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Intellectual property boutique Pennie & Edmonds will ring in the new year by closing its doors and firing some of its lawyers and staff. Ahead of a likely announcement of a deal for many — but not all — Pennie & Edmonds lawyers to join the New York office of Jones Day, Pennie & Edmonds’ management informed associates and staff members Monday that the 190-lawyer firm will cease practicing law and wind up affairs by Dec. 31. Pennie & Edmonds, founded in 1883, will soon become one of the largest and most prominent New York law firms to have closed its doors outside of a full-fledged merger with another firm. “While this was an extremely difficult decision for the partners of this Firm to make, it is an even more difficult announcement to make to you,” Ed Henry, Pennie & Edmonds’ executive director wrote in a memo. “We especially regret that the timing coincides with the holiday season.” The memo stated that the firm was in discussions with Jones Day and that offers to join that firm’s New York office would likely be extended shortly to many Pennie & Edmonds employees. But the memo was also clear that a still-unknown number of employees would not be receiving offers to join Jones Day. “If you do not receive an offer from Jones Day,” the memo went on, “we regret to inform you that your employment with Pennie & Edmonds will cease effective Dec. 31, 2003.” Among those not receiving offers to join Jones Day will be members of the firm’s accounting department, though the memo stated that several responsible for billing and collections will be retained for a period of months. Henry asked for employees’ understanding and stated that Pennie & Edmonds had made “significant efforts” but had been unable to reach an agreement with another law firm that would have preserved its practice in its present form and with all employees. Affected employees will receive additional information on benefits and continuing medical coverage in the weeks to come. The memo did not discuss whether severance would be paid to any employees. John J. Normile, the managing partner of Pennie & Edmonds, said the dour notice, required by the federal Worker Adjustment and Retraining Act, should not overshadow the positive nature of the imminent deal with Jones Day, which has more than 2,000 lawyers worldwide. “I am confident it’s going to be a tremendous transaction,” he said. “We’ve progressed enormously on what is likely to be the most important combination ever between law firms in the area of intellectual property law.” Normile declined to discuss the outstanding issues in the talks with Jones Day. He said he was in continuing talks with Dennis W. LaBarre, the partner-in-charge of Jones Day’s New York office, and a final deal would probably be concluded in a matter of days. A source at Pennie & Edmonds said most of the administrative staff, including employees in the clerical, financial, recruiting and marketing departments, would probably be let go. A majority of the lawyers could receive offers to join Jones Day, the source said, but there was concern that many of the offers might be for short-term stints of a year or less. Some lawyers, the source continued, will most likely join other firms, and there has also been talk of some attorneys banding together to form a new IP boutique. RECENT ACQUISITION The distribution of the memo Monday followed the acquisition last week of Pennie & Edmonds’ Palo Alto, Calif., office by Philadelphia-based Morgan, Lewis & Bockius. Robert Gaybrick, the head of the IP practice at Morgan Lewis, said Morgan Lewis had made its move because either merger between Pennie & Edmonds and Jones Day or the dissolution of the former was imminent. A number of sources familiar with the situation said Pennie & Edmonds partners had been motivated to look for a merger by their hesitancy about personally guaranteeing a renewed lease on the firm’s office space at 1155 Avenue of the Americas. The partners, several sources said, were worried about the long-term viability of standalone IP boutiques as large, general practice firms increasingly hired away the boutiques’ top rainmakers, most of whom specialize in patent litigation, rather than patent prosecution. A Pennie & Edmonds source said Normile, a litigator, and litigation chair Brian M. Poissant have been driving the firm to do a deal with Jones Day, which is also known for its strong litigation focus. A number of sources said the departure of Pennie & Edmonds’ top litigators would have crippled the firm, which had profits per partner of $835,000 in 2002, according to the most recent AmLaw 100 survey in The American Lawyer. Though litigation is highly profitable for firms, patent prosecution, or procurement, is less attractive to large, general practice firms because it is less profitable and requires a higher degree of specialization. It also carries greater risk of liability. Former Pennie & Edmonds clients G. D. Searle & Co., Pfizer Inc., and the University of Rochester all sued the firm in state court in 2000 for breach of contract and breach of fiduciary duty. They alleged that Pennie & Edmonds was conflicted when it prosecuted a patent for the university that became the basis for patent infringement suits against the pharmaceutical companies, which were also Pennie clients at the time. The patent infringement action is pending in the U.S. District Court for the Western District of New York. Manhattan Supreme Court Justice Charles Ramos will hear arguments on a summary judgment motion by Pfizer on Tuesday. Pfizer’s lawyer, Richard Seltzer of Kaye Scholer, said he was concerned about the implications of a breakup of Pennie & Edmonds on his client’s ability to recover on its claim. He said he planned to ask Justice Ramos to expedite his decision on the summary judgment motion. Pennie & Edmonds became the leading symbol of the trend of general practice firms raiding IP boutiques when Jonathan Marshall, the head of the firm’s litigation department and, along with the late S. Leslie Misrock, one of its best-known figures, left Pennie & Edmonds to join Weil, Gotshal & Manges in February 2002. Marshall said Wednesday he was deeply saddened by the fate of the firm where he spent more than three decades. “These places are more than just places of business,” he said. “They’re your home.” Marshall said he had recently spoken to Misrock’s widow and she was “devastated” by the firm’s closing. But Marshall said Pennie & Edmonds’ decision was not surprising in light of market forces. “It’s a combination of two things,” he said. “It’s the fact that the standalone patent boutique had a limited lifespan, and it was the fact the general practice firms have gotten their act together.” Marshall said he expected most of the major IP boutiques would eventually be swallowed up by larger firms. “The clock is ticking,” he said. New York still counts a number of IP boutiques, including Kenyon & Kenyon, Fish & Neave, Darby & Darby, and Fitzpatrick, Cella, Harper & Scinto. Robert Tobin, the managing partner of Kenyon & Kenyon, said he thought Pennie & Edmonds’ fate was due mostly to factors unique to that firm. “I don’t know why it happened,” he said. “It’s like you’re in race and everybody else is racing, then someone falls.” Tobin also rejected the idea that general practice firms are slowly taking over IP firms, and said it seemed to him general practice firms are racked by even greater instability than boutiques. “Every time I read about [general practice] firms, I read about this group going here, this group going there,” he said. “We’re like an island. We’re doing what we’re doing and we’re doing great.”

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