“If it ain’t broke, don’t fix it,” goes the adage. Intellectual property (IP) lawyers—and law firms more generally—have done extremely well for decades by focusing their innovative yen on the work they’re doing, rather on the way they work or on offering new types of services. Innovation in the actual model of provision has been at the margins.
Some firms are now trying to do things differently—and they’re getting positive results. This is not necessarily by taking business away from more traditional law firm competitors, but by becoming more holistic and finding new ways to support and service clients.
The reasons for this change are complex, but the increasing prominence of alternative legal service providers and the move into the legal market of professional services firms in recent years have certainly increased the pressure on law firms by adding competition across the board.
The Value Chain
Not all IP work is created equal, even if it’s all vital to a given client. Traditionally, IP service providers, whether law firms or technology companies or consultants, have concentrated on specific links in the chain (and perhaps those immediately adjacent as well).
Consultants provide consultancy; law firms provide legal counsel; trademark attorneys advise on filing, application, registration, use, and so on; and IP management companies, often with a large software element, generally focus on tasks in the IP value chain that can be done in large volume and at lower cost, and where technological innovation can increase efficiency.
Various factors impact the industry’s dynamics. As Jeremy Newman, Principal at Rouse Consultancy (United Kingdom), observes, “There is a lot of disruption going on at almost every point.”
Advances in technology, consolidation between companies in parts of the value chain, new competitors stepping outside their traditional niche—all these help create conditions that are ripe for disruption. In the context of a market in which the central truth is one of greater pressure on fees because of cost pressures on in-house IP departments, it becomes almost inevitable.
At Rouse, Mr. Newman says, the response to these conditions has been to try and find a sweet spot between scale and position on the value chain—being large enough to compete in volume terms but also able to do the high-value work at the top end of the chain.
“The opportunity is to build a business that has scale and services all elements of the value chain—growing both horizontally and vertically,” Mr. Newman says. For Rouse, that has meant several significant changes in recent years, not least among them ceasing to be a regulated law firm in the UK in order to focus on consultancy services.
While the global Rouse brand still offers legal advice through its networked firms (which are closely aligned, but independent), especially in Asia, it has added a consultancy function for high-value work, and has invested in technology solutions in order to offer higher-volume, lower-value services, such as portfolio management, at the other end.
The firm operates in three distinct areas: portfolio and enforcement, legal, and consultancy, says Mr. Newman. “We have those three different strands,” he adds, “but when clients want them to be integrated we have the structure and client focus to ensure that they are seamlessly integrated.”
For Mr. Newman, this approach responds to a “real need” in the market, while also enabling the firm to adapt to competitive pressures all across the value chain. Indeed, recent hires into the consultancy business include management consultants, analysts, and technology specialists rather than lawyers—“people who aren’t constrained by a legal background,” as he puts it.
Karin Broman, Head of Team Legal at IPQ (Sweden), agrees that being able to offer a more holistic service is key. Her firm provides commercial consultancy alongside IP and legal advice, offering a “one-stop-shop for clients”.
Ms. Broman notes that “as speed of technology change is moving rapidly and as the challenges our clients are facing are complex—while facing fierce competition on a global scale and from any line of industry—firstly, they don’t have time to shop around, and secondly, they need consultation that offers solutions to their complex needs from the multi-disciplinary perspectives that we offer.”
In addition to multi-disciplinary perspectives, that means providing services on “strategic, tactical and operational levels.” For example, Ms. Broman says, “when we’re talking about a license agreement we may provide consulting on the strategic approach for the company’s licensing activities; and on a tactical level policies may be issued to secure implementation of the strategy: and then on the operational level we provide the licensei agreement.”
She adds: “We are determined to make sure our services meet the intended purpose. An intelligent policy will not get the job fully done. We offer implementation services for our consultancy, because we want to make sure that the intended purpose is fulfilled.”
It’s almost a truism to say that technology is transforming the IP market, and that it’s removing functions that used to be fulfilled by people.
According to Reinhold Nowak, CEO at Dennemeyer Group (Luxembourg), the law firms that do well in the future will be the ones who “focus on their professional work, which means ‘brain work’. They cannot survive by just making payments and managing renewals. This doesn’t have the high impact of the top-notch lawyer.”
Dennemeyer, like some of the other firms mentioned here, has three strands to its work: the IP solutions element, a law firm function and a consultancy business, which Dr. Nowak underlines, operates separately to the other two elements.
“The law firm is not a typical law firm, and not designed to compete with local firms,” he says, focusing instead on handling the horizontal part of the solutions business such as European Patent Validation or Patent Cooperation Treaty filing and trademarks. “We do some drafting ourselves, but we are more interested in helping law firms work better and faster, but with their knowledge and impact.”
On the consultancy side, Dr. Nowak observes that “in the past, IP consulting was more about checking the structure of the IP departments to make structures and processes more efficient and innovative.”
But that has changed. “Today we realize that with pre-defined products like portfolio checks and standardized IP audits, consultancy in the IP area is more about the overall strategic portfolio management and how to maximize the strategic business advantage,” he says. “In the past IP has often been seen as a waste of money, especially by management in Europe, but this has changed. The U.S. started earlier to see IP as a strategic and economic differentiator.”
In many cases across the world, new types of IP firms are developing within existing structures. In Australia, changes to legislation have encouraged some companies to explore new business models. The Intellectual Property Laws Amendment (Raising the Bar) Act 2012, which took effect in 2013, allowed IP firms to be incorporated for the first time in Australia.
Andrew Blattman, Managing Director and CEO of IPH Ltd. (Australia), explains that the change in the law encouraged the creation of IPH Ltd. as a corporate vehicle for, initially, Spruson & Ferguson (Australia). Among multiple drivers behind the change, the “highly fragmented nature” of the patent and trademark market prompted the firm to consider consolidation and expansion, he says.
In a typical partnership structure, however, accessing capital is challenging. “We knew that to consolidate we needed to access capital and grow our footprint further,” Dr. Blattman says.
IPH Ltd. has since made seven acquisitions, while Spruson & Ferguson has opened new offices in Thailand, Indonesia, China, and Hong Kong SAR and has expanded its presence in Australia. IPH Ltd. now also owns AJ Park (New Zealand), Pizzeys (Australia), and service provider Practice Insight (Australia).
This rapid increase in scale has enabled the corporation to grow its footprint quickly while finding efficiencies in back office and technology functions across the portfolio.
Tracey Berger, Director of Trademarks Asia-Pacific at Spruson & Ferguson, underlines that the firms within IPH Ltd. continue to operate separately, and, indeed, in competition with each other. She doesn’t think that the client experience has changed significantly as a result of the structural changes in the firm, but says that “the listing has enabled us to have a closer look at our processes and make efficiencies in them.”
The Elephant in the Room
One aim that many of these firms share is to be able to provide a one-stop-shop for clients when it comes to IP work. That is, to consult on strategy and brand development, provide legal advice and support, to manage their portfolios, and in some cases to provide deep analysis of the marketplace. Ultimately, this requires scale.
That’s where other players come in. One of the more significant developments in recent years has been the entry of the Big 4 professional services firms—Deloitte, PwC, Ernst & Young, and KPMG—into the legal market. If law firms can add consultancy functions, why shouldn’t consultancy firms do the same in reverse?
As Peter Kits, Partner at Deloitte Legal (Netherlands), says, “When you’re not innovating you should be concerned.” With more than 250,000 employees globally, including 2,400 lawyers across the company, Deloitte has made a calculated move into legal services to disrupt the market.
Mr. Kits notes that “IP has and will become more and more a strategic asset for all kinds of businesses,” and that because of its size and reach, Deloitte is able to deliver a “360-degree service” for clients, including consultancy, legal advice, data analytics, and management.
He doesn’t expect the Big 4 to change the IP legal market overnight, but does “see that the need for IP specialists and technology-enabled services in the field of IP is becoming more and more important.”
“If the law firms are not encouraged to innovate because of the scarcity of skilled IP lawyers already, and while we are focusing on the technology-enabled solutions and better service, they will lose business to us,” he suggests. “In the short term they will continue getting their work, but in the longer term we will take some business from them, specifically regarding complex, cross-border projects on IP and tax, licensing structures, and platformification [the building together of multiple services into a single online platform].”
Mr. Kits acknowledges that there is pressure coming from the other side as big law firms look to add consultancy and analytics to their services, but feels that where clients are facing particularly complex problems, the Big 4 are likely to provide a good alternative.
“It’s not that the law firms will lose a lot, but that the extra will be done by the Big 4,” he says.
Of course, many IP firms are doing just fine with their current business model, and Ms. Broman acknowledges that there will “always be room for excellent firms who provide good services in their niche.”
Difference for the sake of it is unlikely to provide much benefit to any firm. However, IP is perhaps more susceptible to change as an industry than most, and as the pace of change continues to increase, firms will need to respond actively—even if that response is to assertively maintain the status quo.
innovation, consultancy, technology, Deloitte, Rouse Consultancy, IPQ, Dennemeyer Group,