When Patents Become Patients (At Least When It Comes to Payment)

The Wall Street Journal (WSJ) has an interesting front page article on how lawyers' 'Billable Hour' style of reimbursement is 'under attack.' Instead of being paid an hourly rate for their lawyering, many firms are yielding to 'alternative billing arrangements.' Stressed by the economic downturn, customers are balking over the hourly 'incentive to rack up bigger bills,' with 'flat fee contracts' and, faced by declining revenues, the lawyers are acquiescing. While activities like 'anti-trust fights,'or 'tricky corporate mergers' or having the 'absolute best team of trial lawyers' will likely continue to be billed hourly, more routine work like 'patent applications' will be paid with.... capitation.

Capitation you say? That's how the Disease Management Care Blog thinks of it. Donning an insurance hat for the moment, the legal customers are transferring the risk of high work effort cost of patent management to its lawyers. If some detail in a patent plan gets thorny and requires more time, that cost is borne by the lawyer, not the payer. Without the remuneration from of fee-for-service (measured in time units), work effort that used to represent revenue now becomes a loss.

The Disease Management Care Blog feels their pain, though it points out that what is described in the WSJ may not represent a full capitation arrangement. That would involve transferring the risk of all the costs of a patent application, such as all the other fees, additional unforeseen litigation (patent infringements?), having to call in additional lawyers (referrals) or loss of income (from delays?). Rather, it's likely to be 'partial capitation' that is limited to a narrower range of services, such as just the legal legwork owned by the firm.

The DMCB asks what's next for our legal colleagues. Other unrecognized but important services may or may not need to be carved out. Customers may want phone counseling over the merits of their patents, the anxiety of dealing with them or now to market them once they are awarded. This would involve specially trained non-lawyer professionals who can work within their scope of practice. Patents probably range from simple to complex, so payment may have to be risk adjusted. Persons who are elderly or socioeconomically deprived may warrant government support: PatentCare or PatentAid. Visiting a patent office and pleading the case with the necessary follow-up correspondence (for, say... 60 days) may have to be managed with a global payment and there is no, repeat NO payment for 'mistakes.' Since there are so many patents, an electronic record of some sort could become necessary to adequately follow progess and populate a registry that can assess patent outcomes. While trial lawyers only get paid if they win (the ultimate pay for performance), some sort of reward for a patent process measure or two (time to application, time to notification) may have to be considered. They may have to be publicly reported on a vetted web site. Of course, the firms offer a spectrum of services, so coordinating them may prompt some to offer client centered legal homes.

Despite that, costs for patents may rise uncontrollably, leading to high costs that hamper our nation's ability to compete globally. We'll debate if equal access to patenting is a right or a commodity. Cherry picked and heart breaking anecdotes of loss of patents will abound. Presidents will wonder why blue ink is preferred versus red ink. Lack of iron-clad evidence that any of this works, of course, may prompt comparative effectiveness research. The government may need to step in with a single patent payer system.

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