Why the IP Law Firm Business Model is Broken And What I Am Doing About It

Business model innovation in IP legal services is only just beginning.

Business model innovation in IP legal services is only just beginning.

As a former IP law firm shareholder and senior corporate lawyer, I know all too well the expense required to start and maintain an IP law practice.  Not only are IP lawyers of all levels of experience paid handsomely, but so are the highly skilled paralegals, docket clerks and administrative professionals traditionally required create the infrastructure needed to handle the myriad of details involved in an IP law practice.  Of course, this expensive infrastructure must be sustaining, so while a lawyer serves today’s clients, her eye must also be on finding the next client because payroll and rent obligations don’t take a holiday when clients do.

This “feed the beast” nature of the IP law practice model was a primary reason that I decided several years ago that I would not again work in the traditional practice of law.  How could I?  The standard legal service framework required me to build and maintain a business model where the product offered is obtaining patents for clients.  However, over the years I discovered that often the client does not need the very product that sustains the IP law firm business model.  What I perceived as an inherent conflict between my business interests and those of my clients made it impossible for me to continue practicing as I had for many years in the traditional model.  Instead, I moved in a different direction in becoming an IP Strategist where, for the last 5 years, I successfully built a business model where I could focus on building and maximizing IP value for my clients independent of any need to build and maintain the expensive “bells and whistles” of a functioning IP law practice.  In other words, I have figured out how to get paid for saying “no you don’t need a patent.”

Certainly, clients appreciate the ability to provide IP advice given independently of any need by me to generate legal fees from patent drafting.  Nonetheless, many clients have expressed disappointment when I cannot provide them with additional patent services beyond that of IP strategy consulting when we do determine that a patent is the right course of action.  Even though I choose my referrals very carefully, when I have to bring lawyers with more traditional legal services models in to service my clients’ patent drafting needs, I have found that the normal pressures of maintaining an IP legal services business appear.  As a result, costs to my client start inching up even though I worked to avoid this at the front end of the engagement.   I strongly believe that the cost of obtaining IP legal services is too darn high, even at law firms that portray themselves as being willing to use “alternative billing” structures.  Put simply, the IP legal services model is broken and tweaking of billing structures and the like can only amount to the proverbial “rearranging deck chairs on the Titanic.”

I am not the only one who realizes that the law services model is broken:  books and newspaper articles have been written about the general structural problems in legal practice and a recent Businessweek article provides a detailed post-mortem examination into the now-bankrupt Howrey IP law firm.  After reading these materials, many will understand why some lawyers who entered IP law for the intellectual challenge and desire to create value for clients have discovered that the brass ring of professional success can often feel more like a noose.  While many highly experienced lawyers have left the profession entirely, others like me are trying to figure out a better way.

My desire to utilize a lower overhead model but still provide a clients with a scope of IP legal services in a motivated me to search for products and services that will allow me to provide value-added IP legal services without also incurring the personnel and infrastructure costs normally associated with building and maintaining an IP law firm.  The good news is that there are a growing number of free or low cost products and services that can streamline IP-related operations.  My go to list includes free downloadable patent searching from Sumobrain.com, a various patent information services from Max-val IP, and outsourced patent administrative services from Black Hills IP.  (I will be discussing in detail each of these services and others and the value they add for my clients in a subsequent post.)

I am sure that by astute selection and use products and services like these, one can provide a broad suite of IP legal services while at the same time reducing the need for highly skilled personnel that have traditionally been required.  Moreover, these products and services are cloud-based, thus eliminating the need for expensive office space and the like.   By rejecting the traditional overhead intensive model in favor of this new model, an experienced IP lawyer like myself can practice patent law at a high level, without the need to also build a patent law business that needs to be continuously fed with patent work.

This new model, which can be termed a “Lean Legal Practice Model,” means that I can charge a fraction of the hourly rate charged by my experienced peers; indeed, my hourly rate today is less than that of most first year IP attorneys at any sized firm.  Even more importantly, I do not need to worry whether I am going to be able to make payroll this week, which allows me to focus primarily on servicing my existing clients, not on generating the next client.

No doubt this new model of IP practice is disruptive in relation to the standard legal services model.  Not all clients will feel comfortable selecting someone like myself who practices with only one other highly experienced IP attorney instead the “marble and mahogany” downtown law firm with which business is most familiar.  So be it–if someone does not immediately get the value added by stripping away those aspects of the legal services model that do not add value for their own business, then they are not a client for us.

Traditional law firms will not worry too much about what my partner and I are doing.  We are small and cannot take much business away from them any more than small furry animals on the floor of the forest did not concern the dinosaurs because they did not eat much food.  But change is undoubtedly brewing: I have recently met quite a few business leaders as well as a number of lawyers who are intrigued by what we are trying to accomplish.  I am entering an exciting time in my professional life, and I look forward to sharing what I find out during this journey.  Whether you are a potential client or a like-minded lawyer, please feel free to reach out to me if you’d like to share your experiences or learn more about our new IP legal services model.

One thought on “Why the IP Law Firm Business Model is Broken And What I Am Doing About It

  1. Dan Whittle

    Thanks, Jackie.

    As a reference point in support of your infrastructure beast feeding perspective, an IP lawyer associate of mine from Seattle told me she left her large firm for similar reasons. The overhead rate for the facilities and support staff amounted to $12K per lawyer per month. I look forward to a changing landscape where telling a client that they didn’t need to invest in a particular patent will be generally recognized for the strategic value it brings in avoiding an investment with inadequate return for their business needs.

Leave a Reply

Your email address will not be published. Required fields are marked *