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Disrupt the Status Quo: Unbundle Intellectual Property Services to Extract Value

By Cary Levitt, U.S. Chief Operating Officer, Dennemeyer & Co.

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Cary Levitt, U.S. Chief Operating Officer, Dennemeyer & Co.

One of the most challenging tasks for a legal manager is to determine how to efficiently perform or allocate certain services. When do you employ in-house attorneys, a law firm, or a service provider? Who can satisfy the company’s diverse legal requirements?

I have witnessed and managed all sides of this equation—as a practitioner in a law firm, a legal executive in a multinational corporation, and now a leader of a legal services business.

With increased focus on managing legal expenses—coupled with the rise in competition among law firms—outsourcing (domestic and overseas) legal services has become prevalent in the U.S. The IP practice is no exception. As an alternative to in-house lawyers and law firms, entrusting IP services to specialists can unearth significant value. Further, executives are disrupting the status quo by utilizing new avenues to tackle varied legal needs. Whether the IP owner opts for a fully outsourced solution or simply seeks to optimize in-house management with select outsourcing, unbundling IP services can minimize risk and increase efficiency. IP owners can be relieved of portfolio management related responsibilities; this allows them to allocate efforts towards higher-level strategic planning

Bargaining Power

In the business realm, the practice of outsourcing is commonplace. With the economic downturn acting as a catalyst, a shift has occurred in the legal field that has enhanced clients’ bargaining power. Companies and law firms alike are realizing such developments and are outsourcing legal processes in order to reduce costs, increase turnaround times, and afford decision makers the opportunity to concentrate on core business planning. The results of this phenomenon are disruptive. Now, larger and more complex legal undertakings are being unbundled; thus, reducing the overall number of hours of senior-level attention. The bottom line is that judiciously outsourcing IP services makes sense. Many companies are already there.

Unbundling IP

Traditionally, the types of outsourced legal processes resided on the low end of the value chain. However, corporations and firms are now recognizing that everything from portfolio management and maintenance (e.g., patent annuities, trademark renewals, IP recordals, translations, and watch services) to legal services (e.g., clearance, global prosecution, and monetization) are now viewed as viable outsourcing candidates. Based on this shift, legal work is being assigned to those best suited to perform the task, as opposed to paying the high cost of a single provider. While it is no secret that outsourcing IP functions can present risks, this practice is expanding rapidly.

With new competitors, unique business models have emerged that view IP services as distinct processes on a supply chain. Many components of an IP transaction, or even case, can be assigned to a provider fit to efficiently perform the specific function. Take, for instance, the maintenance of a patent portfolio. Previously, the typical dynamic would be the company would either personally manage their portfolio, or the firm that assisted the patentee with the initial prosecution would provide this service. However, general costs for firms to perform administrative tasks are greater and managing multiple portfolios exposes firms to potential liability. Consequently, the modern trend has shifted towards outsourcing management to service providers due to their ability to offer high-quality solutions that tackle global IP management needs. With infrastructure, expertise, and technology, service providers offer a breadth of knowledge regarding domestic and international laws and maintenance strategies.

Exploring All Options

Outsourcing IP processes is a business decision that should not be taken lightly. While decreasing overall cost is an important factor, it is equally as important to improve the level of service. Before deciding whether to outsource, you should clearly define your business objectives. Begin by thinking about more than just reducing expenses. The essence of the question should be framed as follows:  how can the service provider add value as opposed to simply reduce costs? If you act carefully and deliberately, unbundling and allocating IP processes can unlock significant value.