A: Usually, an hourly fee arrangement prevails since the amount of work is unknown due to other parties involved. But, sometimes, depending on potential recovery, a contingent fee arrangement is used.

Q: Can a corporation structure a contingent fee arrangement?

A: Yes. Corporations historically use hourly fee arrangements, but there is no reason they can't use contingent fee arrangements.

Q: When is a flat fee arrangement to be used?

A: In most cases, when the work is specific, accurately estimated, and has limits on modifications and interference. In intellectual property law, a flat fee may suit patent, trademark, or copyright applications--and also contracts.

Q: Then where does a time basis or hourly rate fit in?

A: Usually, when accurate determination of work is difficult and reasonable recovery is not possible or is indeterminant. However, caps can define an upper limit. For example, an hourly basis may suit counseling, negotiation, and defense of litigated matters.

Q: How can costs be distinguished from fees?

A: Costs are usually out-of-pocket expenditures that are incurred in the performance of a legal service. Court-reporter charges and filing charges are examples. In contrast, attorney fees are for the attorney's services.

Intellectual property fee/cost determinations

Gerald Geren Gerald Geren Ltd. Chicago, Il

Today, attorneys and clients consider many types of fees to suit intellectual property matters. The change seems to arise from the judicial climate, the economy, and a new sense of competitiveness.

So, when structuring fees and costs, a straightforward discussion is necessary to determine an appropriate agreement. Watch out! Attorney fees and legal costs, in intellectual property law, are regulated locally, unless specific statutory provisions exist.

Only guidelines. Fees and costs are the subject of discussion more and more. Generally, national statements are only guidelines.

When a person seeks representation in a legal matter and an attorney is willing to oblige, the two create a contract by which the client pays the attorney incurred fees and costs.

Fees are charges for legal services rendered in connection with a legal matter, such as preparing documents, taking depositions, appearances before court, and tribunal or legal research.

Costs refer to expenses such as travel, court-reporter transcript fees, filing fees, and more, which the attorney pays on behalf of the client.

Attorney fees are not legal costs and costs are not fees, but the two are often confused.

Attorney fees may be based on time, the project, or its value; fees can also be capped, contingent, or a combination of all elements.

On the basis of time, an attorney charges fees for the time he/she expends to perform a desired function. This is a common arrangement and a standard billing method, especially when the amount of work is indeterminant. But, since total expenditure may be unknown and unlimited, fees based on time may also be unsatisfactory.

To create some certainty, attorneys and clients may cap the total fees so they do not exceed a predetermined value.

An attorney and a client negotiate a flat fee when they decide to determine that fee on a project basis. Time is not a direct consideration here, but the ability to specify a job and avoid modifications and/or unexpected extras are.

Time vs. project. Fees determined on value include attributes of those based on time and those based on the project, but also incorporate factors such as experience, customary charges, and reasonableness.

The contingency arrangement, while not common, solves specific problems. In a simple contingency arrangement, attorney fees are a percentage of recovery. Situations include:

A client who cannot afford another fee arrangement but has chance of recovery.

But remember, costs are separate from attorney fees and are not part of the contingency. The parties need to work out a precise agreement.

Contigent fees, however, are more common now, if the chance of significant recovery is present.

Also, attorneys now create fees based on combinations of the five options discussed to accommodate cash flow and risk.