Patent Annuities Outsourcing for Law Firms Developing and Executing a Well Conceived Exit Strategy

Patent attorneys and intellectual property law firms appreciate the importance of mitigating the risks associated with IP practice management. Recent insurance company statistics indicate that approximately 50% of IP related malpractice claims are the result of clerical errors related to filing and docketing. These seemingly mundane tasks can have significant financial implications for both law firms and professional insurance providers should patent rights become irretrievably lost or compromised. That is why law firms as well as their insurers are seeking ways to execute a well-conceived exit strategy for the management of annuities.

Consequences associated with patent maintenance malpractice can range from costly lawsuits, to incurring bad debt, to conflicts of interest. Realizing that the risk clearly outweighs the reward, many law firms have opted to remove themselves from the patent maintenance business. However, many law firms remain burdened with annuities management for the following reasons:

• Fear of jeopardizing valued client relationships
• Lack of project management infrastructure to properly execute an exit strategy
• Uncertainty whether the transfer of activities and responsibilities translate into a liability reduction
• Concern over the loss of firm revenue earned through annuity management

Throughout this document, we will discuss how these issues are addressed through a well developed and executed exit strategy coupled with the right annuity service provider.

By Elizabeth Norwood, IP Solutions Manager at CPA

White Paper Contents

• The Challenge
• Points to be Considered
• Summary

The Challenge

For law firms considering outsourcing patent annuities, the initial obstacle is often just starting the process. Many do not have the time to dedicate or are unsure of how to develop and manage a tight "get out of the annuities business" plan. A well conceived approach for removing this function is essential to ensuring a smooth and timely transition. It is key that such a plan be embraced firm-wide with all key stakeholders contributing and buying into the overall strategy. When considering outsourcing vendors, firms should evaluate each vendor's planned approach and methodology in support of its exit strategy. The firm's selected service provider should offer knowledgeable and experienced insight to help formulate the firm's exit strategy to ensure a successful transition and mitigate risk during the process.

Points to be Considered

The following points should be considered when a law firm decides to exit the annuities business.

Establish a Project Sponsor

One of the most important "first steps" is appointing a project sponsor who will commit to keeping the process moving and seeing it through to completion. Commonly, this is the firm's managing partner, a senior partner or head of the firm's IP department. This person will need to direct and appoint resources in the firm to manage the project, establish a firm wide deadline for exiting the business, ensuring that clients are properly notified and implementing a process to mitigate the risk of a missed payment during the transition and exist phase.

Choose Engagement Option that Supports Goals & Objectives

When formulating goals and objective, law firms will need to decide to what degree they would like to engage with their clients and the annuity service provider after successfully transitioning away from processing renewals. For example, some firms choose to retain full responsibility in the transfer of all data to their annuity service provider while other law firms choose to have partial or no involvement in the transfer of data, placing the responsibility on the firm's clients. Some law firms choose to outsource annuities for all cases (pending and granted) while other law firms decide to outsource only the granted cases. Whatever the engagement model, it should support the law firms' defined goals and objectives and the inherent risks and time impact should be understood.

Understand the Risk Factors

During the transition and exit phase, there are certain risk factors that must be addressed. One of these factors is to understand the origin and condition of the data that will generate annuity and maintenance fee deadlines as part of the initial data transfer. Once the transition period is complete, a process will have to be implemented for the transfer of future cases to the selected annuity service provider.

At the time of transfer from law firm to annuity service provider, verifying critical patent data fields such as filing and grant dates, application and patent numbers helps mitigate the possibility of generating incorrect annuity deadlines and deadlines against an incorrect case. An air-tight outsourcing strategy should budget for and allow time for the verification of patent data against official data sources. This is an opportune time to address data integrity issues and to ensure your clients' deadlines are met.

Your service provider should have the expertise and capability to conduct systematic data verification checks across all jurisdictions when payment responsibility is transferred out of the law firm.

The following diagram illustrates the phases taken to shift annuity management responsibility from the law firm to CPA Global .

Phase 1 - Responsibility and liability for reminders, instructions, and invoices shifts from the law firm to CPA

Phase 2 - Law firm chooses engagement options for managing transfer of responsibility for the completeness and accuracy of the patent data for pending and/or granted cases, specific clients or across the entire portfolio. The options selected can determine the degree of liability reduction.

Include Specific Goals, Objectives and an End Date

The overarching short-term goal for most firms is to safely exit the annuities business in a manner that mitigates risk and exposure to the firm and ultimately protects valuable client relationships. In addition, a well-conceived strategy must also ensure that the business is able to function with limited transparency or no service disruption or hardship to its client base. In order to facilitate the firm's goals and objectives, it is critical to develop a comprehensive exit plan that takes into consideration short-and long-term goals, impact to the business, and ensures consistent client service communication. This plan will most likely require a multi-phased approach with specific milestones related to project action items such as the contract process with the service provider, written notification to clients, data verification, data transfer, etc. Your selected service provider should develop a strategy that guarantees a successful transition and a full exit from renewal and annuity management by a certain date.

Select an Experienced Annuity Service Provider

Many law firms do not have the infrastructure and resources to create and execute a plan for managing the transition and ultimate exit from the renewals business. In order to keep this process manageable and low risk, it is important to choose an experienced annuity service provider that can support your objectives and that understands the unique issues faced by law firms. Select a service provider that can offer a controlled project management approach and will commit to project delivery milestones. Of utmost importance is a provider that will coordinate data transfer and start pay dates with your existing payment cycles to ensure that no cases lapse during the transition period. Be sure to ask for references that you can contact.

Client Management

A common problem in successfully exiting the annuities business is clients that are non-responsive and put their own patent assets in jeopardy because they fail to comply with the firm's annuity service provider engagement relationship. As such, they run the risk of lapsing patents and the patent attorneys must attend to the payment as a precaution. This scenario highlights several key points. First, the firm must adhere to its self imposed timeline for exiting the annuities business. Second, an effective exit strategy includes clear and frequent client communication. Third, the firm should select an annuity service provider that has the proven processes for proactively working with clients of all sizes and sophistication levels.

Client Annuity Disengagement Communication

Critical to the exit strategy is properly notifying your client base that the firm will no longer take responsibility for annuity and/or maintenance fees and monitoring and reminding of same as of a specified date. The language in the letter should be explicit in nature and should include an up to date list of the clients' cases. Furthermore, the letter should state that the firm is taking no future responsibility for the data and should be verified by the client.
A typical disengagement letter will provide information on annuity service providers, state what annuity service provider the firm is retaining, and put them on notice that in the absence of their instructions, their cases will be turned over to the firm's selected provider. An experienced annuity service provider should provide you with samples of disengagement letters.

Time Frame

Law firms can choose an expedited exit strategy or choose to exit on a more rolling basis. Regardless, the chosen annuity service provider should be able to support the firm's timeline objectives.

Summary

Exiting the annuities business is a key component to a law firm's overall risk management strategy. However, safely transitioning out of annuities management without compromising valuable client relationships can be a very complicated endeavour. A successful exit strategy will require an initial investment in time and dedicated resources on behalf of the law firm. By choosing an experienced service provider to support and compliment its exit strategy, a law firm should meet its goals and objectives through adopting a customized outsourcing model specific to firm needs while mitigating its risk during the transition period and on an on-going basis.

About CPA Global Patent Annuity Outsourcing

CPA Global is the world's largest intellectual property service provider supporting more than 40,000 clients worldwide and paying 1.4 million patent and trademark maintenance payments annually. CPA Global's client base is comprised of some of the largest IP practice firms and Fortune 500 companies.

For more information on CPA Global's Law Firm Patent Annuities Services, Please contact Vincent Brault, VP of Business Development at 703-739-1244 / vbrault@cpaglobal.com.

About CPA Global

With clients in over 100 countries, CPA Global is a leading provider of legal process outsourcing (LPO) and the world's top intellectual property (IP) management specialist. Founded in 1969, CPA Global provides lifecycle management services for intellectual property such as patent, design and trademark searching, watching, renewals, and portfolio strategy in over 181 jurisdictions. CPA Global is also a leader in the growing market for outsourced contract management and litigation support services, helping law firms and corporations to realize value by managing risk, cost and capacity. CPA Global employs over 1,000 people in 16 offices in 8 countries. www.cpaglobal.com