Long-term legal outsourcing the best solution

Legal outsourcing providers should focus on building long-term relationships with their clients if the sector is to prosper over the next five years, says Marks & Clerk partner Keith Hodkinson. Speaking to IP Review Online in the wake of Marks & Clerk's conversion to a limited liability partnership (LLP), Hodkinson chair of the specialist IP firm's International Board of Management also offered his thoughts on the benefits of LLP status, and the Indian LLP Act.

From Hodkinson's perspective, IP litigation activity is currently stable but the unique circumstances facing the industrial world make caution a priority. 'Traditionally, IP work is counter-cyclical,' he said, 'so in a recession there is likely to be more litigation. But even though Marks & Clerk's Solicitor business is growing, we have yet to see a dramatic increase. This may be because portfolio managers are running high maintenance costs. However, this recession is different to any other I have seen in the past 20 years: this is the first time that the banks have gone bust.'

According to Hodkinson, the role of legal outsourcing in IP-related work will be just as important on the other side of the recession as it is now, as long as providers can modify themselves for the long haul. 'Outsourcing does look more attractive in a recession,' he said, 'but the best outsourcing relationships are long-term, as portfolio and technology knowledge are value-added. Outsourcing should not be a short-term panacea based on overheads.'

Hodkinson added that the next five years will be a 'crucial' time for legal outsourcing to mature. 'A lot of money has been invested in providing document-related services in bulk,' he said, 'but that won't necessarily lead to added value. I think the winners will be providers who build relationships to add value, as admin work could become so automated that the margins will be squeezed.'

For Marks & Clerk's part, LLP status will allow the firm to be more flexible in the current economic climate and beyond. While the concept of limited liability itself played a part in the firm's decision to convert, Hodkinson said that 'the main driver is the chance to modernise our management structure into a more corporate model'. This will give junior staff a greater chance to contribute. 'Younger entrants into the legal business have a different tolerance to personal risk to that of my generation, and are thinking, "Why can't we share in limited liability?" In addition, LLP allows firms to keep the same partnership values of utmost good faith to clients, mutual trust between partners, and an alignment of interest between management and shareholders. We don't want to become an anonymous entity.'

In the light of his firm's new status, Hodkinson takes a favourable view of recent legislation that will allow LLPs to flourish in India. 'It's long overdue that India liberalises its legal system,' he said, 'so I'm delighted to see the LLP Act coming into play.' Hodkinson believes that India's previous stance on LLPs left it at a disadvantage, compared to other nations that have been able to open global legal business markets. 'If you operate a protectionist market,' he said, 'eventually the dam will break and you'll be in a weaker position than you were at the outset because it will be harder to shore up the damage. If you upgrade your processes and technology in the interim, there's a reason for operating a protectionist system. If not, you will only set yourself back.'