How Law Firms Can Leverage IP Portals to Prepare for the Future

12
Jan
2014

Jeff Shieh

Technology has disrupted many traditional service businesses.  Online travel sites have caused the brick-and-mortar travel agency industry to decline, and Amazon has no doubt reduced the number of bookstores in existence.  

The Intellectual Property (IP) industry, while historically slow to change, is now seeing a sharp rise in specialist IP service companies who focus on particular parts of the patent process. Many of these companies fall into the category of “IP portals,” offering cloud-based technology and streamlined backend systems to lower clients' costs, while increasing transparency and efficiency. 

The outsourcing of patent annuities payments has been commonplace for several decades now, but other areas ripe for technological enhancements and a new way of thinking are emerging.  

Foreign patent filing is one example.  The international patenting steps of PCT national stage entry and European validation are highly administrative, yet can be very expensive, especially if broad patent protection is sought.  Traditionally, applicants have engaged their local counsel to handle these parts of the process (unless they have an in-house IP department), but because foreign filing requires no substantive work, it can often be more cost-effective to engage a company that specializes in foreign patent filing.  

Factors driving IP portals

There are several factors encouraging companies around the globe to turn to IP portals and service providers, in order to supplement their in-house patenting capabilities.  These include:

• Economic downturn - Many companies responded to the global recession by carefully examining their IP budgets in order to make cuts. For some, this meant filing in fewer countries or abandoning more patents, while others turned to IP specialist firms in order to maximize their patent protection under limited budgets.
• Applicants are taking more control of their foreign filing - inovia conducts an annual survey of U.S. patent owners to gauge the impact of the economy on their IP strategy and foreign filing plans, and each year, a growing number of companies report that they plan to save on foreign patenting costs by migrating their work from traditional attorneys to non-law firm providers. 
• Historical lack of transparency - A key selling point of IP portals is transparency; many offer upfront quoting using fixed pricing schemes, so there are no surprises when the bill arrives.  This is a significant departure from the traditional law firm hourly billing model, where an applicant may not know what a particular stage in the patenting process will cost until they receive the bill.

How should law firms respond?

On the surface, platforms that enable companies to streamline various aspects of the patenting process may seem competitive to patent firms.  However, the reality is that some tasks traditionally handled by firms have become less profitable, and firms may be able to leverage IP portals in order to maintain or even increase their profits.

According to the 2013 Law Department Metrics Benchmarking Survey, 20 percent of corporate law departments surveyed implemented budget cuts in 2013.  While this represents a smaller proportion of respondents compared to previous years, cost cutting pressure still remains.  Companies are increasingly turning to IP portals directly, in addition to pressuring outside counsel for lower rates and alternate fee arrangements; so without some cooperation with IP portals, firms risk losing certain revenue areas entirely.

In the case of PCT national stage entry, for example, if an attorney presents a $20,000 bill to his client, the majority of that amount will be the government fees, the translation fees, and the service fees of the foreign associates.  The fee that the local counsel adds for coordinating the work is a relatively small percentage.  If his client asks for a discount, the government fees are merely pass through costs, and it will be very difficult to go to all the foreign associates and negotiate a price cut.  Instead, the attorney may be forced to cut his own fee, reducing his overall margin on a very large transaction.

In order to maintain that profit margin on the foreign filing work, the attorney can work with a foreign filing service provider.  In the case of inovia, the company has negotiated low, fixed rates with its foreign associates, so it can pass those savings along to the patent attorney user.  The patent attorney can then add his usual coordination fee for the work, while passing an overall lower service fee on to his client. 

IP portals offer other benefits that patent firms might find attractive.  A request from a client to file into an obscure destination (at the last minute, no less) can catch them off-guard.  Many IP portals, such as inovia, have a fully vetted agent network and can handle last-minute instructions.  IP portals that also provide accurate, upfront cost estimates for work allow attorneys to gather the appropriate funds from their clients before the work is completed, reducing the need for the patent attorney firm to act as a bank for their clients.

The IP landscape is changing and law firms must look for ways to stay competitive.  Whether clients are demanding lower fees or there is a need to increase internal efficiencies, now is the time for firms to consider aligning with an IP portal and be part of a global shift to a more efficient and cost-effective approach to the international patenting process.