When an Attorney Acts as Licensing Agent
Proceed with caution
Sometimes, an attorney will act as an agent to license your great idea or patented invention. The attorney may have connections within an industry and may be willing to represent you to potential licensees. For example, a patent attorney sees value in your invention and agrees to represent it and waive attorney’s fees in return for a percentage of the royalties.
If an attorney offers to represent your product, you should take the same precautions you would with any agent. Find out if they have represented other clients and what their success rate was. Also, check with your state bar association to determine if the attorney has a record of disciplinary actions. When an attorney performs nonattorney services, such as acting as your agent, the attorney is mixing legal and nonlegal services. In some states, such as California, the law requires that an attorney entering into such a relationship advise the client in writing to seek the advice of another (independent) attorney.
The Representation Agreement
The terms of the business arrangement must be in writing and in a manner that “should reasonably have been understood” by the client. In other words, you should understand everything you sign and, if necessary, seek independent advice. Obtain a written agreement from the attorney. If the attorney is representing your product or waiving fees, it should be stated in the agreement.
Another concern about having an attorney as an agent is that there may be a conflict of interest. Lawyers are bound by ethical rules to disclose if there is a potential conflict of interest. A conflict of interest occurs whenever a lawyer represents adverse interests, for example, if your attorney also represents the licensee. When there is a conflict of interest, there is the potential that your attorney may not battle as forcefully for your position.
What if the attorney does not want to represent your invention but is willing to waive fees for performing legal duties in exchange for a piece of the action? For example, maybe the attorney is willing to draft the patent application or assist in the negotiation of the license in exchange for royalties from the license. This is not uncommon in the business of software technology. The attorney is willing to take a gamble (possibly working for free) for the potential of a percentage of future sales. However, you should proceed carefully. Check the attorney’s record. Find out if the attorney has done this with other clients, and ask for a list of clients or if it is possible to speak with any clients. Some law firms will furnish lists of clients; others will not. Becoming intertwined with an attorney in your business dealings can sometimes prove disastrous. It may be difficult to extricate yourself and may be very expensive. Proceed cautiously.
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