Can you take a lien over your clients' patents? IPReg explains the rules

The Patent Regulation Board (known as IP Reg) has today published a practice note reminding attorneys that any lien they claim must be allowed under law and as well as complying with IPReg’s conflict rules.

It goes on to say “Regulated Persons do not benefit from a statutory lien. The circumstances entitling a Regulated Person to claim a lien at common law are far from clear. Whilst stopping short of requiring all Regulated Persons to claim only contractual liens, IPReg and the Joint Disciplinary Panel believe that in cases where there is no contractual right to claim a lien in the relevant terms of business a Regulated Person places themselves at a significantly increased risk of breaching Rules 5 and/or 7 [relating to conflicts on interest] in the event that they seek to retain their client’s property to secure payment of fees and disbursements.”

As a result, the attorney industry’s watchdog urges attorneys who want to claim a lien to put clear contractual terms in their terms of business and ensure that their clients understand what they mean.

IPReg issued the guidance after handling a disciplinary procedure between an IP attorney and a former client who claimed the adviser had tried to transfer rights in its intellectual property to himself following a dispute over unpaid bills.

Now the attorney has agreed to hand back intellectual property belonging to the client. David Rickard said he would transfer the legal title in the IP “free of all encumbrances” by February 4 in an undertaking last month following a determination by the disciplinary panel of IPReg.

The Statement of Facts in the dispute published by IPReg reveals that Rickard and his client, legal software provider Desk Space, were in dispute over money. Desk Space claims that Rickard failed to pay for office management software it had provided to him. Rickard alleges that the software was defective and that he was due payment for work he had carried out for Desk Space.

In March 2009 Rickard notified his former client that it was required to execute a transfer of its IP to him under the attorney’s terms of business. He later executed a deed purporting to assign the IP to himself.

Now Rickard has agreed not to rely on any new terms of business without approval from IPReg.

The dispute raised questions about the right of attorneys to assign clients’ IP rights as security for unpaid bills. IPReg will hope that its practice note will clarify how such liens can be used in attorneys’ terms and conditions.

IPReg handles complaints referred to it by a legal ombudsman about the conduct of IP attorneys. These are relatively rare: In 2011, for example, the ombudsman reviewed 16 cases and accepted 11 of them for resolution. It did not refer any to IPReg.