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As partners at Burns, Doane, Swecker & Mathis gathered over the weekend for a three-day retreat, they were sure to be haunted by the ghosts of the disappeared. The Alexandria, Va.-based firm is facing some of the same troubles as expired intellectual property boutiques like Fish & Neave, Pennie & Edmonds, and Lyon & Lyon. And partners at their meeting were attempting to decide how — or if — they can avoid the same fate. Whatever they decide, the list of troubles facing Burns Doane is a long one. Perhaps foremost is the struggle of competing with general practice firms for big-ticket patent litigation. Also, head count has been halved from its peak of 120 lawyers. Work from Ericsson Inc. — once Burns Doane’s largest client — has dried up or migrated to other firms. The firm shuttered its North Carolina outpost and tried but failed to merge with a rival boutique. Profits per partner have dropped from $600,000 in 2002 to $350,000 in 2004. And now the firm faces the challenge of hanging on to its top rainmakers. As they met at a location a firm spokeswoman called “confidential,” the partners were grappling with at least three possibilities: try to find a large general practice firm willing to acquire the whole group; drop practices and become an even smaller, more-specialized boutique; or, according to four sources with knowledge of the firm, dissolve altogether. “We’ve lost some people,” says managing partner E. Joseph Gess. “Litigation is cyclical. The litigation we were doing before disappeared, and we haven’t replaced cases as quickly as we’d like.” Gess says he’s betting that the future of IP boutiques is still bright, though he acknowledges the firm will have to home in on core areas like pharmaceuticals, biotechnology, and chemicals. “Our interest is to focus on our core strengths,” says Gess, who declined to specify whether certain practice groups would have to be eliminated. “They’re in a very difficult situation,” says a former partner. “They have to do things differently. … I think the litigation group is almost unemployed.” In 2000, prospects for the firm looked much different. Burns Doane had just moved into a gleaming new space in Alexandria’s Old Town, just a few blocks from the U.S. Patent and Trademark Office’s new headquarters. Over the previous decade, the firm had tripled in size, boasting roughly 80 attorneys in Alexandria, 32 in Northern California, as well as an eight-lawyer outpost in North Carolina’s Research Triangle. But problems loomed on all sides. As with Pennie & Edmonds, Fish & Neave, and Lyon & Lyon, Burns Doane was being undercut on low-margin patent prosecutions by micro-boutiques and started to lose ground to larger firms such as Cooley Godward and Howrey Simon Arnold & White, which used their heft to poach the most lucrative IP litigation work. The big firms’ size not only gave them better access to the corporate general counsel who had begun hiring IP lawyers, but also helped them pay top litigators a 20 percent premium over what they could earn at boutiques. For years, Burns Doane had been able to keep young lawyers from leaving by essentially guaranteeing them a spot at the top of the firm. “You were told when you interviewed there that if you do your time and do a good job, you’ll make partner,” says one former associate and patent agent. But that changed as the firm grew larger. In 2000, then-managing partner Ronald Grudziecki called a large group of associates into a meeting. “[He] looked around and told us, ‘Not all of you are going to be partner,’” says the former associate. “Shortly after that, people started running for the doors.” BURNING DOANE THE HOUSE The exodus was accelerated by the declining fortunes of the firm’s biggest client, Swedish telecom giant Ericsson. Once a pioneering mobile phone maker, the company had been eclipsed by Nokia, Motorola Inc., and Samsung. By 2002, it held less than 6 percent of the market for mobile phones and was in the midst of slashing 20,000 jobs. That same year, the telecom company that had registered thousands of patents with Burns Doane, and, at its peak, accounted for more than 10 percent of Burns Doane revenues, pulled its work from the firm. “Ericsson had its own troubles, and as a result, the amount of money they were putting into patents has gone down,” Gess says. That left the firm with a high-billing litigation practice hurt by competition from general practice firms; a relatively profitable group of biotechnology, chemical, and interference patent prosecutors; and a third group of attorneys who performed lower-billing patent prosecution work. Shortly thereafter, the firm hired a non-lawyer, Michael Blanchard, to become its executive director. Former Burns Doane attorneys say Blanchard and then-managing partner R. Danny Huntington instituted a number of changes that, in effect, centralized more power in the executive committee. The duo also changed the firm’s relatively egalitarian, hours-based compensation structure to more greatly reward business-generating partners. That decision increased pay disparity among partners and may have helped retain rainmakers, but it rocked service partners steeped in the firm’s democratic culture. “Only certain contributions were really well-rewarded,” says one former partner. By early 2004, the firm’s shrinking head count was having a withering effect on its bottom line. With expensive offices in Alexandria and Northern California leased near the peak of the technology boom, the firm was now struggling to pay for space that was increasingly vacant, according to sources with knowledge of the firm. In an effort to add bulk, Huntington entered merger discussions with Merchant & Gould, a Minneapolis-based IP firm. That decision was a conscious effort to retain the culture and identity of an IP boutique, and would have given the combined firm depth to compete with larger IP firms like Fish & Richardson. “Both firms came to the conclusion independently that they wanted to remain exclusively IP,” Huntington told Legal Times last May. (Huntington did not respond to repeated interview requests for this article.) But by June 2004, a merger that had appeared imminent was called off. “It was just a marriage that wasn’t going to work,” says D. Randall King, Merchant & Gould’s managing director. “There were cultural differences in the way they approached compensation.” The failure of the talks helped accelerate departures, say those familiar with the firm. Since April 1, the firm’s Alexandria office lost nine of its 65 lawyers; its North Carolina office, opened to support Ericsson’s Research Triangle operations, was shuttered; and James Peterson, a longtime partner in its Northern California office, left for Jones Day. The firm also had become too small to support Executive Director Blanchard and let him go. Since the opening of the firm’s two-attorney San Diego office in January 2004, the firm has not hired any new lateral partners. Many who have left the firm are watching what will happen to Huntington, a top rainmaker and well-regarded patent interference attorney who stepped down as managing partner a month ago. When asked about Huntington’s status with the firm, Gess replied: “As of right now he’s still coming into work. I hope he’s here for the long haul.” The fate of Burns Doane may depend on the result of partner talks this past weekend. In a brief interview on April 7, Gess didn’t address whether the firm would consider being acquired by a general practice firm, as happened to Fish & Neave last year. But legal business observers say it’s far from secret that midsize IP boutiques will struggle to stay independent. “I think it’s a difficult road,” says Avery Ellis, head of the D.C. office of recruiting firm Mestel & Co. “It’s harder and harder for them to differentiate themselves from the capabilities of the general practice firms. … Ultimately, it becomes a war of attrition.”

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