Will Uncertain Client Demands Continue to Fuel Turbulence in IP Marketplace?

By Anthony S. Volpe
Special to the Legal

We have seen an increase in the amount of movement, both locally and nationally, of IP attorneys in and out of general practice firms and out of IP boutique firms into smaller IP boutiques with a more limited focus on certain practice areas.

The question raised by these movements is whether they reflect client needs or the shifting needs of the attorneys in view of what they perceive to be the new order in IP practice.

There has been a continuous increase in the demand for lower costs, while at the same time there has been an increase in the demand for value-added IP services. Many of the clients searching for new firms or a new arrangement within an existing firm are stressing the need for the selected IP firms to have a firm grasp of their business models and to deliver IP services, especially patent and trademark prosecution, at commodity pricing. 

These client demands are more frequently finding their way into discussions of the firm's licensing support and litigation services, where clients are increasingly demanding defined cost controls.
So, how does the shifting client demand influence or translate into the movement of IP attorneys between and among existing firms with IP practices and newly created IP firms?

Some of this movement may be driven by the often-repeated statement that a particular lawyer moved to gain a larger/smaller platform that is a better fit for the demands of existing clients.  The size of the practice group the lawyer required to meet client needs seems to be determined by the size of the group available at the successor firm; this size is almost always the size that best fits the public relations story accompanying the move. 

My guess is that these moves are being driven more by personal views of the desired practice management than by client demands. If the attorney or group does not have the necessary level of influence within the firm's management group, the move is more often driven by the attorney's need/desire for more control in billing arrangements, or the realization that others with more influence are driving conflict decisions that hamper new client development or cross selling opportunities. I see these movements as being more attributable to the circumstances within a firm than to client demands for change.

Some of the movement may be driven by the more recent trend among some clients to view everything as a commodity that can be competitively priced by market pressures on supply and demand.

If prosecuting firms need a certain volume of work to achieve efficiencies that produce profits, unit pricing can be negotiated against a given volume of active cases. This type of economic model has lead to the creation of low-overhead firms that offer unit pricing without regard to subject matter. In these arrangements, there is often very little attention paid to a particular matter until it has demonstrated value within the IP rights portfolio.

This belated determination of value is a major problem associated with this volume/price model, and it may be a direct result of the model. If the attorney or firm has decided to price services on the basis of volume, there is not likely to be much time for consideration of anything that is not focused on the immediate task. Since the basis of the bargain is price for volume, and volume demands throughput to achieve profits, there is an operational dynamic that works against added value. This may be acceptable to the client, but it seems to be against the client’s best interest.

Because companies are increasingly aware of the importance of securing and protecting IP rights and are increasingly under pressure to control cost, there will be a continuing tension between spending on IP services and the creation of added value in the portfolio as a result of those services.  Companies will continue to search for the right model and IP attorneys and firms will continue to modify their approaches to address their perception of the clients' needs.  Since there is currently no uniform direction of the demand from clients, the currents will continue to shift according to the client's philosophical approach to cost and value. Reaction to those currents will produce continued turbulence.

Anthony S. Volpe is a founding partner of Volpe & Koenig. He can be reached at TVolpe@volpe-koenig.com.

Comments

[Nadrich Personal Injury Law]

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