A paradigm shift is apparently underway at a number of Florida's general practice firms. Due to a changing legal industry, advances in technology and unprofitable intellectual property groups, Florida's general practice firms are reconsidering how to best serve their clients' intellectual property needs. In the past, general practice firms often used small, local IP boutiques to provide clients specialized IP services. Then, with the boom of IP litigation in the early 2000s, general practice firms rushed1 to establish their own IP practice groups. Many of those attempts faltered. As a result, we've seen a new IP services model — reminiscent of the early, small IP boutique model — emerge.
In order to offer profitable, sophisticated intellectual property representation, Florida's general practice firms are forming collaborative relationships with IP boutiques that have rosters of 50 or more attorneys, scientific advisers and patent agents. There are a number of benefits to the boutique, general practice firm and client that stem from this kind of strategic alliance.
Most importantly, clients receive top-quality patents, freedom-to-operate opinions, and transactional provisions drafted by highly specialized patent attorneys. This specialization occurs because, while the general practice firm may partner with one IP attorney at an IP boutique, that IP attorney can then reach out to his entire firm of specialized IP attorneys to identify an IP attorney with the desired background. Through this close relationship, I've witnessed general practice firms successfully compete against national firms with massive, fully resourced IP groups. Indeed, by joining forces with big IP boutiques, Florida general practice firms can continue actively representing their clients while offering clients a world-class bench2 of patent expertise, without the profit-draining overhead and support required for a Florida general practice firm to establish and maintain an in-firm patent group.
Understanding the "Failure to Launch" of Many IP Groups in Florida's General Practice Firms
To understand the reasons for a paradigm shift to using big IP boutiques, it is important to consider what motivates general practice firms to form IP groups and why those IP groups often struggle.
Why Florida's General Practice Firms Add IP Groups
For years, forming an IP group was en vogue3 at general practice firms. In the early 2000s, there was an incredible emphasis on patenting and defending technology. Books such as "Rembrandts in the Attic" instructed companies about the "lost art" of patent strategy,4 patent mining5 and surviving the "internet patent wars."6 As technology giants asserted claims and counterclaims of patent infringement of complex and valuable innovation, legal fees through trial in patent infringement litigations often reached multiple millions of dollars. This created a perception that IP groups were roundly predestined to originate lucrative IP work. Of course, the perception was not unique to Florida. All around the U.S., wherever the legal sector was thriving, general practice firms added intellectual property groups.
In this environment of increased emphasis on IP law, and not wanting to fall behind competitors with IP groups, we watched many of Florida's general practice firms form IP groups, a trend that was spreading7 to a number of other states. For years, they invested talent and treasure in adding and maintaining those IP groups. Despite the investments, many of those IP groups disappeared or struggled to grow.
Why IP Groups Often Languish in Florida's General Practice Firms
Many of Florida's general practice firms, to the extent they have patent attorneys, max out at one or two. In my experience, I've seen that those patent attorneys are devoted to representing the IP needs of the firm's institutional clients, which is important, but leaves spaces to fill. General practice firms acknowledge that, and round out their IP group roster by adding attorneys with isolated experience in intellectual property matters. The resulting IP group thus has one or two full-time IP practitioners, surrounded by attorneys who have little involvement in IP matters. For a number of reasons, such IP groups struggle to originate new clients with significant IP work.
First, a small patent group is limited8 to the scientific fields represented by its individual patent attorneys. Because each patent attorney's education focuses on a specific scientific field, the fewer the patent attorneys in a patent group, the fewer industries the firm can market their services to. For example, a general practice firm that hires a patent attorney with an electrical engineering background may find it difficult to represent clients in the chemical industry. In that instance, the only practical solutions are either refer the chemical work to an outside patent attorney with a chemical background, or have the electrical engineer undertake the chemical work. These solutions may not be particularly profitable for a general practice firm trying to maximize the work performed by its own patent attorneys.
Second, there are often practical limits to growth of small patent practice groups at general practice firms. With only a couple of patent attorneys, originating large patent litigations is unfeasible. Companies in bet-the-company patent litigations typically seek out a firm with a bench of qualified patent litigators with some specialization in the subject matter of the litigation. That, in turn, limits prospects for the most profitable patent enforcement or defense work. Or worse, in some instances, I've witnessed general practice firms successfully convince a client that the firm's commercial litigators can handle a patent infringement action without patent attorneys. Should the commercial litigators lose the case — even if they handled it competently and capably — the firm may end up with a client questioning their handling of the litigation.
Third, IP groups have difficulty thriving due to the costly, specialized resources they require. Small IP groups require specialized business development support, paralegals, secretarial support, docketing software, docketing personnel, information technology support, and continuing education — all of which are things that large IP boutiques provide, in working alongside traditional counsel. With only a handful of IP attorneys handling a relatively small number of clients, general practice firms may not be able to defray the expenses of the group, while still keeping rates reasonable and turning a profit. As a result, small patent groups either become cost centers or struggle to make do without necessary resources.
Fourth, general practice firms also struggle to retain9 patent attorneys. Among lawyers, patent lawyers can be exotic birds. They somehow combine all the eccentricities of a type-A scientist, the corpulent ego of a trial attorney, and the wardrobe of a Silicon Valley entrepreneur. This can lead to cultural or personality hurdles, especially at Florida's more conservative general practice firms. Additionally, it is not unusual for IP groups to quietly leave their general practice firm to form an IP boutique. A cycle forms when the senior patent partners at the resulting small IP boutique retire, looking to sell to general practice firms. Real-life examples of the general practice firm/small patent group cycle abound, and again, the cycle is not necessarily limited to Florida. Anecdotal information suggests that legal markets similar to that which we see now in Florida either have or are currently experiencing a similar dynamic.
Given these and other obstacles, a number of Florida's general practice firms are shifting their approach to providing IP representation to their clients.
The New Paradigm: Strong Relationships With Big IP Boutiques Reward Clients and General Practice Firms
Increasingly, general practice firms are shifting10 to long-standing, client-focused relationships with big IP boutiques. Big IP boutiques with 50 or more patent attorneys uniquely provide multilayered scientific specialization across almost every industry imaginable, resolving the issues of cost and lack of specific knowledge that we've seen general practice firms face. Specialized patent counsel is particularly important in states like Florida, which incubate11 hundreds of innovative companies developing highly complex technologies. Florida's technology landscape now spans everything from high-level optics, to aerospace, to software analytics, to nanotechnology. In such fields, a patent attorney with a general mechanical engineering background may lack the specialization necessary to deliver patent quality, drafting efficiency and enhanced client experience. The same is true in the courtroom and transactional context when handling complex technology and ever-changing patent laws.
Additionally, in my experience, collaborating with a big IP boutique permits the general practice firm to retain much of the most lucrative litigation or transactional work. In practice, it seems that big IP boutiques can be especially welcome in a "special counsel" role as part of a broader litigation or transaction. While the IP boutique handles much of the substantive patent work, the general practice firm maintains an active role in the case. The same collaboration is seen even between the successful IP groups of some of Florida's top general practice firms and large IP boutiques. For example, IP groups are able to work side-by-side with a large IP boutique for matters requiring a particular specialization.
A close collaboration between a general practice firm and a big IP boutique requires that the IP boutique fully invest itself in the relationship, applying all the thoughtfulness afforded to its own clients. There are several "musts" that I've identified over the years in order for this to work. The IP boutique must provide exceptional, substantive representation to the general practice firm's clients. Beyond providing excellent substantive representation, the IP boutique must excel at client relations, responsiveness and administrative functions. Further, the IP boutique must get to know attorneys at the general practice firm. It must meticulously respect the general practice firm's boundaries with client relationships and practices. Without such careful respect, the general practice firm will (rightly) feel betrayed or slighted. The IP boutique must also, at every opportunity, refer the general practice firm non-IP work, educate the general practice firm with IP-related CLEs, and answer day-to-day IP questions for the general practice firm.
In response, general practice firms rely on, trust and benefit from the relationship. As the relationship grows, the client, the general practice firm and the IP boutique all profit. Given these wide-ranging benefits, forming alliances with big IP boutiques is a strategy that I believe Florida's general practice firms will undoubtedly continue using to meet their clients' intellectual property needs.
The principles undergirding a strong general practice firm/IP boutique relationship are universal. Sophisticated clients need experienced patent counsel no matter the location. Small and mid-sized firms often want for the critical mass needed to support a robust IP group. It would not come as a surprise to learn that similar shifts are underway in other states that, like Florida, enjoy a vibrant, emerging technology sector.
Footnotes
[1] https://www.law360.com/articles/12356/ip-boutiques-surviving-and-thriving
[2] https://www.law360.com/articles/703653?scroll=1
[3] https://www.law360.com/articles/904036/the-state-of-the-ip-boutique-part-1
[4] Kevin G. Rivette et al., Rembrandts in the Attic: Unlocking the Hidden Value of Patents 1 (2000).
[5] Id. at 119.
[6] Id. at 173.
[7] https://www.law360.com/articles/910282/the-state-of-the-ip-boutique-in-a-general-practice-firm
[8] https://www.law360.com/articles/159133?scroll=1
[9] https://www.law360.com/articles/911456?scroll=1
[10] https://www.law360.com/articles/1017410/the-firms-landing-the-most-cases-in-7-practice-areas
[11] https://www.miamiherald.com/news/business/article151189417.html
Originally published by Law360, August9, 2018
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