Money Laundering

The tale end of Rule 11 says: Every regulated person must ensure they comply with all legislation

pertaining to “money laundering” and “proceeds of crime”.

No problem. Back in 2008 Solo posted about it. The 2007 Regulations don't apply to patent and trademark agents.   I was therefore surprised by the IPREG advice page.  In August they took advice from Mr James Ramsden, a junior counsel, who opines that the Treasury is wrong (as is SOLO). Brave man! I was alerted to this development by the report at the back (page 655 to be precise of the recently arrived CIPA Journal on the webinar in September. Personally I would have made it front page news as we know from the secret diary that no-one reads these features. Webinars are of course for CPD points getters not for any useful information. There is also a summary published clandestinely on the CIPA web site in October here.

The consequence of Mr Ramsden being right and me being wrong is (amongst other things) that all solos now need to become nominated officers to submit Suspicious Activity Reports (SARs). The National Crime Agency has a nice on line interface for enabling us to pursue our new career as a nark. Under the law as I understand it, if someone asks me to participate in a dodgy transaction, I can just say no. I have no further obligations. Yes you do need to be aware of the possibilities of money-laundering and now that we all have client accounts, we may be tempted by suggestions that we use them to facilitate interesting trades that our clients have in mind. Don't do it. Just say No. Client accounts are for managing credit risk in a way that is fair to the client.

The reason why the Treasury were wrong apparently is that we are independent legal professionals who by way of business provide legal services to other  persons, when participating in financial transactions concerning the managing of other assets (where the other assets are patents and trademarks). Me thinks he is stretching it. We do manage patents and trademarks but participating in financial transactions concerning their management? I don't think you can have  had in mind the payment of renewal fees as a financial transaction. Managing assets means looking after an investment portfolio, a load of houses - something of that ilk, not keeping a database of renewal dates. Probably you should read the opinion yourself.  Paragraph 17 to 22 are the knub of it.

Under the 2007 regulations, I only have to do client identification procedures when I am establishing a business relationship to participate in these strange financial transactions. Therefore, it seems to me that I had better not even get close to doing that.

Since IPREG took counsel's advice in August, one would have hoped that they have managed to engage with the FCA (Financial Conduct Authority not Crime Agency) and work out who is the supervisory authority for us.

ITMA recently conducted a survey to find out how many members had held money in an escrow account as part of an assignment exercise. Was that what they thought managing assets meant? An independent legal professional that is involved in financial transactions concerning the buying and selling of business entities is caught by the Money Laundering Regulations. However a trademark is not a business entity. A business is a business entity and the business might include a trademark but it would be remarkable if the trademark agent acted in the sale of the business entity just to get the trademark. If something like that comes along, pass it on to a business solicitor.

I am also confused by the Statement from CIPA and ITMA that you can see here. The first paragraph while true does not seem to support any assertion. Are they asserting that we don't need client accounts or that we should not be covered by the 2007 Regulations. The next paragraph bemoans the fact that we are not covered and some people (not many)  have had difficulty getting client accounts (as to which see my earlier post). Hopefully someone who knows will provide an illuminating comment. Maybe it could be you!

The Agreed Fee and Your Client Account

Now that the  UK patent and trademark agents amongst us have heard from our regulator that there will be no suspension in the introduction of the new rules on client money that will commence on 1 January 2015, many of you will be polishing up your procedures manual.

The purpose of this post is to explain how Agreed Fees work. I mentioned them in my February 2014 post here.

The example I have in mind is that you have undertaken to do a piece of work for a client that involves substantial disbursements. This could be a foreign filing program for a trademark or a national phase entry program on a PCT application.  You have carefully worked out what you expect the disbursements to be because it's highly unlikely that the client will instruct you without knowing what he is in for. 

Some of these disbursements will be in overseas currencies so you've done the sums on today's exchange rate.  Your terms of business will have explained your client how you bill disbursements, which might for example include adding a percentage to cover the administrative costs.

If you want the money in advance then the simplest way forward to is to use an Agreed Fee. 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. This definition comes from Rule 17.5 of the Solicitor's Accounts Rules. I see no reason why IPREG would not follow this example and when operating under those rules (which I did for many years, my firms relied on it a lot). You issue your VAT invoice (The best possible evidence in writing) for the agreed fee and when it's paid, its office money.   It never touches your client account. Simples. Even if your client can only afford to part pay the invoice that's fine, the part he can pay goes into your office account and stays there (SRA Rule 12.7 (c) (iv) is your authority if you need it). 

The downside of an agreed fee is that it is fixed. If exchange rates move against you, tough. Therefore, you might say to your client that you will do the work and bill it when you have complete certainty. This is fine if you have a lot of working capital. Again, you don't need to use a client account.

If however, you want to ask the client for a sum on account of costs generally, you can and must stash any such payment into your client account. You need to make it clear on what terms this sum of money is paid and what interest will be paid to them on it. I am a big fan of 0%.  When the time comes to issue an invoice for the work, you transfer payment from the client account into your office account. The downside of this is that it makes life awkward if you don't have very much working capital and need to use the clients money to pay the disbursements as you go along so that you are forever dipping into the client account. This really does need a good bookkeeper, so its not a plan for a solo. The best approach then would be to pay all the disbursements out of client account at the same time as you issue your invoice to the client. Do remember to make it clear on the invoice that you wish you exactly how much he now needs to pay you.  If you end up being overpaid then you have to put the overpayment into your client account or send it straight back.

Now that you can fix a renewal fee budget with a supplier like Envoy or get Valipat to help you manage the costs of a PCT national phase, the agreed fee is relatively risk free.

Sally Cooper in Munich finding that Small is Beautiful

Munich ? December ? Trade Marks ?

From Heather Cowper

But surely Munich = EPO ?

And surely Munich / December = Christmas Markets ?

YES - but Munich in December in 2014 was logo host-City for INTA’s last Conference of the year : “When Trademarks Overlap with Other IP Rights”. The Conference took place in the nicely-named district of Arabellapark. As cold and dense fog were the order of the day, around 350 or so persons eschewed walks in the park – they sensibly stayed indoors and diligently followed proceedings. This is true. From 9.00am on Monday 8th to 6.00pm on Tuesday 9th the focus of interaction was the Conference Hall. A heavy first day worked through “Trademarks and Copyright Law” and “Trademarks and Designs” and a heavy second day worked through “Trademarks and Geographical Indications” and “Trademarks and Unfair Competition Law” and “Trademarks and The Right of Publicity”. For me, the glue that held these Sessions together was the format of a full-time academic beginning the Session and “perspective” Speakers following. There was surprisingly little repetition and a lot of learning and a lot of fun : well done to all Moderators ! Along the way I learned about the Skydisk of Nebra  decision from Germany and the Tripp Trapp chair decision from the CJEU  and Darjeeling Lingerie (a Decision in favour of the Indian GI for tea in Taiwan but a Decision against the Indian GI for tea in Israel) and was given a wake-up-call on what we all (as IP lawyers) owe to the Paris Convention (1883) and the Berne Convention (1886).

Mr Campinos Thanks to Mladen Vukmir

The Conference ended – appropriately - with Antonio Campinos (President of OHIM) looking forward to (amongst many other things) a reduction in fees for users of the Fast-Track Trade Mark Application procedure. And slotted into proceedings was a short (VIP Interview) Session on Trademarks and Patents : yes – we were in Munich after all ! And right at the beginning / present throughout was Jeremy Phillips. He introduced himself as the gypsy violinist – in attendance as Keynote Speaker trusting thereby to enhance the experience of those partaking of the (Conference) feast. He reported just about all of the Conference proceedings on the IPKat blog “in real time” (thereby – to the relief of this writer - making further reporting on content redundant). Indeed, I suspect Jeremy pressed the “post” button on his Address “Overlaid, Overlegislated and Overloaded: Trademarks in the Twenty-First Century” before his Address began (so quickly did it appear on Twitter #INTAMunich) !.

For me, there were two “take-aways”. The first was the pleasure of being at a Conference where trade marks were “a given” : the focus was firmly on the many other IP rights that work alongside trade marks (sometimes overlapping / sometimes not) and Speakers from across the world should be congratulated on underscoring the significant “education” task confronting INTA’s Related Rights Committee. The second is in my notes of the concluding remarks of OHIM’s President Antonio Campinos : that “the majority of businesses are small – not large”. Thank goodness someone said this!

Rule 11 and opening your Client Account

I was pondering (as you do) whether the profession was ready for ABS licensing and client accounts. Back in February we were all told Rule 11 meant we had to have our client accounts open and ready for 2015. See my post at the time.

I was pondering because I happened to notice  a few days ago, on the SRA Question of Ethics page, a note about the operation of client accounts and how evil it was to have the interest paid into the client account because the interest on a general account is office money (at least in SRA land it is - IPREG may have other ideas but I doubt it). In any event the interest on the overpaid sum of £35 that came from an Australian client and which would have been lost in exchange rate differences and banking fees if I had paid it back was going into my client account. Oh woe! Now don't worry that client account has always been IPREG regulated so I wasn't about to get hung drawn and quartered as promised by the helpful Ethics police at the SRA. Even so I got in touch with my Bank (Barclays fortunately not a Building Society) and they have made me honest by directing the interest to my office account. OK so if you have set up your client account in readiness you too might want to check where the interest will go.

Meanwhile the Bar Standards Board have started an escrow service BARCO regulated by the Financial Conduct Authority. If you use that they charge you 1% but it seems to be capped at £250 per transaction. Presumably you have to pay that out of your funds rather than the client's so I'm not thinking of using BARCO myself for that overpaid £35. If you charged the £250 to the client would that be "protecting client money" - the tenth SRA principle.?

Next I heard from ITMA via their Chief Executive's Bulletin today (4 December 2014):

Unfortunately the current banking practice only allows true client accounts to be opened by a profession included in Schedule 3 of the Money Laundering Regulations 2007 and currently the IP profession is not included in this schedule making it difficult for those bound by the new rules to comply. The new Rules are due to come into force on 1st January 2015 and we have written, together with CIPA, to IPReg to request they delay bringing into force the new rules until it is possible for our relevant members to fully comply. We will advise as soon as we have any further information on this matter.

Its very easy to blame "banking practice" and I would be interested if others have found difficulty with the mainstream banks. I didn't and all litigators have needed to have client accounts for a while.

I was surprised to hear that postponement of the rules was being requested on my behalf. The bar has managed to prepare itself and given that we nearly always deal with business clients we should be able to manage a client account or credit risk  by now. Moreover delaying the new regime would presumably knock back those who are ABS and want to offer more co-ordinated business and IP advice to their clients.

Anybody know more about this? Please comment