their outside counsel have become innovative in creating alternative fee structures that provide both budget predictability and fair value for services received.
In this week’s poll we asked our IP professional benchmarking group (x=258): What type of billing method do you primarily use for outside counsel prep and prosecution work? Using only a traditional hourly-based billing has become much less common, with only 18% reporting this method; similarly a fixed-fee only approach was reported by just 23%. The most common approach, reported by 57% of our participants, was the combination of fixed-fee and hourly-based.
The type of billing method used with outside counsel is about more than just budgeting. The financial arrangement has important implications for the nature of the relationship and ensuring proper alignment in the quality and outcomes of the work product. Using a combination of fixed-fee and hourly-rates–plus the potential for other types of fee arrangements–allows client and firm to establish a true quality focused approach that properly allocates both financial and professional resources. We see this trend continuing with “Other” methods (of which only 2% reported in this poll), to become more common. The use of long-term retained services agreements, work-block billing and auctions, are examples of alternative approaches that are being explored.