Intellectual Property

Rate Disruption In The IP World?

The days of IP litigation commanding premium rates may be behind us.

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Intellectual property litigation has always been safe.

Even as other types of litigation have ebbed and flowed, helping or hurting PPP depending on the waves, IP litigation has been steady.  It’s high stakes; it can’t be ignored; it’s massive; and billing rates are extraordinarily high.

But now, I hear, there may be turbulence in the waters. 

Two things are disrupting the IP wave. 

First, there is increased use of post-grant proceedings, principally inter partes review, which take place in the Patent Office, rather than in court.  The courts think this is wonderful — stay the case, let post-grant proceedings go forward, and perhaps never get the case back.  From a trial judge’s perspective, what could be better than that?

But for high-stakes litigators, this is bad news.  First, this reduces the number of patent disputes that become full-fledged litigation.  Second, and related, the type of lawyering skills needed for post-grant proceedings are far different from the type of skills needed to present an IP case to a lay jury.  Somewhat less experienced lawyers can be trusted with post-grant proceedings, and surely high-priced litigators who flaunt their experience with IP trials are unnecessary for post-grant disputes (which don’t involve a jury).  Thus, fewer IP trials means less demand for IP trial lawyers, which means the waves are not cresting quite as high in the IP field as they once did. 

Second, big corporations are increasingly flexing their muscles by using their buying power to squeeze firms on rates.  Repeat players in the gazillion-dollar IP dispute space — high tech companies, pharmaceutical companies, and the like — have begun to insist on being charged lower rates by their outside counsel.  I put my ear to the ground for you, dear reader, and raise that filthy ear to report that corporations are demanding discounts of 20 (and even 25) percent from outside firms handling IP cases.  Not all of those discounts start from the first dollar — some kick in only after a significant amount of money has been spent — and not every client has the clout to extract this type of concession from its firm.  But discounting has become commonplace among the big players. 

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We’ve seen this film before: Big pharmaceutical companies started demanding price concessions from outside firms in mass torts back in the early 2000s, and much of the pretrial work in mass torts has now become commoditized.  Clients will pay for experienced trial counsel, but not for experienced discovery jocks.  It’s entirely possible that the same thing will happen to IP cases, so that much work will be handled at a lower cost, and clients will retain the high-priced guns only for matters that survive post-grant proceedings and return to court for an actual jury trial. 

IP litigation was often viewed as one of the last bastions of litigation able to command premium rates.  Those days may, at last, be behind us.

Mark Herrmann spent 17 years as a partner at a leading international law firm and is now deputy general counsel at a large international company. He is the author of The Curmudgeon’s Guide to Practicing Law and Inside Straight: Advice About Lawyering, In-House And Out, That Only The Internet Could Provide (affiliate links). You can reach him by email at inhouse@abovethelaw.com.

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