IP law firms: time to wake up

27-09-2018

IP law firms: time to wake up

Volker Spitz

Traditional IP law firms need to wake up to the major changes that service providers are causing in the legal industry, or risk vanishing forever, says CEO of Brandstock, Volker Spitz, in an interview with WIPR.

Unless IP law firms realise that it’s time to “wake up and do something”, a large part of the IP industry as we know it will soon be gone, says Volker Spitz, chief executive officer of Brandstock, an IP service provider.

Spitz says that the way organisations manage their IP has changed “completely” over recent years, and traditional law firms must adapt—or risk becoming redundant.

The main factor behind this transformation is the injection of private equity into the IP market, which investors have increasingly seen as an available target over the past decade, he suggests.

But, over the last three years in particular, the influence of private equity in the IP market has been particularly “massive”, according to Spitz.

Investments have increased from millions of dollars to billions, while at the same time, there is more pressure than ever before to produce fast and large returns for the investor, he explains.

This cash injection has resulted in a “shift from traditional IP law firms to private equity-owned service providers”, explains Spitz.

Now, the IP market is “totally dominated” by these service providers, whereas once upon a time the IP law firms had a stronghold.

“Traditional IP firms are struggling with this development,” says Spitz. “They have a hard time coping with what’s happening.”

Back to basics

To understand why the change is so huge and how firms need to adapt to survive, it’s necessary to go back to the beginning.

Previously, the IP market was dominated by law firms.

Simply put, attorneys came together and focused on a couple of areas, such as patent renewal or trademark filing, Spitz says. Service providers were few and far between. But after the IP market was tapped as an available target about ten years ago, people started to invest, and the landscape is now very different.

Private equity investors have continued to look at more traditional sections of law firm businesses that were initially left alone, such as trademark searches and filings, explains Spitz.

“The only piece left alone now is litigation,” he warns, as everything else in the IP market is up for acquisition.

Alongside the investments are the “young, small startups that are popping up in the IP industry”, Spitz says.

He adds that young companies are entering the IP market with “disruptive solutions and great ideas”, using technology to provide solutions to IP management.

Investors have now expanded their field of activity “tremendously” into nearly all forms of the IP business, Spitz claims, and this cash boost tends to be accompanied by the added benefit of a technological makeover.

As such, private equity-owned service providers often have a modern, cost-effective, and customer-friendly platform to work from.

"Traditional IP firms must adapt, be consolidated into a conglomerate created by private equity firms, or vanish."

Spitz says this is in stark contrast to the “stone age” technology still being used by traditional firms, and they simply have “no means to keep up with this development”.

He thinks that traditional IP firms must adapt, be consolidated into a conglomerate created by private equity firms, or vanish.

In Spitz’s experience, traditional firms and their lawyers have no inclination to change with the times. “They’re just watching and hoping everything will be fine, with no willingness to adapt to the changes,” he says.

Adding value

Spitz identifies “old-school management” and outdated technology as critical problems for IP firms, particularly as competition from service providers continues to rise.

He says that having traditional and “IT-averse” process management is a hindrance for efficiency, service, and client offering—which is another area where modern providers are outdoing their more traditional rivals.

“The requirements have changed when it comes to clients,” Spitz says.

He explains that client expectations are no longer the same as when IP firms had a monopoly of the market, when a lawyer would take instructions from the client, get the work done, and follow up with a bill.

Now, a service provider will look at the aims and portfolio of a client and consider how value can be added. It isn’t just about “taking instructions and getting that task done”, Spitz says.

"Traditional IT systems may allow firms to manage a client’s portfolio, but they won’t produce the analytics and business intelligence that today’s clients expect from their IP managers."

Traditional IT systems may allow firms to manage a client’s portfolio, but they won’t produce the analytics and business intelligence that today’s clients expect from their IP managers, he explains.

Another area in which Spitz thinks traditional firms are falling behind is competitor awareness.

“For IP firms, there’s an assumption that they are the best and they do the best work, so there is no need to collect intelligence on competitor behaviour,” he explains.

But lacking competitor awareness is a sure-fire way for firms to lose clients and also lose touch with the market, particularly amid the rise of private equity-owned service providers.

Despite this, the traditional firms have no urgency to change their practices, and “change without urgency is virtually impossible”, Spitz says.

“Law firms have to understand that service providers are the competition, not a friendly partner. Private equity companies have invested billions into the IP market, and they are determined to make billions out of it.”

Client focus

Despite these hurdles, Spitz doesn’t believe that traditional IP firms should simply give up and accept being taken over by service providers. He says there is a way out of this dilemma, but willingness to change and adapt is a must.

“The focus has to be on clients, and at the same time on competition,” Spitz explains. “Firms have to learn what clients really want, and what the competition is offering, and why.”

On a practical level, he says that this means firms must watch, listen, and learn in order to collect this intelligence. The most important thing that traditional firms can do to help themselves is to become innovative.

“The firms have to learn to bring innovation to what they do,” he says, and this will involve taking a page out of the service providers’ book to invite outsiders—who know how to disrupt the status quo—into the firm.

“By innovating and embracing IT, technology, and modern processes, IP firms can become much more effective,” Spitz suggests. He adds that, to be successful in the current IP market, firms must become “a super highly efficient machine”.

Using an “off-the-shelf” IP management system is no longer good enough, and in Spitz’s view, an internal technological revolution can be achieved only by hiring external specialists.

He also advises firms to have a dedicated budget put aside for the investigation and acquisition of new technology, to allow for the exploration of emerging technologies such as blockchain.

In response to the private equity-backed competition, Spitz says that IP firms could look to combine forces with each other. Few firms have the resources to finance the technological overhaul of their IP services alone, he explains, but partnering up is a viable option for firms to survive.

Further investments are needed when it comes to marketing and client management.

Spitz stresses that, in an increasingly global market, competing against private equity firms locally and nationally is a major challenge for traditional IP firms.

“Most law firms fall behind on the marketing side,” Spitz says, but this is not an option for those wishing to remain visible and attractive in an IP market dominated by service providers. He advises firms to push their marketing “heavily” to ensure their spot in the market is secured.

A bigger role

Finally, Spitz emphasises the importance of client management and the new, broader role that firms must encompass when managing clients’ IP.

“It’s all about taking away the pain a company associates with renewals,” he says. “Modern firms are all about adding value and finding out what the client really needs.”

According to Spitz, clients want full transparency on costs as well as progress, and they “demand” analytics and business intelligence as part of the service.

Whereas an old-school firm would take on an IP portfolio and conduct renewals as required, Spitz explains that a proficient service provider offers clients a modern platform on which they can access all the information they need to make decisions based on revenue, use, competitor mapping, and licences.

“That can all be done very fast and very easily, making life easier for clients,” says Spitz.

He adds that law firms may manage, renew, and search for IP, but what they don’t do is offer clients business intelligence: statistics, audits, and comparisons.

“With modern service providers, everything is 100% transparent on an easily accessible platform,” Spitz says, and IP firms need to acquire the tools to match this offering to stay relevant in the market.

An additional element of client management centres on cost.

“Law firms are used to high fees and high profit margins, but service providers owned by private equity are offering nearly all the services offered by law firms for a fraction of what law firms are charging,” he says.

He adds that, as well as being cheaper, modern service providers are “much faster and more reliable”.

Although Spitz believes it is possible to save the old-school firms, he doesn’t think it’s probable that they will make the changes necessary to do so.

“They will sleep through this development and run into severe trouble within the next five years,” he concludes.

Volker Spitz is founder and owner of the Brandstock Group. He specialises in German, European and international trademark, design, patent, competition and contractual law. The Brandstock Group, comprising five companies, provides services in legal, IP, valuation and domains, and has more than 150 employees in six countries. He can be contacted at: welcome@brandstock.com

Volker Spitz, interview, Brandstock, IP service providers, IP portfolio management, innovation, legacy IT, clients, technology, value added

WIPR