Can You Bill Your Clients for Software?

There's rarely much debate over whether attorneys are justified in passing through case related expenses and other case related costs to their clients. Good retainer agreements hold clients liable for attorney fees, attorney expenses, and case costs. However, attorneys sometimes wonder where a piece of software, or a smartphone app, falls on the spectrum of case costs or expenses?

Under the ABA model rule 1.5, which governs fees, there is no prohibition against charging clients the costs for software you obtain, or use, for their matters. However, the rule does call for costs to be clearly communicated before being incurred. So if items or categories that arguably include software are not listed in your retainer, you may want to get written permission before spending that client money. Also, if the software is for general use, like Microsoft Office Suite, or Adobe Acrobat, billing these to a client is likely to raise a red flag.

Passing Through Software Costs

Software can generally be written off as a legitimate business expense. However, when there are subscription fees associated with a software application, passing those fees through to a client could potentially be appropriate, especially when the software, application, or license, are exclusively used for the one client. But clearly communicate what you're doing, or else you may face the ire of a clienpat that suspects bill padding.

Similarly to passing through the costs of online legal research (before the unlimited research subscriptions took over as the norm), if you can trace any expense to be solely associated to the case, and it's reasonable, it's probably fair to bill it.

Building/Buying Software for Specific Cases

Some cases are bigger, or more complex, than others. Sometimes, a case requires an entire database on its own, with a dedicated computer, server, other peripherals, or even custom software. When this situation arises, passing through the expenses to the client will be appropriate, depending on your agreement.

Clients may sometimes be upset at the prospect of their attorney getting to keep a piece of software or hardware that they paid for. One way to avoid this is to offer to give whatever you can to your client at the conclusion of the case.

If you think your client may be upset about your purchase of specialized software and/or hardware due to cost reasons, there may be the possibility of renting or leasing what you need. Though the economics often do not work out better for leasing computers and software over buying, presenting the option to a client can help ease the tension associated with buying software and hardware on a client's dime.

Related Resources:

• Easy Hourly Billing Rate Calculation for Lawyers (FindLaw's Strategist)
• Will This Startup Change Legal Billing or Incite More Disputes? (FindLaw's Technologist)
• 3 Ways an Attorney Can Raise Rates Without Losing Clients (FindLaw's Strategist)