Outsourcing In-House Counsel: IP Department Creation

Previously I discussed the business case for engaging outsourced in-house counsel when a company is facing legal challenges related to standard essential patent (SEP) assertions,[1] in the context of trade secret services,[2] and when engaging outside litigation counsel.[3] In this article I discuss a slightly counter-intuitive use for outsourced in-house counsel: intellectual property (IP) department creation.

When companies find themselves facing increased IP risk and an acknowledged need for long-term, specialized advice they traditionally perceived a binary choice. They could either go on a hiring spree and take a chance on new in-house staff who might turn out to be experienced but expensive and set in their ways (for good or ill), or very inexperienced and needing to be trained by outside counsel at no small cost to their employer. Alternatively, companies could hire a law firm to handle the relevant work while they figure out who to hire in-house. Relying on outside counsel for traditional in-house counsel work, as I wrote previously, can get to be very expensive, to say the least.  There is a third approach worth considering: hire outsourced in-house counsel to handle your short-term IP needs and help you to hire and train a more permanent in-house IP team.

Large companies in sectors where patents[4] have traditionally played a large role in shaping how that industry develops (e.g., telecommunication and pharmaceuticals) typically have had the luxury of organically developing both their patent portfolios and their legal and IP departments.  Sometimes a company in those sectors finds that it has transformed from a start-up to a giant seemingly overnight and is in a rush to build up its IP portfolio and an internal team to manage it. Most of the time, however, such companies can carefully vet potential hires, and once hired slowly train them in the company’s culture and ways of working. Additionally, these companies’ in-house teams slowly nurture their intellectual property development as they harvest the best innovations to patent from their research and development.

Most companies, whether large, a start-up, or something in between, on the other hand, do not typically have a large legal or IP department. Even where there is a robust legal group, few companies have IP specialists. And even when they do have specialists, it is typically one or two patent prosecutors who are tasked with collecting invention disclosures and managing outside counsels’ patent prosecution. Such arrangements can work rather well. The challenge is when the landscape changes and a company that has been previously insulated from serious IP threats (an opportunities) now faces them.

In our tumultuous times, a company’s business landscape can change rather quickly and change more frequently than most people appreciate.  Without preparation, a company can be quickly caught flat-footed. A classic example, is the foreign company that experiences tremendous growth in their home market and wishes to expand abroad to places like the US or Germany where litigation (of often staggering complexity) is more common.  Similarly, a company (start-up or established) could be affirmatively interested in diving into a patent-contentious sector but is concerned with the IP assertions it may face. More recently, with the explosion of Chinese patent litigation, increased IP risk can even happen in the reverse of the traditional model. For example, a US or European company that had traditionally not considered patent assertion to be a concern, can now very easily find itself at the mercy of Chinese “patent cockroaches”[5] and unsure how to defend its interests.

Increased IP risk can happen to entire business sectors as well. For example, with the advent of the internet of things (IoT) companies in sectors like white goods, home monitoring devices, and automobile parts manufacturing will soon find themselves colliding with the telecommunications industry, who have a very different (and overall far more aggressive) approach to patent assertions.  Such companies may find themselves very quickly in a hot legal mess from which it can be extremely difficult to extricate themselves effectively.

As noted in my prior articles, most legal professionals who have faced complicated legal problems on the inside are locked into companies and not easily hired away. Moreover, most lawyer-managers who have themselves hired and nurtured top quality legal departments are also working for large companies and unavailable for hire.  Outsourced in-house counsel can provide an elegant solution.

Typically, outsourced in house counsel have held senior positions in top in-house IP groups and may have even built those groups themselves (often from nothing). They may have also been instrumental in developing their former employers’ successful IP harvesting and generation efforts and/or their licensing and litigation strategies. They are thus very much aware of how to build a well-functioning group. Moreover, having worked in-house they are experts at navigating the complex interplay that can occur between legal, intellectual property and business interests.

Engaging outsourced in-house counsel allows companies with acute needs to access top tier talent on a short-term basis.  This gives companies the breathing room to take the right amount of time to acquire the best in-house team it can. But if it cannot easily find top talent ready to join, companies can utilize outsourced in-house counsel to help find new hires. They can then train the junior talent to reach their potential. As the old saying has it, “give a man a fish, you feed him for a day; teach a man to fish you feed him for a lifetime.” So too here. Outsourced in-house counsel not only will have resolved the company’s short-term needs, it will have developed a top tier in-house team ready and able to handle the company’s future IP needs.

David L. Cohen, president and founder of David L. Cohen, P.C. was former in-house counsel at Nokia and former Chief Legal IP Officer at Vringo. His law firm focuses on outsourced IP counsel services including: SEP licensing; F/RAND and anti-trust compliance; offensive and defensive patent licensing and litigation management; IP and public markets concerns; outside counsel management; agreements; and trade secret auditing and protection. Through Kidon IP corp., David also offers: IP and standards white-spacing to guide R&D, patent brokering, patent review and valuation services, IP services for M&A, and global IP portfolio building.

[1] https://www.linkedin.com/pulse/outsourcing-in-house-counsel-case-standard-essential-patent-cohen/

[2] https://www.linkedin.com/pulse/outsourcing-in-house-counsel-case-trade-secret-services-david-l-cohen/

[3] https://www.linkedin.com/pulse/outsourcing-in-house-counsel-case-litigation-management-david-l-cohen/

[4] Industries where trade secrets, trademarks and copyrights are the prime IP driver (e.g., brands and media content) can have a very different business dynamic, which while also amenable to this model are not discussed here.

[5] http://www.iam-media.com/blog/Detail.aspx?g=8602e91e-7ef4-4037-8c14-e0ebf8ba5377