Sunday 9 February 2014

Client Accounts for All

The new IPReg rule 11 that will come into force on 1 January 2015 requires all regulated patent and trade
mark agents to have a client account or ensure they never handle client money.

Here is the current rule
Rule 11 – Financial Matters
Regulated persons shall ensure that their professional finances are managed appropriately.

Here is the amended rule
Rule 11 – Financial Matters
Regulated persons shall ensure that their professional finances are managed appropriately.
Every regulated person must ensure that they have in place appropriate controls, procedure and records and also sufficient and appropriately qualified staff and/or other resources to ensure that clients always receive a high standard of service in relation to the management of client money.
In the event that a regulated person receives money from a client, other than by way of payment of fees or disbursements incurred but including money on account for fees or disbursements paid up front, they should ensure that such money is held on trust for the client in an account which is entirely separate from the regulated person’s or the firm’s professional business accounts In the event that money is held on trust for a client the registered person’s terms of business should deal with the issue of the ownership of the interest earned on the money held on behalf of a client.
Every regulated person must ensure they comply with all legislation pertaining to “money laundering” and “proceeds of crime”

CIPA have already run one webinar reported at Page 49 of the January 2014 CIPA Journal  and another is on its way to scare you. Its on the 4 March starting at 12:30 and for a mere £30 plus VAT or £45 if you are not a CIPA member you can book it online. It is also supported by ITMA and hopefully trademark agents qualify for the £30 rate.

Having come from practice as a solicitor I opened a client account early on. It did take some time to get the bank to understand that it must be designated a client account and they could not raid it for arbitrary charges, but that is all sorted now. Post 2008, the banks are a bit better at recognising the need for client account designation. The mainstream banks now seem to be more up front about their offerings. Here is Lloyds and here is Barclays. For most patent and trademark agents you want to make sure it stays open with a zero balance. The client accounts of property solicitors were always attractive to banks, but I suspect that for most of the IPReg regulated, the odd payment  of €300 costs may be the best it sees.

The one thing that the rule makes clear is that if you collect your PCT nationalisation fees or the anticipated costs of the foreign filing programme for a trade mark client in advance it should go into the client account. If you don't have a lot of working capital or you don't trust the client, this advance collection is necessary. When practicing as a solicitor, I found the provisions under the then Law Society rules about agreed fees very helpful. These are still recognised by the SRA see their Rule 17.5 

A payment for an agreed fee must be paid into an office account. 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.
Therefore if you specify a fixed fee for the service and bill it up front, it does not need to enter the client account. If you want to do a final accounting, then its provide the credit and bill afterwards or ask for a payment into your client account.

The obvious thing to say in your terms and conditions is that interest is not paid and any interest earned is yours.

The one area where it would be helpful to have some guidance from IPREG is what about refunds made by OHIM and the EPO direct into your deposit account and therefore mixed with office money. It is a matter of British competitiveness that we should not be disadvantaged relative to our European competitors. Up till now I have felt that IPREG regulation saves me from anguishing about this issue too much. Can we make it clear in our terms of business that such refunds are refundable only at our discretion. For OHIM refunds, the amount is €350 but for abandoned EPO applications that have gone un-renewed the amounts can be significant. If the non- renewal is because the foreign start up has gone into administration, the  client may be another law firm who is not too keen to receive  difficult to allocate funds.

Hopefully most firms who have not already got a client account will find it possible to open one during 2014.

Another requirement is that we must have  "sufficient and appropriately qualified staff" . Is that meant to rule out solo practitioners. Lets hope not!


  1. Thanks for posting this. I sent an email to IPReg (duly acknowledged) asking whether there might be exemption / special rules for sole practitioners. No reply as yet - but good to know there's the whole of 2014 to take on board the new Rule (which has been part of the Rules as set out on the IPReg website for some time !)

  2. Sorry - posted too quickly - forget the last bit (in brackets) : the Rule as set out is different from the version on the IPReg website !

  3. The Rules have been on the IPReg website - in the ABS section for a while and the potential change was mentioned on the Code of Conduct page itself. What has happened is that IPReg have now set a date for implementation - 1 Jan 2015.

    Note also that they may be a get out for EPO and other refunds since the new rule refers to receiving "money from a client".

  4. Dont think We can treat client money is only that which comes in from the client. As a litigator, you might well get client money from the other side as part of a settlement,costs or damages. There is no doubt that that would be client money to be held on trust

  5. Still not sure how any / all of this is going to be policed ? Hope it's another light-touch situation so end-year question "Please confirm you have a client account which is being operated per Rule 11?" YES/NO !

  6. Was wondering if Anonymous was IPReg itself - but the final line suggests not ! Here's hoping others will be encouraged to contribute.

  7. I would agree that refunded fees would be considered to be client money.

    However, looking at the wording of the rule, it would appear that it has two parts.

    Firstly there is a requirement for all attorneys to have in place an appropriate system for managing client money.

    Secondly and separate from the first, there is a clear, absolute prohibtion on paying money received from a client (other than in respect of fees and disbursements incurred) into an office account. Any money received from a client must be paid into the client account.

    To fulfill the first limb of the rule, a mechanism must be in place to credit clients for any refunds received. However, that does not mean that there would necessarily be a breach of the rule if a refund was initially credited to an EPO office account and then subsequently paid out to the client account even though in theoretical terms that would involve a temporary mixing of client and office money. It really turns on whether such a system passes the "high standard of service" test required by limb one.

  8. I wonder if the "high standard of service" for returning refunded EPO fees should be benchmarked against the EPO standard of service in providing reaction to responses on examination reports. In other words if we were to refund the fees to our clients within 12 months, would that be sufficiently "high"

  9. Quite straightforward really:

    Money received before you send out a VAT invoice = put it in the client account

    Money received after you have sent out a VAT invoice = put it in the office account

  10. If you are a litigator you have to have a designated account already...