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When the costs of handling international patent and trademark filings started rising at E. I. du Pont de Nemours Co. four years ago, the legal management team overhauled its traditional system. The results of the restructuring have exceeded expectations — significantly lowering costs and improving relationships with outside firms. In 1997, DuPont had more than 60 in-house patent attorneys, agents and trademark paralegals filing and prosecuting patent applications and trademark registrations. Like many corporations, we handled all domestic filings and prosecutions in-house. Outside the United States, we used local IP firms. Throughout the 1990s, patent and trademark costs were escalating. Filing fees and attorney costs were going up. We were able to reverse this trend for several years through concerted cost control initiatives. However, in 1997 costs started rising again. Concurrently, our in-house staff’s workloads were steadily increasing, leading to greater reliance on the international firms for drafting claims in other countries. This increased billable hours. We had less time to manage and review the work of the firms, leading to significant quality issues. Clearly, something had to change. We began the overhaul with a study that determined the critical factors contributing to the cost and quality issues. From this we learned that many of our problems were related to the large number of firms we were using outside the United States — 123 for patent work and 168 for trademarks. In some cases, a firm handled both patent and trademark work. However, we managed these areas separately so a firm would be dealt with as two separate entities, with different fee arrangements, standing instructions, and evaluations. In effect, we were trying to manage nearly 300 firms outside the U.S. How did this happen? At DuPont we subscribed to the common wisdom that it’s important to retain more than one firm in a country in case a conflict of interest arose. We also believed that competition between firms in the same country worked to our advantage in terms of fees and service. However, spreading patent and trademark work among a large number of firms limited rather than strengthened our bargaining power. Firms receiving a relatively small amount of work, even from a perceived “prestigious” client, were not inclined to offer discounts or give close management attention to the work. The study also indicated that we needed to develop closer working relationships with all firms, not just the key ones, to ensure a good understanding of our business and IP strategies. We learned that the firms had little incentive to cooperate with one other on our behalf by sharing information and collaborating. Dealing with nearly 300 firms made it difficult for the DuPont clerical staff to establish efficient internal procedures. Our bill paying practices were inconsistent and jeopardizing relationships. We also determined that conflicts of interest fears were unfounded; all conflict issues in memory had been satisfactorily resolved without switching firms. The first step in gaining management control over the international work was to consolidate our IP practice into a few firms worldwide. We conducted a similar “convergence” program at DuPont during the 1990s, shrinking the size of our roster of U.S. firms. We hoped that we could conduct a similar exercise on our international IP work. Our goals were to cut costs, improve IP practice efficiencies, and increase work quality. We designed the following model: � We would administer patent and trademark work as one to provide greater bargaining power and more effective management control over the entire IP effort. � We would try to establish partnership-like relationships with the selected firms, requiring them to collaborate with us to achieve DuPont’s business goals. � We decided to hire just one firm in a country, making this an all-or-nothing proposition for the competing firms. When possible, we would retain a single firm to represent DuPont in a region of multiple countries. � We would select firms based on capability, reputation, quality, and costs. We proceeded on a country-by-country basis. We invited our firms, and others recognized as good candidates for the convergence program, to submit detailed proposals. We used these proposals as a basis for further discussions and negotiations. For countries of major importance to DuPont, a convergence team member visited the competing firms to assess staffing, competency, infrastructure and client orientation. Team members also examined the firm’s commitment to meeting DuPont’s expectations and willingness to negotiate a reasonable fee structure. The process took a year. It was difficult and personally painful when we selected an outside firm over one that we had used for a long time. We reduced the number of firms from nearly 300 to 48 — an 85 percent reduction. Of those, 28 have ultimately gone on to handle more than 95 percent of our international patent and trademark work. All the firms agreed to discount their fees in return for greater volume, faster payments, and referrals and recommendations from DuPont and others in the convergence program network. Reducing firm numbers was just the beginning. The next step was to build on the good relationships with firms we already had and to develop mutual trust and understandings with the others. Because we were focusing our attention on fewer firms, establishing strong personal working relationships with the others came easily and provided the basis for developing productive business partnerships Firms felt a greater commitment to DuPont when they were entrusted with our entire IP business in their country or region. In many, the senior leadership on their own initiative undertook a study of DuPont’s business and demonstrated an eagerness to adapt their practices to meet our needs. We were gratified by the tremendous enthusiasm and commitment displayed by the selected firms. Our work now received much needed management attention and closer professional focus. Further strengthening the business partnership, we brought the selected firms together to give them an overview of DuPont’s business, the international IP operations, and preferred practices for handling IP matters. The meeting gave the firms an opportunity to get to know others in the DuPont network and to discuss ideas on improving ways of working together to handle our work. At the unanimous request of the firms, we agreed to hold biannual meetings to share business practices and best practices. We also periodically visit key firms to communicate and evaluate their capabilities and infrastructure. Firm managing directors now monitor costs and quality closely. With fewer firms, DuPont managers are also able to better monitor these concerns. The division of labor and responsibilities between the firms and in-house attorneys is more clearly defined. Within DuPont, we have been able to simplify and speed procedures, like bill payments. It is safe to say that the restructuring has exceeded our expectations. We are saving money and creating better patents. John E. Dull, former chief intellectual property counsel for DuPont, is an intellectual asset management consultant with Deloitte & Touche. David J. Gould is corporate trademark counsel and international IP firm account manager for DuPont.

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