A few weeks ago, we hosted a webinar on the topic of portals and their effect on the IP industry. In the program, legal consultant Duncan Hart presented his views on the commoditization of the IP industry, specifically how portals, such as inovia and CPA Global, are changing (for better or for worse) the traditional law firm ecosystem. If you haven’t already, I encourage you to take an hour to watch the program.
Duncan drew parallels to other industries that have been both threatened and revolutionized by “creative disruptors.” iTunes changed the music industry, Amazon changed books, and newspaper advertising revenue has taken a nosedive as a result of technological innovations like the tablet.
This makes portals seem like they are foes, but with cost pressure mounting from clients, they may prove to be useful tools in patent attorneys’ arsenals.
The client squeeze
Attorneys are facing increasing pressure from their clients to reduce their fees, increase their value-add, or agree to alternative fee arrangements. Corporate Counsel’s 2012 Law Department Metrics Benchmarking Survey found that 24 percent of corporate legal departments surveyed trimmed their budget in the previous year and as a result, 59 percent predicted that they’ll do more business in the future with firms using alternative fee arrangements.
How are firms responding? Slowly, and it seems fees are actually increasing! In their 2012 Law Firm Billing Survey, The National Law Journal found that the median hourly billing rate for US partners was $517, a 4.5 increase from the previous year. However, according to law firm consultants, the higher rate is merely an “asking price or suggestion,” from which larger clients can negotiate down. And are firms getting more creative with their fee arrangements in order to placate clients? No. A July 2012 report released by ALM Legal Intelligence found that only 6 percent of law firms use alternative fee arrangements.
Corporate clients are likely to continue to push for what they want. Chief Legal Officers surveyed in the Altman Weil 2012 Chief Legal Officer Survey listed their top cost-cutting measures taken in 2012 as: negotiating price reductions from outside counsel (71% of respondents), shifting work from law firms to in-house staff (47%) and shifting law firm work to lower priced firms (41%). 25% surveyed outsourced some work to non-law firm providers to save money.
This brings us back to the topic of IP portals. In the webinar, Duncan urged that attorneys can no longer have a “head in the sand” approach – and we agree. With clients demanding lower fees and shopping around for lower-cost firms and outsource providers, firms’ profit margins are being threatened. To prevent a newspaper industry-like nosedive, firms need to look outside of just reducing their fees.
In the case of a foreign filing transaction (e.g. national phase entry filing) of, say, $20,000, the vast majority of the costs involved are the foreign attorneys’ fees, government fees or translation fees. The fees of the local attorney, who is coordinating the work and directing the client’s strategy, is a relatively small amount of the total. When the client balks at the $20,000 and asks for a discount, how can the attorney respond? Trying to negotiate with the foreign agents for a price reduction may upset that relationship. The alternative is to reduce his own fee to placate the client.
IP portals, which for some time have been viewed by patent attorneys as competition, can alleviate this pressure and help attorneys not only maintain but increase their profit margins. In fact, nearly half of our clients are attorneys who have decided to outsource their foreign filing work to us.
How is it possible?
Speaking specifically about the inovia.com portal, an attorney can make selective use of inovia’s foreign agents (in the countries from which they don’t receive reciprocal business) at a lower price from their traditional agents. By passing those savings on to the client, they keep the client happy without reducing their own fees.
Because the inovia.com platform allows an attorney to instruct a foreign filing in one tenth of the usual time, the attorney’s profit margins increase because they can earn the same fee for coordinating the filing using one tenth of the resources.
In just a few minutes, attorneys can place one online instruction for filing into multiple countries. We provide upfront cost estimates, consolidated and itemized invoices, and also prepare all of the forms required for each case. We’ve heard from both our corporate and attorney clients that inovia.com can save them up to 3 hours of administrative work per case. Think of what those 3 hours could mean for your margins.
We understand that change isn’t easy, but now may be the time for your firm to consider using a portal for foreign filing (and other administrative tasks). We’ve grown significantly since we were founded in 2002 and now handle more PCT national stage entries than any US law firm* — and that is mostly due to the fact that so many patent firms are making use of inovia’s world-beating foreign filing technology to bring greater efficiencies and profits to their firms.
Might now be the right time for your firm to consider a change? We’d like to hear your opinions and feedback, so please feel free to submit a comment below.