IP Prosecution Firms - Brace For Impact (part 2)

PROSPECTING AT ITS FINEST

With Intellectual Property's new-found stardom, pause for evaluation becomes relevant. Barriers of entry into the IP prosecution services market are largely unprotected, rendering it susceptible to ransacking by divesting enterprises. If that happens – watch out.

The end client - who loses Intellectual Property rights because their attorney's paralegal firm relied on snake oil software that missed an obscure non-assignment hidden deep within the bowels of some encrypted subscription-only database - will be hunting for payback. Said attorney's law firm would ultimately be held liable, thus affixing themselves squarely in a very pissed off end-client's crosshairs.

Of concern are fortune hunters expanding into the IP prosecution market from other disciplines - even other non-technical industries like digital document reproduction - without fully grasping and embracing its extreme technical severity.

Prospectors don't enter a field because they are adept in that field. They enter a field because proliferation studies detected an unlocked bank vault with money to be had. From an attorney's perspective, a paralegal firm's reasons for being in the IP prosecution field had better stem from:

      (a) their knowledge of exactly what must be done and how to do it, and
      (b) their not allowing shortcuts or mistakes to happen.

Mistakes - even tiny ones - can cause clients to lose $millions.

CONFLICTS OF INTEREST?

Strict adherence to ethics and confidentiality cannot be overstated. IP Prosecution paralegal services firms that are founded, funded, managed, directed or supported by IP prosecution lawyers could easily possess inherent conflicts of interest with the industry's target client base ... because the industry's target client base also happens to be IP prosecution lawyers. Existing IP law firms that "farm out" their paralegals likewise bear a similar flag.

The American Bar Association's amendments to the ABA Model Rules of Professional Conduct dated August 2012, provides guidance regarding the ethical implications of retaining lawyers and nonlawyers outside the law firm to work on internal client matters. But what about guidance regarding the ethical implications of a law firm having their internal nonlawyers work on client matters that reside outside the firm? A valid question since working on client matters that reside outside the firm is precisely what IP prosecution paralegal outsourcing firms do.

END-CLIENT LAWYER GUIDELINES

Per the ABA Commission on Ethics 20/20 's recently released REPORT TO THE HOUSE OF DELEGATES RESOLUTION 105C (Outsourcing): "Before a lawyer retains or contracts with other lawyers outside the lawyer's own firm to provide or assist in the provision of legal services to a client, the lawyer should ordinarily obtain informed consent from the client and must reasonably believe that the other lawyers' services will contribute to the competent and ethical representation of the client."

Representation is ultimately the end-client's choice, with the responsibility of ensuring confidentiality and competence throughout the prosecution chain resting firmly on their immediate prosecuting attorney's shoulders. As it should be. This sums up the end-client attorney's relationship with an outside firm's counsel. But what about the end client attorney's relationship with an outside firm's paralegals?

NONLAWYER GUIDELINES

Courtesy of Guideline 7 from the ABA Model Guidelines for the Utilization of Paralegal Services: "A lawyer should take reasonable measures to prevent conflicts of interest resulting from a paralegal's other employment or interests. The independent judgment of a lawyer should be exercised solely for the benefit of his client and free from all compromising influences and loyalties."

Once again, the responsibility to ensure confidentiality and competence throughout the prosecution chain lies squarely within the end-client prosecuting attorney's purview. At issue is this: what responsibility does the firm have that outsources their paralegals?

OUTSOURCING FIRM GUIDELINES

RESOLUTION 105C's Rule 5.3 "Responsibilities Regarding Nonlawyer Assistance" commentary explains it thusly: "... requires lawyers with managerial authority within a law firm to ensure that the firm has in effect measures giving reasonable assurance that nonlawyers in the firm and nonlawyers outside the firm who work on firm matters act in a way compatible with the professional obligations of the lawyer."

Rule 5.3 addresses both the outsourcing law firm's inside and outside nonlawyers working on the firm's (internal) matters. What is missing are rules (even mere guidelines) governing their nonlawyers who would work on matters OUTSIDE of their firm.

File that one under a potentially exploitable loophole that should give prosecution attorneys in search of outsourced paralegal services something serious to think about.

UNNECESSARY COMPLICATIONS

The end-client relies on their prosecution attorney to get their matters prosecuted. The end-client's prosecution attorney relies on their paralegals to perform their non-lawyer prosecution and filing functions. Quite the simple arrangement actually, as long as the paralegals are completely independent of possible access by - or influence from - another attorney.

If they aren't then it becomes a situation of multiple roosters in the hen house who are left to hammer out "eyes only" agreements so a paralegal can ethically be allowed to engage outside work. An exercise that necessitates an inordinate amount of CYA negotiation, red tape ... and "reasonable measures" of faith in the outsourcing firm's adherence to ethics and confidentiality.

Additionally partners and principals are typically responsible for final review and approval of staff compensation. So out of curiosity, if there is truly an impenetrable confidentiality wall between a law firm's reviewing attorneys and their outsourcing paralegals, how are their paralegals' outsourced technical performances QA'd and evaluated? Military-style internal knowledge testing? Customer feedback?

The short answer is no one's supposed to ask that question.

OF GENUINE CONCERN

Savvy prospectors will eventually figure this out and likely react accordingly. Resultantly one would expect some publicized reorganizations, or not-so publicized vested ownership name juggling, to address this. All so as not to reflect attorney involvement. This could particularly effect firms coming from backgrounds outside of IP prosecution, or IP litigation divestitures who rely (still) on teams of supervised support reps to perform prosecution paralegal functions.

The hard questions are thus ... why would a client's 1st response IP prosecution law firm contract another IP prosecution law firm's paralegal? What prevents the end client from bypassing their 1st response law firm altogether and going directly to the law firm that employs the paralegal? Could that be the real end game for these paralegal service providers? If it is, are there ABA client development Rules implications associated with a law firm essentially marketing their own nonlawyers as independent contractors? What affect will this have on the IP prosecution industry's small law firm and solo practitioner business segments?

Money doesn't make the world go 'round ... the sun's gravity and angular momentum do. Though both the sun and money can have an equally blinding effect when stared at for too long. Having an IP attorney presence with a vested interest anywhere in an IP paralegal services operation may unceremoniously deposit the contracting paralegal, as well as the end client and the attorney who operates between them, deep inside of Pandora's Box. How much of this the industry is willing to tolerate engenders a lively roundtable that could prove most interesting.

In Part 3, operational challenges which prospective IP prosecution paralegal services firms must embrace will be dicussed.