Innovation Spotlight: Law Firms Can Recast Their Intellectual Property Practices

by: Tom Hochstatter, President

Today, I re-read the 2019 Report on the State of the Legal Market that was published back in January. I know - who would actually read it a first time, but that’s how us IP and data nerds operate (and the Cowboys are in a bye week). The fact is I was troubled with the statistics and trends the first time I read it and I have been working with the team here at Techson since that first reading to determine how best we could address the real headwinds in our industry. Most specifically within the Intellectual Property practices of our law firm clients and their corporate clients alike. Because Times They Are A Changin’…

Demand for Legal Services is Flat (At Best)

By all accounts and by every meaningful economic metric legal services have been down or flat over the past 8+ years. I don’t consider ~2.0% growth to be “meaningful”. We witnessed the expected dip back in the ‘08-’09 recession, but it has hardly recovered and there has been little to no growth since. I’m not sure “anemic” covers it; maybe, life support is a better description. That said, we do see lots of lateral hire announcements and some M&A, but law firm M&A through the first half of 2019 “Has Hit Doldrums” according to Law.com; so, while it would appear we are in a robust growth cycle with so many announcements, the “pie” simply isn’t growing. In mature industries that suffer downward growth pressures, commoditization such as this we tend to see an “eat your own” strategy - rob the competition to shore up your own growth. It’s a win for the lucky few at the top; a zero sum or pure negative tactic for the rest.

Grow IP Legal Services

We’d like to offer a “grow the pie” alternative that leverages your existing IP practice expertise, available labor, and relationships among corporate clients. It’s simple, but before that let’s look at the numbers and why you should care.

Below is the Year over Year Demand for Legal Services since 2007.

Source: The Georgetown Center on Ethics and the Legal Profession and Thomson Reuters report

More striking to me - here on the Intellectual Property side - is if you look closer at the break down by practice area you see three more troubling trends:

1) Patent Prosecution and Patent Litigation are 2 of the 3 practice areas most under financial pressure (Bankruptcy being the third, but not unexpected given the strength of the current US economy),

Source: The Georgetown Center on Ethics and the Legal Profession and Thomson Reuters report

2) Trends in patent litigation (District Court and Patent Trial and Appeal Board) are in a 4-year free fall with 2019 projected to slip yet again, and

Source: Unified Patents Q3 2019

3) For the first time since 2009 U.S. Patent Application volumes declined - while other countries such as China have grown enormously.

Source: WIPO Intellectual Property Indicators October 2019

So, prep & proc prospects are down (even though FY 2019 US patent issues were up YoY) and patent litigation “demand” is definitely down.

Where are you redeploying your valuable IP attorney experts to further support the corporate IP clientele? Techson has a plan to partner with you - both in-house IP professionals and outside counsel practices.

Intellectual Property Practice Gets Strategic

Ok, so we’re not ones to wallow in the negative. In fact, we see remarkable and impactful blue sky potential ahead for all of us. If necessity is the mother of all invention then what’s necessary is for IP legal practices to reinvent themselves at exactly the same time that corporate America has (re)discovered intellectual property as a strategically competitive advantage (despite all the legislative, court, PTAB & USPTO headwinds).

Really!

Back in June at the IP Global Business Congress (IPBC) in Boston, I sat in on the keynote and full session panels with F500/G2000 GCs and CIPOs on stage and I spoke with many of them post-panel. The resonant theme among all of them was: “Our C-Suite is asking us for more business insight, more often with regard to our patents, and patent strategy”. This is no longer a check box at the management offsite or next board of directors meeting. Business leadership wants to know more about the risks, challenges and opportunities with their portfolios.

A CEO or board member reading a Wall Street Journal headline like, “Apple owes Virnetx $439 Million” and/or “By the way, who the hell is Virnetx” is all it takes to send the GC/CIPO into their departments scrounging for answers. They don’t need pretty “eye candy” charts full of bar charts with patent volumes by global geography or CPC class. Those things are meaningless to the non-IP executives in your client’s company. Executives want to know, explicitly, are we “ok” and “if not ok” what are the GC and CIPO doing to maximize the company’s IP protection or more positively, the ROI?

Where does the GC/CIPO go for help? Do they get it from you - their “Prep & Proc” or Patent Litigation firm? Management consultants? Their own internal teams?

New Kind of IP Consultant

What’s clear to us is the F500 and G2000 need a new kind of (IP) strategy consultant - one that has deep domain knowledge in the business of intellectual property, understands business from a C-suite perspective, has legal perspective, and importantly, knows how to work with both in-house counsel and outside counsel. We’ve seen one company “get it” earlier this year when Deloitte went out an acquired Clearview IP in June. Others will follow.

One thing we know: Deloitte does not create market demand as such, they fulfill it. Their acquisition was a clear response to a growing need, and an ask for help from their current management consulting clients in the area of IP strategy. So who’s most at risk in this? It’s simple - incumbent outside IP counsel. If Deloitte sees need for IP legal expertise while conducting IP strategy work they will most certain bring their own.

It’s Not Just Patents; It’s the Entire Innovation Supply Chain

In August of this year, we announced our entrance into the IP Advisory space to meet these explicit needs of the worlds largest corporations. And if you read this blog regularly you know we have been vocal advocates for this concept (we invented it) called the Innovation Supply Chain. It drafts on the philosophies of traditional supply chains - in that you have to have a firm grasp on the entirety of the supply chain in order to strategically inform any one part of it. If you don’t, it won’t matter what part you “fix” or help; the fix will likely not be enough or will negatively affect another part of the chain.

This is how we see the Innovation Supply Chain:

Source: Techson IP Advisory

IP Partnerships Prevail

The point: for any of this to work in delivering the exact answers the C-Suite and BOD are demanding we need to work together to partner among GC/CIPO and Outside Counsel and create a triumvirate of expertise, perspective and most importantly privilege.

Each group brings a unique perspective - inside and outside of the company to firmly measure those risks and opportunities with a sense of confidence that, say a CFO brings to those same meetings with the company financials. Also necessary is the need to make any insights or outputs immediately actionable.

This team can grasp the totality of the Innovation Supply Chain and put the entire C-Suite at ease knowing its company’s risks are mitigated and its Innovation ROI is maximized.

I encourage you to reach out to me directly with your thoughts or interests in partnering with our IP Advisory practice. We have an exceptionally talented and experienced team ready to partner.