The IPReg Core Regulatory Framework and other reforms came into force on 1 July 2023, with an enforcement grace period expiring next month on 31 October 2023 for the Transparency Rules, an important element of the reforms.
The new framework sets out a number of radical overhauls to the regulation of patent and trade mark attorneys and the entities they work for. Many will note that the new regulations bear a significant resemblance to the SRA’s Standards and Regulations, which came into force in 2019 and apply to solicitors and law firms.
In this article, we discuss what is (and what isn’t) changing and what IP firms need to do next.
1. What is changing?
The key changes, amongst a number of others, are:
Overarching ethical principles
Most fundamentally, the regulations introduce overarching ethical principles for all “regulated persons” (as defined in the Legal Services Act 2007). This definition includes not only attorneys but also other managers and employees of regulated IP firms. These include acting with honesty, integrity and independence, and acting in the best interests of each client. These are very similar to the SRA’s seven principles.
The overarching principles also apply to a regulated attorney’s personal life, but only where it has relevance to their practice. Acts which are “relevant” to practice means either (1) there is a clear and qualitative link between the act of misconduct and the person’s practice (such as fraud or other types of dishonesty) or (2) the conduct risks damage to the reputation of the profession (such as unacceptable social media posts). This brings attorneys into line with other regulated professionals such as solicitors and doctors.
A new Code of Conduct, set out in Chapter 2 of the Core Regulatory Framework
This covers the more granular rules and regulations as a supplement to the overarching principles, though it remains a relatively streamlined document. They cover client care, supervision and governance, conflicts of interest, confidentiality, risk management, complaints handling and other matters. Again, there is a strong resemblance to the SRA Codes of Conduct.
New client care and transparency requirements
These are a central part of the new Code of Conduct and are similar in scope to the SRA’s Transparency Rules. These are set out in Part 1 of the Code and require attorneys and firms to be transparent about referral arrangements, fee sharing agreements, foreign exchange uplifts, commissions and discounts.
These new regulations will require all firms and practitioners to review their engagement letters and terms of business, as well as internal processes regarding how they interact with clients. This will require firms to take action on or before the end of the transitional period on 31 October 2023. IPReg will be checking on compliance with the new requirements from the end of this point, although it expects compliance to start from 1 July despite this grace period.
New requirements on CPD
Rule 2 of the Code of Conduct requires attorneys to only undertake work that is within their expertise and competence and maintain their continuing competence in accordance with IPReg’s requirements and guidance. In addition, those with management responsibility ensure that appropriate training and supervision arrangements are in place for those working at all levels. The previous requirement of 16 hours of CPD activity per calendar year has been shelved, in favour of a more reflective practice with a focus on continuing competence rather than on time spent.
At the outset of each practice year and at regular intervals, regulated attorneys should reflect on their own practice and skills and any emerging issues. They should use that reflection to identify how to ensure they keep skills and professional knowledge up to date. The guidance of the IPReg website contains example templates of self-evaluation grids.
Client accounts rule changes
There is a new definition of client money, which is aimed at making it easier for firms to manage client accounts. The rules now accommodate the use of third party managed accounts (“TPMAs”), following in the wake of similar provisions in the SRA rules.
Greater powers for IPReg to waive its requirements
Including as to professional indemnity insurance.
More options for different business models
By opening up the use of multi-disciplinary practices, and more flexibility to admit non-UK qualified attorneys. For example, attorneys from jurisdictions similar to the UK such as Australia and New Zealand may be able to avoid some of the usual steps required to qualify in the UK.
A new disciplinary process
This introduces the concept of independent case examiners to deal with disciplinary matters, rather than IPReg Board members. There are also more options for the consensual disposal of disciplinary and powers to impose interim orders.
Procedural matters have been brought together under “Standard Operating Procedures”
These contain provisions dealing with matters which are not day-to-day, such as admissions and authorisations, investigations and disciplinary processes and waivers.
New guidance has been implemented with respect of a range of matters such as transparency and costs, client money, continuing competence and decision-making. IPReg guidance can be found here. The guidance will be updated from time to time in response to feedback or other developments in practice.
Despite all this, some things are broadly staying the same. These include admissions requirements and procedures, education and examination requirements, the rules governing litigation and advocacy certification and compensation arrangements.
2. Why are things changing?
The new IPReg regime is strongly influenced by the 2019 SRA reforms, particularly in taking a high-level principles-based approach. This recognises that a regulatory code cannot legislate for every eventuality, so the Overarching Principles will fill the gap where there is no specific provision in the Code of Conduct.
Where the Overarching Principles come into conflict with one another, the Principle that safeguards the wider public interest (such as upholding the rule of law and upholding public confidence) is to take precedence.
A key motivation for the changes was to ensure that clients are given the best possible information about the cost of the work which they instruct attorneys to carry out. Complaints about costs have been the most common type of complaint received from clients, so a fundamental objective of the reforms has been to reduce the prevalence of such complaints.
Other changes also bring IP professionals into line with other regulated persons.
3. When are things changing?
The new Regulatory Framework is already in force. However, IPReg recognises that certain of the new requirements, in particular around costs transparency, will take time to implement.
There is, therefore, a grace period for enforcement until 31 October 2023 for implementing the transparency requirements, including by ensuring that:
- clients receive the best available information about the work and costs for the matter – which must be given at the time of engagement but should also be given as the matter progresses;
- any financial benefits (such as commission, foreign exchange uplifts, discounts and rebates) received as a result of a client’s instructions are disclosed to the client; and
- clients are apprised of information about any referral arrangements in place, including the payment of referrals fee and fee sharing arrangements.
4. What should firms do about it?
Now is the time for IP firms of all sizes to review their internal policies and procedures to ensure that they are compliant with the new regime.
This should include:
- reviewing template engagement letters and terms of business (as well as guidance to staff for drafting engagement letters) in order to ensure that they reflect and uphold the client care requirements in Rule 1 of the Code and the complaints handling provisions in Rule 5;
- conducting a survey of the source of clients and all formal and informal referral arrangements, to ensure that these are disclosed to the client where relevant;
- reviewing standard form costs estimates and fee proposals to consider whether these give sufficient information about fees and charges, including what factors will affect costs and timeframes;
- implementing standard protocols for updating clients as to the anticipated costs of the matter on a periodic basis;
- considering whether employment contracts and staff handbooks are up to date and require employees to comply with the new IPReg requirements, with the handbook (or standalone policy documents) spelling out the practical implications of the rules for example guidance on handling client money and keeping clients updated about their matters;
- reviewing training and supervision arrangements in view of rule 2.3 of the IPReg Code (which places a specific responsibility on managers to ensure these are adequate) and consider if any of the arrangements need to be changed or enhanced. This might include, for example, revising policies, processes and forms for annual appraisals, additional training, and protocols for partners supervising the work of associates; and
- updating other internal compliance policies and procedures, such as information about referrals and fee sharing, confidentiality, and conflict checking.
Given the strong resemblance of much of the new Regulatory Framework to the existing SRA regulations, it is possible that these new developments are a further step towards the Legal Services Board’s previously stated goal of creating a sole combined regulator for all legal service providers.
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