Save Costs, Not Quality
Dr. Kfir Luzzatto reveals his tips for an economically sound IP management, which will help you navigate through lean times.
These are difficult times for IP owners. The economic pressure they feel daily is inevitably passed on to the patent law firms that manage their intellectual property. Faced with the need to accommodate their clients’ demand for reduced costs, many patent law firms around the world have resorted to cost-cutting schemes that adversely affect the quality of the work they can provide, on the assumption (which, sadly, is often justified) that it will take a long time -- typically years, if ever -- before the client realizes that the quality of the work has deteriorated, but on the other hand he will see the cost savings immediately.
One of the most dangerous schemes is that of "cooperative work". Firms that operate in that way employ professionals on a "pay per charge" basis, according to which the professional is paid a share of the revenues that the firm receives from the client for which he has done the work. In many cases the professional is paid a low, and even only a nominal salary, which the firm recoups from the billing that he generates.
The advantages for the firm are enormous and evident: it in practice acts as an intermediary between the professional and the client, receiving a good cut of his billing, while relying on its existing infrastructure and without having to pay him a real salary. In some cases, beside the administrative support, all the firm has to worry about is giving the professional a laptop or a PC, and allowing him the use of the office facilities, such as meeting rooms. This scheme lets the firm grow to a large size without investing the sums of money that a conventionally-run patent law firm needs to spend. As long as there is enough work to be distributed between the various professionals the scheme works, and if the volume of work diminishes it's no skin off the firm's nose: the professionals will make do with less or will look for work elsewhere.
While at first sight the above may seem a clever scheme, implementing it may lead to disastrous results. Some of the immediate consequences of the setup described above will be briefly described below:
Courting dishonesty. The cooperative scheme proverbially places an obstacle in the blind man's path, inasmuch as it directly links the salary of the professional to the hours he bills on behalf of the firm. While we would like to think that everybody is honest, it would be naïve to assume that heavy overbilling does not ensue. This means, for example, that if ten hours are needed to perform a specific task with good quality and giving it the required attention, a professional may be tempted to bill those ten hours, but to spend only six or seven of them actually on the job, using the remaining time to do work for a different client.
The end of intra-office consultations. One of the advantages of a firm that employs a number of professionals in the same field and in closely-related ones, is that whenever a difficult question arises, or doubts bother one of the professionals, he can consult with his colleagues and benefit from their knowledge and experience. In the environment described above this is no longer possible because consultations within the firm are not for free. Absurd as it may sound, professionals working in the same firm will bill one another at the end of the month for the time spent in helping their colleagues. Therefore, any attempt to do a better job for the client results in an out-of-pocket expense for the professional. This effectively kills the practice of intra-office consultation.
The end of quality control. Some firms may turn a blind eye to the practice of overbilling, perhaps quieting their conscience by saying to themselves that they are saving costs to the client because their reduced operational costs allow them to charge less, and that the client should take the rough with the smooth. However, they confront a bigger problem: the control that the firm retains over the quality of the work done by its professionals is limited at best. The temptation to grow more and make a good profit with little overhead, also inevitably leads to a situation in which quality control is not practically possible, because the billing professionals greatly outnumber those who can exercise proper technical control over them.
In the personal opinion of this author (which, no doubt, may and will be challenged and criticized) the only way in which high quality professional work can be delivered to a client in the IP field is by severing the direct linkage between the professional work and the wages. In other words, there should be no pecuniary considerations involved in the professional work done by an employee for a client, and every professional should know that he will not suffer financially for spending the amount of time needed to do a proper job. That does not mean that the efficiency of the professional is not at scrutiny, or that he is allowed to spend an unreasonable amount of time doing a job -- all that belongs to the quality control process which must be in place and which is a basic requirement. However, the professional must know that he has nothing to gain by overbilling and that, quite to the contrary, performing his job inefficiently will not reflect well on him.
So how can you know if you're walking into a patent law firm that is free from the issues described above? The first question you should ask them is on what basis does the professional assigned to your work get paid. If he receives a monthly salary that is independent of the work he does for you, then you may assume that the problem does not exist. However, beware of situations in which the firm gives him "bonuses" of any kind that are directly linked to the work he does for you; regardless of how nicely it may be dressed, any such remuneration scheme is not in your best interest as a client.
But then, you will ask, how do I save on costs? The truth is that there is no universal scheme for saving costs and at the same time maintaining quality. Cost savings are achieved through accurate planning that must be tailored specifically to your needs. Many patent law firms in recent years have struggled with the problem and have come up with ingenious ways to help their clients save costs, without negatively reflecting on the quality of their work. Cost savings indeed can and should be achieved by streamlining the firm’s work, but also and principally through a thorough understanding of the needs of the client. It should be a major item on the agenda not only at your first meeting with the firm you are engaging, but constantly and periodically in discussion with the firm, because circumstances and opportunities change with time.
Giving up quality to save costs is the easy way out through the wrong door. So before you touch that doorknob you will do yourself a service by considering first what lay behind it.
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