Where do midsize IP firms exist in the legal world?

February 1, 2012
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By Robert Loerzel

We live in an age of invention. Gadgets that seem commonplace today, from the iPhone to the microwave oven, would have amazed Thomas Edison. We take medicines designed at the molecular level in ways that Louis Pasteur probably never imagined.

All those ideas and innovations come with legal implications. And so, this is also an age of intellectual property law. Attorneys who handle patents, trademarks, copyrights and trade secrets have seen a boom in their field over recent decades.

For decades, small firms dominated the IP law practice, where lawyers earned scientific degrees and technical training along with their law degrees. As the demand for IP lawyers grew, these boutique firms also expanded. Meanwhile, big general practice firms added IP departments and began competing with specialized boutiques for patent litigation.

"In the early '90s, the general practice firms decided to start doing patent work," said David L. Schwartz, an assistant professor who teaches patent law at IIT Chicago-Kent College of Law. "Patent litigation became bigger business and there was lots of money to be made there."

But he said the growing domination of big firms in IP law "seems to have stabilized in the last few years. You just don't see that many boutique firms dissolving and joining general practice firms."

About half of the IIT Chicago-Kent students who specialize in patent law end up working at big firms, while the other half go to specialty firms, Schwartz said.

"Last year, just more than half went to boutiques," he said.

Lawyers at several midsize IP firms in Chicago said they're confident they'll remain big players in their field.

"When I started, the big firms were a source of referral to us," said Jim Sobieraj, president of the 148-lawyer IP firm Brinks Hofer Gilson & Lione, who has three decades of experience. "They didn't have the people to handle patent cases, they didn't understand them. They would refer their clients to us. But then, once they began to appreciate that this could be a lucrative area of law, they were less interested in referring clients to the boutiques."

When Sharon A. Hwang, a shareholder at McAndrews, Held & Malloy, began working at the firm in the 1990s, she said she felt her firm demonstrated an edge in knowledge and experience whenever it faced off in the courtroom against attorneys from an IP department of a big firm.

"If there was a general firm against us, we would be like, 'Hooray! They have no idea what they're talking about,'" Hwang said.

Hwang said she's learned to be not quite that confident in the years since, as some general practice firms proved themselves with successful IP litigation.

"There are certainly some general firms with patent attorneys who have gained a lot of experience over the last 20 years or so," she said, declining to name firms.

But Hwang, whose firm has close to 100 lawyers, said she believes midsize IP firms still maintain the edge.

"This is a field that has a lot of little nuances," she said. "If you don't know what those nuances are, I think you're at a disadvantage. This is what we do. We know our patent law. We have two training sessions every week, just to make sure that we're keeping up on it."

But Reginald J. Hill, a partner in the patent practice at Jenner & Block, said IP lawyers working at big firms such as his have just as much expertise. And they can offer clients more, he said.

"We have a wealth of expertise in all sorts of areas that are also helpful," he said. For example, Jenner & Block can add a lawyer with antitrust expertise if it's relevant.

"Most large general practice firms have some patent expertise these days," Hill said. "A lot of the work is being done by general practice firms. On the other hand, I don't see a lot of new boutiques popping up."

In addition to specialized knowledge, IP firms tend to charge lower rates than the large firms do. That helps them compete as clients tighten their belts during the recent tough economic times, said Grantland G. Drutchas, a founder and partner at the 80-lawyer IP firm of McDonnell Boehnen Hulbert & Berghoff.

"Our billing rates tend to be 15 to 20 percent less than billing rates on the West or East Coast," he said. "We're able to compete on the technical basis with any of those firms."

One example of a big company hiring a midsize firm: About a year ago, Google Inc. began using McDonnell Boehnen Hulbert & Berghoff for some of its IP litigation, he said.

"The amount of work coming from them has really mushroomed," Drutchas said.

The 90-lawyer, Chicago-based IP firm of Banner & Witcoff continues to get work from some very prominent companies, including Lexmark, Nike, Kimberly-Clark, Nokia, Microsoft, Pepsi and Toshiba.

"Those are big, sophisticated companies who still find that they're obtaining what they need through IP boutique firms," said Charles L. Miller, Banner & Witcoff's president. "We have less of a bureaucracy, which allows us to respond to client needs quicker. Many times, you'll find that IP boutiques have lower billing rates than very large GP firms."

Midsize IP firms also tout their stability and the longevity of their lawyers. Their specialized attorneys tend to stay at the firms for a long time, building up valuable experience.

"At the partner level, we've had virtually zero attrition," Drutchas said.

 

"For the most part, our attorneys are homegrown," said John Kilyk Jr., a shareholder at the IP firm Leydig, Voit & Mayer, which has about 80 lawyers.

"We're picking up people coming out of law school. We're very proud of the fact that most of the attorneys stay here for their entire career, through partnership. The only time they leave is when they retire."

The big firms take on patent litigation, but they rarely get involved with the other major areas of IP law handled by the midsize firms: Giving businesses advice and filing patents at the U.S. Patent and Trademark Office, a process known as patent prosecution, the IP lawyers interviewed said.

"Some general practice firms do patent law very well," Drutchas said. "But they don't tend to compete on the patent prosecution side at all — I think, frankly, to their detriment."

Kilyk agreed.

"Those bigger firms, they like the litigation work," he said. "They don't want to do the counseling work … and they certainly don't want to do the patent prosecution work. In those latter areas, we don't really compete with them. They're just not in that field. They're not set up to do that kind of work."

Hill, from Jenner & Block, said his firm used to do patent prosecution work, but it no longer offers that service. The reason?

"Economics," he said. "Cost becomes an issue for doing that type of work."

Companies filing patents were looking for less expensive alternatives than hiring big firms to handle the work, he said.

"I think there'll always be a place for boutique firms, frankly — especially those that want to keep their mainstay in the patent prosecution area," Hill said.

Many lawyers at midsize IP firms said they believe their work dealing with the U.S. Patent and Trademark Office gives them a depth of knowledge that helps them win patent litigation in the courtroom.

"If you've actually written some patents and prosecuted them through the patent office, you can read between the lines and get a deeper understanding of what's going on," Sobieraj said. "We can handle the litigations much more efficiently. We're not handling these issues for the first time. We don't have to come up to speed. We're there."

The way IP attorneys practice law will change soon, thanks to the Leahy-Smith America Invents Act, patent reform legislation that President Barack Obama signed into law in September. Several lawyers said they're anxious to see how the new law plays out in practice.

The law will be phased in and it won't apply to patents that are already approved, Drutchas said. As a result, he said, "It could be months, years, even decades before the real effect is felt on the litigation side."

The law, which aims to speed up and streamline the patent-issuing process, demonstrated a rare example of bipartisan harmony in Washington. Republican House Speaker John Boehner called it "an important part of the Republican jobs plan." And Obama hailed it as an innovation booster.

"Somewhere in that stack of (patent) applications could be the next technological breakthrough, the next miracle drug," Obama said. "We should be making it easier and faster to turn new ideas into jobs."

"That's all just political talk," said H. Michael Hartmann, president of Leydig, Voit & Mayer. "I kind of laughed when I heard President Obama refer to the patent act as part of his jobs program."

But Hartmann said he does hope the new law will create a "better filter" to block bad patents and approve worthy ones.

"I think it will help companies, it will help innovation," he said. "And that is all good. I'll let you speculate as to how many jobs that might create."

McDonnell Boehnen Hulbert & Berghoff's Drutchas said he doubts the new law will create many jobs, but he praised it for simplifying the patent process.

"I think most people will be able to learn to play by the new rules just fine," he said, "and at the end of the day, I don't think it's going to unduly harm one industry sector over another."

Among other things, the law says that whoever files a patent first is the legitimate patent-holder, even if someone else claims to have invented it earlier. This "first-to-file" approach brings the U.S. in line with international patent law, but not in every case.

"We have a lot of exceptions," said Hwang, of McAndrews, Held & Malloy, "so it's not exactly like the rest of the world."

The law also creates a new way of challenging patents after they've been approved — at the U.S. Patent and Trademark Office instead of in court.

"If that turns out to be an effective way to challenge patents, that could be a significant change," said Brinks Hofer's Sobieraj.

Drutchas predicted that a lot of legal action will shift from the federal courts to the U.S. Patent and Trademark Office. And this will benefit midsize IP firms, he said, since nearly all of their lawyers are registered to practice before the U.S. Patent and Trademark Office. That isn't always true for the IP lawyers at big general practice firms.

"It may mean more of a push toward smaller firms," Drutchas said.

Kilyk agreed, predicting a boom in patent office work for IP boutiques.

"It's probably going to take off," he said. "I can see a lot of companies taking advantage of that. … They're going to look at this and say, 'This is a much more efficient and cost-effective way of having a patent reviewed.'"

Some of Chicago's IP firms maintain long histories.

Leydig, Voit & Mayer traces its roots back to 1893 when its founding attorney, Luther Miller of Rockford, filed his first patent application. He helped an Iowa inventor to win patent protection for his "earth-loading machine."

At the time, "Rockford was the center of the world in manufacturing any type of fasteners: screws, nuts, bolts, nails," Hartmann said.

"That was a huge technology. In those days, patent lawyers walked the factory floors, looking for inventions to protect. This was the day of Edison, the classic inventions. Patent lawyers just began to develop into their own and to help this country develop technologically."

Even though the technology has evolved far beyond the nuts and bolts of 1893, Hartmann said, "In a way, nothing has changed. We still strive to be as close as we can to the inventors. The factory floor isn't the nail-manufacturing floor anymore. You're talking about manufacturing or designing molecules."

Back in the 1890s, patent law firms were small — as were most law firms. "If you had four or five lawyers, that was huge," Hartmann said.

Firms gradually grew over the years. Leydig, Voit & Mayer now employs about 80 lawyers at four offices in the United States as well as in Germany.

"When I started practicing at this firm in '83, the biggest patent firms were probably 30 or 40 attorneys," said Kilyk, of Leydig, Voit & Mayer.

"And that was true across the country. … The patent firms now have 80, 90, 100 or more attorneys and the general practice firms, some of them have a thousand attorneys."

When Hwang joined McAndrews, Held & Malloy in 1993, the firm employed 19 lawyers. It now has about 100.

Brinks Hofer was founded in 1917 as Wilkinson & Huxley. When Sobieraj joined the firm in 1982, it employed 25 lawyers.

"And we were the largest patent boutique in Chicago at that time," he said. "When I joined, there were only a few large law firms that had patent attorneys. In Chicago, it was Kirkland & Ellis. I'm not aware if any of the other big firms at that time even had a patent department."

When Sobieraj considered where to start his legal career, "I didn't even consider the general firms," he said. "At that time, the IP field was underappreciated and undervalued. All the patent firms, their starting salaries were a few thousand dollars less than the general firms. That was just the market then. You didn't go into the patent field because it was the most profitable. You went into this practice field because that was your passion."

Brinks Hofer has grown to six times as big as it was when Sobieraj joined.

The growth of IP firms slowed down in recent years, as the economy stalled. But Chicago's midsize IP firms say they've weathered the downturn.

McDonnell Boehnen Hulbert & Berghoff laid off several lawyers, but Drutchas said business rebounded, thanks to growth in biotech and pharmaceutical work.

Brinks Hofer also laid off some lawyers, but Sobieraj said, "It's rebounding. It's picking up."

When companies cut other parts of their budgets, many of them realized that IP was too important to cut, he said.

One area of growth for Brinks Hofer is the U.S. International Trade Commission, which can block foreign products from being imported if they violate U.S. patents.

"It's a very powerful legal remedy," he said. "In 2009, because we saw this was a growing area, we opened an office in Washington."

Banner & Witcoff got through the recession without reducing its staff. In fact, "We've continued to grow," said Miller, the firm's president. "We weathered the storm."

Leydig, Voit & Mayer also held steady during the recession. "We run fairly mean and lean," Hartmann said, explaining that the firm's cost-efficient operations helped clients during the downturn. "We try to run a very tight ship."

Clearly, the goal for IP lawyers is winning the day for their clients in court or the patent office, but many of the attorneys in this field also see their work as doing good for the economy and society at large.

"Patent attorneys understand that innovation is really what our country is built on," said Hwang, of McAndrews, Held & Malloy. "Our patent system is key to growing the economy. It's really important to protect the rights of those who have invented something. … It's also important for the public to know what you invented, because maybe they can come up with something that's even better."

"It encourages people to always be thinking of new and better ways to do things," Sobieraj said. "It encourages people because it provides rewards if you come up with a better way, a better idea."

Some IP lawyers also say they simply enjoy seeing the cutting-edge technology being developed by their clients.

"It's fun to come into work every day," Kilyk said. "There are always very cool things to deal with."