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In early September as the Boston Red Sox and the New York Yankees were battling for post-season berths, two venerable law firms — one from Boston, the other from New York — were considering coming together. New York IP boutique Fish & Neave and Boston’s Ropes & Gray are in “extremely preliminary merger talks,” says Fish spokesperson James Haggerty. Ropes has been courting Fish for years, but this time around Fish may be more receptive. Since 2003, 12 partners have left the 160-lawyer, 40-partner firm, to join expanding IP practices at Latham & Watkins, Kirkland & Ellis, Quinn Emanuel Urquhart Oliver & Hedges, King & Spalding, and Wilson Sonsini Goodrich & Rosati. At least 20 midlevel associates have departed, some following partners, others seduced by recruiters. Several IP boutiques have closed in recent years. New York’s Pennie & Edmonds, Los Angeles’ Lyon & Lyon, and San Jose’s Skjerven Morrill are among the more well-known. Over the past year, there has been a significant increase in the number of Fish lawyers willing to explore the market, says Anna Tsirulik, managing director of Major Hagen and Africa Legal Search Consultants’ New York office. Is the 126-year-old firm famous for representing Thomas Edison going the way of the phonograph? In an interview prior to the news of the merger talks becoming public, managing partner Jesse Jenner says no. “We are recognized in most quarters as being the leading IP firm, if not on everybody’s list of the top three or five,” he says, noting that he litigated one of the firm’s biggest court wins this year, taking down the legendary $1.5 billion Lemelson licensing empire. Jenner couldn’t be reached for comment on the Ropes & Gray talks. In earlier interviews, he did say that the firm would consider a merger. “We would be crazy not to consider anything that would enhance our practice,” he said. Ropes & Gray managing partner John Montgomery refused to comment on the talks, but said that the firms had worked together in the past. “We have the greatest respect for them as a firm,” he says. The wave of departures at Fish & Neave began when senior partner John Nathan left for Paul, Weiss, Rifkind, Wharton and Garrison in June 2003. Like most other lawyers at Fish, Nathan started, and expected to end, his career there. In his 32-year tenure, he built a significant practice with prominent clients like The Gillette Co. and Home Box Office Inc. As Nathan saw more and more patent litigation going to general practice firms, he realized that to stay competitive he needed the support of a powerhouse litigation firm. Taken alone, Nathan’s departure didn’t cause much concern at Fish & Neave. But when Pennie & Edmonds combusted six months later, many partners started getting antsy, wondering how to best position themselves if Fish met a similar end. According to Latham & Watkins partner Steven Cherny, who left Fish in August after 12 years with the firm, the end came fast at Pennie, leaving many lawyers there with few options. “I’m more risk-adverse,” says Cherny. “I wanted to have six months in terms of deciding where I was going as opposed to six weeks.” After Pennie’s collapse, associates began to jump ship. Cherny says that this “run-on-the-bank mentality” quickly became a self-fulfilling prophecy. “If people start leaving,” he says, “it doesn’t make a difference what’s true, it just starts feeding on itself.” Terrance Kearney, who helped open Fish’s Palo Alto, Calif., office in 1992 and left for Wilson Sonsini in 2004, places some of the blame on recruiters. When he worked at Fish, headhunters told him that the Palo Alto office was closing, a story he knew was patently false. “Recruiters contributed to general background noise and created a corrosive effect,” he says. “Partners can access and digest the merits of these things, but associates can’t do that as well.” Headhunters and recruiters are hardly a new phenomenon. Jenner says that he’s been getting offers for the past 20 years. Jenner thinks that his firm’s efforts to stay competitive are what drove his partners away. The firm doesn’t have a history of hiring laterals — it brought on its first in 2002, when former Delaware district judge Roderick McKelvie opened Fish’s Washington, D.C., office. Through the process of hiring McKelvie, it became clear that the firm’s unusual accounting model was a recruitment liability. Fish’s mixed cash flow/accrual accounting system charged expenses immediately and paid out income when it was received, months later. New hires would not get paid for nine months and, to cover expenses, would have to take a loan from the firm. (The same held true for associates who were promoted to partner.) The firm decided to change, but it took a year. The year lag motivated partners who were thinking about leaving. Because of the old accounting system, departing partners would get paid for ninth months after they left Fish. “People who had been thinking about making a change had an incentive to make the move,” says Jenner. The accounting modifications came with a gradual switch from a lockstep to a merit-based partnership system. Jenner says that the compensation committee now makes salary decisions based almost entirely on performance-based factors. “A number of the people who left,” says Jenner, “felt rightly or wrongly that they would do better compensation-wise by making a fresh start somewhere else.” According to Jenner, the departing partners’ clients only brought in 1 percent of the firm’s total revenue in 2003. According to The Am Law 200, Fish grossed $124.5 million last year. If the Ropes talks founder, Fish & Neave has other options. Jenner says the firm plans to start using aggressive business tactics employed by bigger firms to seduce lateral partners. More significantly, Jenner says that Fish is open to expanding into different practice areas like corporate or general litigation and geographic locations.

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