ADAPT. EVOLVE. THRIVE. HOW CAN LAW FIRMS RETAIN THEIR MARGINS AND GROW THEIR PRACTICES IN CHANGING TIMES?
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1 ADAPT. EVOLVE. THRIVE. HOW CAN LAW FIRMS RETAIN THEIR MARGINS AND GROW THEIR PRACTICES IN CHANGING TIMES?
2 TABLE OF CONTENTS Executive summary 3 Four big changes 3 Two big opportunities 6 Adapting to thrive 7 Testimonial: Change in practice 8 Conclusion 9 About CPA Global 9 CPAGLOBAL.COM PAGE 2
3 EXECUTIVE SUMMARY Times are changing. Markets are evolving, laws are developing and competitors are emerging faster than ever before. With these changes come many opportunities for positive and proactive Intellectual Property law firms. The prize of growing margins awaits those that adapt to their environments and stand out from the competition. The biggest changes affecting law firms include: Market dynamics and client pressures Legal and regulatory changes New competitors and business models New technology, information and analytics Each change represents an opportunity for law firms that adapt, and a threat to those that do not. Successful adaptation will see you: Embrace innovation and technology for more efficient operations Differentiate from the competition and become a strategic partner With so many law firms competing, evolving with each change and embracing opportunities will help you stay ahead of the pack. FOUR BIG CHANGES 1 Market dynamics and client pressures With record numbers of IP rights being filed globally and in force, it might appear there is more work for IP law firms than ever before. However, this hides the fact that, in recent years, the clear majority of filings growth has originated from Asia and, in particular, China. Growth in domestic filings in North America and Europe has stagnated in recent years, with flat or low single-digit growth. For many law firms, these flat markets make practice growth more challenging than usual. Couple these market trends with increased corporate scrutiny on costs a seemingly permanent by-product of the 2008 financial crisis and increasing law firm competition, and growth cannot be taken for granted. CPAGLOBAL.COM PAGE 3
4 Trends and pressures across the globe that are challenging law firms margins include: CLIENT PRICING PRESSURES Many in-house corporate IP departments face intense pressure to do more with less budget. This is compounded by procurement teams increasingly negotiating IP spending, where IP teams once managed their own costs. There is also an increasing requirement for fixed-fee billing from IP law firms, putting further pressure on margins. INCREASING CLIENT EXPECTATIONS Clients are becoming more sophisticated and demanding of the services they receive, for example, expecting IP docketing to be part of their offering. Clients also have higher expectations of technology to reduce overheads and increase productivity, based on what they have seen in other businesses. DISAGGREGATION OF TASKS In response to client pricing pressures, IP firms are increasingly looking to separate their core legal and administrative tasks, such as PCT nationalisation, EP validation, renewals and prosecution support. More than ever, firms are outsourcing certain tasks to service providers or finding alternative ways to complete these tasks more efficiently. GROWING SELECTIVENESS Corporate IP departments are focusing increasingly on IP quality over quantity, which is impacting the total number of new IP filings. IP leaders are experiencing growing pressure to file selectively and cut back aggressively on their portfolios. Filing patents is time consuming and costly and, to be profitable, businesses must be sure each filed invention will deliver excellent ROI. STRATEGIC PARTNERS To make the most of their IP portfolios, clients are looking for law firm partners to develop a better understanding of their products, their competitors and their business strategies. The expectation is often that obtaining this institutional knowledge should not add to law firm costs. 2 Legal and regulatory changes Adapting to legal and regulatory changes is business as usual for law firms. However, there have been various recent reforms in key jurisdictions that are significantly impacting the law firm market. IN EUROPE Brexit: Ultimately, no one knows how Brexit will affect the IP sector until the terms between the UK and the EU are clear Unitary Patent: Law firms must prepare for the Unitary Patent and the Unified Patent Court, however, long-term adoption of the unitary patent is still not clear cut, particularly following Brexit Harmonising trade secrets laws: Trade secrets are becoming a priority, with the European Commission close to harmonising its laws Anti-corruption and bribery legislation: Managing corruption and bribery risks, and complying with legislation, are now among companies biggest priorities CPAGLOBAL.COM PAGE 4
5 IN NORTH AMERICA Leahy-Smith America Invents Act (AIA): The AIA switched the US patent system from first to invent to first inventor to file, pressuring businesses to file early. Inter Partes Review also made it easier and more cost effective to challenge granted US patents Alice decision: The 2014 Alice Corp. v. CLS Bank International decision has affected the validity of many US patents, especially those involving business methods and software Halo and Stryker cases: In 2016, a unanimous opinion on two cases (Halo Electronics v. Pulse Electronics, and Stryker Corp. v. Zimmer) effectively made it easier for businesses to seek enhanced damages in patent infringement lawsuits IN ASIA Before 2013, IP firms in Australia were prohibited from incorporating. To protect themselves against growing competition and modest local growth, many have now incorporated, and are increasingly listing on the ASX (Australian Securities Exchange) and expanding into Asia. Consolidation is also on the rise, giving the new groups access to significant capital, buying power and efficiency gains 3 New competitors and business models IP law firms are facing increased competition in their local markets and from global players. In a number of markets, flat growth is encouraging law firms to consolidate and look elsewhere for opportunities. Increasing service and cost expectations of corporate clients are also requiring IP law firms to compete more keenly. At the same time, a trend for disaggregation of legal and associated administrative tasks is allowing non-legal providers to compete for particular tasks with new offerings or business models. In the future, continued deregulation of the law firm market may increase the number of new competitors and business models that compete for traditional law firm business. Equally, corporate cost pressures can, in some circumstances, lead to clients looking to in-source as much of their legal work as possible. 4 New technology, information and analytics In recent years, the IP sector has seen an unprecedented number of technology solutions launching and changing traditional ways of working. The pace of change is very likely to accelerate in the coming decade. Key technology developments include: Service portals: For example, foreign filing portals from Inovia that were designed to displace traditional law firm business and relationships, have fundamentally changed certain law firm markets. CPAGLOBAL.COM PAGE 5
6 Legal price comparison websites: Price comparison websites for the legal sector are a recent phenomenon. It will be interesting to see how these are adopted in the future. Big Data and analytics: Big Data analysis of IP prosecution data (for example, LexMachina); and rankings and ratings of IP attorneys and firms (for example, Juristat), are allowing corporates and law firms to make more informed decisions about individual patent cases and the law firm partners they work with. TWO BIG OPPORTUNITIES 1 Embrace innovation and technology for more efficient operations and enhanced client collaboration By embracing technological innovation, IP law firms can improve the efficiency of their operations, enhance client relationships, and save time, effort and money. Technology that allows law firms to execute tasks more efficiently and more securely improves staff satisfaction and gives IP professionals the opportunity to focus on their key activities and add more strategic value to their client base. Clients benefit from receiving timely and accurate information, and enhanced, real-time communication with their law firms. Additionally, as consumers, clients are accustomed to user-friendly software, and want to see the same intuitive functions in their business interactions. Clients are also upgrading their technology regularly and want to work with partners who show the same commitment to continuous improvement. Big Data analysis provides compelling opportunities for law firms. The data can deliver insights that inform decisions and allows clients to maximise the potential of their inventions, and protect themselves from competition. There are many additional business opportunities for law firms who can demonstrate that they know their clients and the competitive IP landscape. This additional business can include IP filings, competitor oppositions and freedom-to-operate opinions. CPAGLOBAL.COM PAGE 6
7 2 Differentiate from your competition and become a strategic partner Traditionally, IP law firms have differentiated themselves on the quality of their offering. However, clients are looking for more objective evidence of quality. Clients are increasingly interested in patent quality, not purely from a standard of legal defensibility but from a commercial and strategic business perspective. This requires their law firm partners to step-up in their role as a strategic partner. Clients also increasingly focus on working with cost-effective partners, not necessarily the cheapest providers. They want to work with law firms that have considered carefully how they can add value and deliver efficiencies. Most IP law firms look very similar today, so there is a real opportunity for those who can increase their relevance to their client base in changing times. ADAPTING TO THRIVE There is much law firms can do to adapt to this new IP environment. However, they do not have to do it alone. To achieve success, law firms should choose a partner with: The scale and technologies to support them through the changes and beyond A proven track record of working successfully with law firms A commitment to working, not competing, with law firms THRIVING TOGETHER CPA Global can help you thrive, providing services that maximise profits, reduce risk, optimise profits and inspire better data-driven decisions. Scale. We serve customers worldwide from 26 offices employing over 2,000 IP professionals Vision. Our IP Platform is transforming the industry, providing the connection, integration and collaboration law firms need to succeed Heritage. We understand your needs and challenges. We were founded by law firms almost 50 years ago, and have worked closely with them ever since Trust. We will work as an extension of your team without encroaching on your client relationships CPAGLOBAL.COM PAGE 7
8 TESTIMONIAL CHANGING PRACTICE IN CHANGING TIMES MICHAEL LORD, PARTNER, GILL JENNINGS & EVERY The IP market is changing constantly. Corporates continue to drive down costs whilst at the same time seeking new operational models to balance in-house and outsourced expertise. In response companies are entering the sector with new offerings directed at low-cost filings and online services. The political and legal landscape is changing too. In the UK, following the Brexit vote, many in the IP industry thought that the UK wouldn t support the Unified Patent Court and Unitary Patent. However, the government has indicated that it will continue with ratification of the EU s patent plans. There is also some uncertainty about the future shape of IP firms. There has long been talk of consolidation in the UK, of firms providing a broader range of legal services, of economies of scale. And yet largely this has not happened. Will Brexit now drive that consolidation? As a firm, we need to adapt to keep ahead of these changes. STRATEGIC PARTNERSHIPS One part of our response to these changes is to work more closely and more strategically with our clients. Our job is not just to protect their IP; it s about making sure their IP takes its rightful place at the heart of their business so they can maximise the value their IP creates. And we have to be accessible at all times so every client can use us as a sounding board for their commercial decisions. We have much to add in terms of commercial experience, as we invest significant time listening to our clients to understanding the challenges they face. EMBRACING INNOVATION To exceed our clients expectations, we also need to embrace technology so that we consistently deliver the most efficient, accurate and timely service. Automating certain parts of the IP process enables us to improve the client experience whilst assuring the greatest costefficiencies, both of which I find are always at the top of a client s must have list. DEVELOPING CLIENTS BUSINESSES We want our clients to grow and the best way we can help to facilitate sustainable growth is to make sure our clients understand how best to match their IP budget with revenue earned from the products or services that their IP protects. This is why we invest significant time into discussing our clients needs and finance levels and then adapt our advice to match. A STRONG RELATIONSHIP We have worked with CPA Global for decades. We recommend them to our clients for handling IP renewals because we believe they are the best in the business. We know when we send our clients case data to CPA Global, they will handle the renewals efficiently and liaise with our clients professionally. Their skills, industry oversight and global reach are invaluable and we know they have helped enhance our clients view of us. Additionally, CPA Global s software, Inprotech, is central to our business in managing the many thousands of IP cases for which we have responsibility. The development of CPA Global s range of software is driven by the demands and insight of law firms and corporate clients so I have the comfort of knowing their software is always up-to-date and, to my mind, the best around. The combination of those two factors is what underpins the strong relationship we enjoy with CPA Global today. A POSITIVE FUTURE Everything changes. However, wherever there are changes, there are always opportunities. My view of the future of our industry is overwhelmingly positive. We have a great team and a can-do attitude. I expect us to forge an even closer relationship with CPA Global in the years to come so that together we can continue to deliver the very best IP advice and services to our clients in the ever- changing commercial landscape that they face. CPAGLOBAL.COM PAGE 8
9 CONCLUSION In business, as in evolution, it is not the strongest of the species that survives, nor the most intelligent but the one most responsive to change. Embracing the opportunities of this new world will do more than ensure your survival; it will ensure your practice thrives, retaining margins and growing profits in challenging times. The law firms that succeed will be those that guide clients strategically, embrace technological innovation, and most successfully differentiate themselves from the competition. ABOUT CPA GLOBAL CPA Global is the world s leading IP management and technology company. With offices across Europe, the US and Asia-Pacific, we support law firms worldwide, helping them manage risk, costs and capacity, and realise greater value. We know practices large and small are under increasing pressure to deliver more for clients. At CPA Global, we will free you from your administrative burden and liberate your experts to deliver differentiating services. TAKE THE OPPORTUNITY To discover how CPA Global can help you adapt and thrive in today s environment, visit us online at cpaglobal.com/law-firms CPA GLOBAL 2017 CPAGLOBAL.COM PAGE 9
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