In his “Trademark Blog,” noted trademark attorney Martin Schwimmer asks, “Why Are The Big Patent Firms Disappearing?” As he points out, many of the largest and oldest patent firms, which “have been competently handling the largest, most complex patent litigations, since forever,” are disappearing, either by merging with large general firms or by shutting their doors altogether. Why is this? Why, he asks, do clients accept the higher fees that almost always result?

Well, I’m a bit biased but think I can shed some light on these excellent questions.

To get a handle on this, let’s consider the psychology driving the three principal players, namely the general firms, the patent firms and the not-so-innocent clients.

Let’s start with the general firms.

Traditionally, i.e. up until about twenty or so years ago, large general firms routinely referred patent matters out to patent firms. Patent cases, which involved dull, boring technology and arcane legal principles, weren’t terribly interesting and didn’t involve a lot of money anyway. The general firms took a pass, the patent firms stayed busy and everyone was happy. With the advent of the Federal Circuit and multi-million-dollar patent judgments in the 1980s, that began to change. Dry technology and arcane law suddenly became very interesting! History majors around the country found themselves “fascinated” with technology and “keenly interested” in patent law! The large general firms, which served as gatekeepers and generally got first dibs on the matters that came their way, discovered they had several million good reasons to keep, rather than refer out, large patent cases. No mystery there why they want to handle these cases.

OK. So what’s up with the patent firms?

Initially, the new competition from general firms was more of an annoyance than a serious threat to patent firms. There was enough work to go around. More importantly, the responsibility for hiring outside patent litigation counsel in those days usually rested with the inhouse patent counsel rather than general counsel. Typically, in-house patent counsel had much stronger personal ties with the company’s outside patent lawyers than with the general lawyers. Often he was able to persuade the corporation to hire the patent firm he knew and trusted. With relatively little at stake, the company often agreed. With time, this too changed. With the much larger stakes now involved in patent litigation, the choice of outside litigation counsel is rarely left to in-house patent counsel — the general counsel, who typically deals little with the outside patent firm, now makes the call.

Which brings us to the crux of Mr. Scwhimmer’s question. Why do otherwise intelligent clients hire mega-firms to represent them in high-stakes patent litigation knowing full well they will be paying far more for the same (or worse) representation they could get simply by hiring their existing patent firm? Again, the answer lies more in psychology than rational thought.

Despite their tough talk, lawyers are some of the biggest cowards around. The name of the game in corporate law and corporate litigation is “CYA.” (If you doubt me, take a look at any offering memorandum or even the warning labels on a step ladder.) To answer Mr. Schwimmer’s question, in-house counsel is usually more concerned with not being criticized than with saving money. Simply hiring the biggest firm in town is not likely to require a lot of explaining, even when things go wrong. Corporate management, too, is not interested in costs — not really. Their interest also lies in avoiding criticism — this time from angry shareholders. So, if in-house counsel hires the biggest firm around (and preferably goes through the motions of staging a “beauty contest” to show he’s really. really trying), and if management hires and then defers to the in-house counsel (already knowing who the big firm in town is, but, what the hey, let’s play along), everyone’s “A” is adequately “C”d and it doesn’t really matter how the litigation plays out. Yes, I’m oversimplifying and being a bit whimsical, but there’s a lot of truth here. (This is true for large, publicly-traded litigants. Closely held businesses are much more likely to make wise decisions in their choice of counsel and the expenditure of their money.)

Now as to why the big patent firms are joining general firms, the answer is easy. For big-time patent litigators who want to continue representing huge corporations in large cases at $700 per hour, the large firms are rapidly becoming the only game in town. Nervous in-house counsel and corporate executives are simply not going to risk their jobs and face the criticism that might result from hiring other than a mega-firm. The highly competent patent litigators often found in specialized patent firms recognize that if they want to play this game, they need to join the general firms that control the business. The general firms too have grudgingly recognized that patent specialists might know a thing or two about patent cases and have sought out mergers with patent firms to increase their perceived competence in the field. Whether the general firms will provide the patent lawyers with the freedom and backing to flourish in a large firm environment remains to be seen. Frankly, I have my doubts.

So, what does this mean for those of us who represent smaller interests against the corporate Goliaths? It means good news. It’s important to understand the psychology driving any lawsuit. It’s important to understand how corporate litigants and their counsel think. Fortunately, they have done little to hide their real concerns. Even better, they have the monetary resources to buy the peace of mind they seek. Unlike corporate players who obsess whether all bases have been covered and all possible avenues of criticism closed off, the small IP plaintiff and its counsel can focus on what’s really important. Like a judo master who uses his opponent’s strength against him, the trial lawyer who understands his opponent’s thinking and fears can use that knowledge to his client’s advantage.

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Photo of Philip P. Mann Philip P. Mann

Philip P. Mann is a trial lawyer with over twenty years experience litigating patent, trademark, trade secret, and other intellectual property matters throughout the country.
Mann’s trial work has taken him to various federal and state courts where he’s tried both cases to…

Philip P. Mann is a trial lawyer with over twenty years experience litigating patent, trademark, trade secret, and other intellectual property matters throughout the country.
Mann’s trial work has taken him to various federal and state courts where he’s tried both cases to the court (a judge) as well as before juries. In addition to trial court work, Mann has performed appellate work before the United States Court of Appeals for the Federal Circuit.
Mann began his legal career in Chicago and Milwaukee before heading to Seattle where some of America’s most innovative companies were developing new technologies at breakneck speed. Before founding his own firm, he was a member of the Seattle Intellectual Property Law Firm, Christensen O’Connor Johnson Kindness.
Mann is an “AV” rated lawyer by Martindale Hubbell, indicative that he has reached the height of professional excellence and is recognized for the highest levels of skill and integrity.
He holds a degree in Electrical Engineering from the University of Illinois (Urbana) and received his law degree from the Washington University School of Law in St. Louis, Missouri. He is admitted to practice in the States of Illinois and Washington, as well as before the United States Patent and Trademark Office, and in various courts around the country.