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Over the past decade several litigation-oriented, IP specialty firms like Lyon & Lyon have merged or gone out of business. Will the remaining top-flight IP litigation boutiques like Fish & Richardson of Boston; Fish & Neave, Pennie & Edmonds, and Kenyon & Kenyon, all of New York; and Finnegan, Henderson, Farabow, Garrett & Dunner of Washington, D.C., be able to survive? Opinions vary. “I think that the landscape a few years down the road will be a dozen very large IP specialty firms across the country and a lot of very small ones,” says Don Martens of Los Angeles’ 160-lawyer IP boutique Knobbe Martens Olson & Bear. “With a few exceptions, it’s the midsize ones that are going to have trouble surviving. They tend to get swallowed up by the larger general firms.” Others maintain that the days are numbered for all IP litigation firms. “The IP litigation boutique is not viable,” one patent lawyer says flatly. “They’re all seeing the handwriting on the wall. … Some of the IP firms that are still touting themselves as being so successful are secretly talking merger.” From a client perspective, this lawyer says, “it’s basically a C.Y.A. situation — cover your ass.” If you’re the general counsel and something goes wrong in litigation, there are no questions asked if you used a big, general practice firm. If you didn’t, “you get second-guessed.” Fifteen years ago, this lawyer says, there would have been no questions raised over hiring Lyon & Lyon or Arnold, White & Durkee (now part of Howrey Simon Arnold & White). Today, this lawyer says, top-tier clients consider IP boutiques “off-brand.” Lawyers at surviving boutiques aren’t ready to concede extinction. “It’s a much more competitive world,” says Fish & Neave managing partner Jesse Jenner. Like Lyon & Lyon when it was alive, Fish & Neave derives 70 percent to 80 percent of revenue from litigation. The firm “has been able to carry on” thanks to a loyal client base, Jenner says. “Knock on wood, we still find we get a substantial percentage of call-backs.” Still, Fish & Neave has made changes to respond to heightened competition. This year, the firm brought in its first-ever lateral partner, former federal judge Roderick McKelvie, who opened a Washington, D.C., office. The firm has considered other options, such as making nonequity partners, to help keep profits high. “We like to think we’re flexible enough to make changes,” Jenner says. Fish & Neave has entertained marriage proposals for at least 20 years, Jenner says. “Nothing has ever reached a point yet where the partnership was persuaded that it wanted to go down that road,” Jenner says. But if the right merger opportunity arose, the firm would be foolish not to consider it, he says, adding, “We’re doing pretty well, but that doesn’t guarantee us that we’ll be doing as well five or ten years from now.” The IP firms that are likely to survive won’t look much like Fish & Neave or Lyon & Lyon. A few different models seem likely to dominate the scene. FOCUS ON PROSECUTION IP boutiques of up to 100 lawyers, or even more, can prosper by concentrating on patent and trademark prosecution in addition to litigation. Few general practice firms compete aggressively for this kind of work, and it can also lead to litigation. Prosecution smoothes out the peaks and troughs in a litigation practice. Plus, the overhead is lower than for litigation. Arlington, Va.’s Oblon Spivak McClelland Maier & Neustadt typically prosecutes more patents than any other U.S. firm. The 85-lawyer firm brings in half of its revenue from prosecution, says managing partner Marvin Spivak. It also has an active litigation practice — arguing the Festocase before the U.S. Supreme Court, for example — but filing applications is at the core of the firm’s practice. Once a boutique has invested in the infrastructure needed to prosecute patents worldwide, it can “push a lot of paper,” Spivak says. That is, a firm can handle a client’s entire portfolio at a reasonable cost. It can also minimize high malpractice risks in an area where the consequences of missing a deadline are enormous. THINK SMALLER Some firms have established a referral network with smaller, general practice firms, in which both firms benefit by keeping the client out of the hands of the big firms. The arrangements with referring firms can include acting as a sort of subcontractor, where the IP boutique bills the general firm, which bills the client. Such boutiques include smaller shops in big markets, such as Los Angeles’ 11-lawyer Cislo & Thomas, and larger firms in less competitive markets, such as Cleveland’s 40-lawyer Fay, Sharpe, Fagan, Minnich & McKee. This type of firm generally caters to small and midsize clients, but can win routine work from big clients by offering much cheaper rates (topping out at $200 to $300 an hour) than IP lawyers in big general practice firms. While such firms do handle litigation, it’s generally not bet-the-company matters for the Fortune500. “You have to know what your market is,” says Dan Cislo, son of the Cislo & Thomas name partner. “Our niche is more robust, because I don’t think that the larger firms could operate in our niche.” BE ELITE Nearly half of the revenue of San Francisco’s six-lawyer Stallman & Pollack comes from writing opinion letters, a small but potentially profitable niche. Large firms often don’t want to write these letters in order to avoid conflicts if litigation arises over the patent in question. Michael Stallman recognized this opportunity in 2001 after his former firm, Limbach & Limbach, closed. Stallman charges premium rates and is able to get A-list referrals from large firms, which trust that he won’t steal their clients. Prosecution-related client counseling and litigation support account for the rest of the firm’s business, Stallman says. Jennifer Thelen is a free-lance writer in San Francisco. E-mail: [email protected].

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