IP service providers: a more cost-effective solution post M&A?
Mergers and acquisitions (M&A) continue to trend upwards in the life science sector. This has proved fertile ground for more specialist intellectual property service providers to offer their post-M&A services at a fraction of the cost of traditional law firms. But does this mean the law firms which traditionally have done this work are making unreasonable levels of profit in post-M&A IP activities?
In the example discussed below, a corporation’s traditional law firm quoted $638,000 for a recordal project that Dennemeyer would have performed for $243,100. To this author, it seems as though the corporation could have been a bit more careful with its money. In addition, Dennemeyer, CPA Global, Brandstock, and Valipat provide outsourced recordal services.
Recordal projects follow most M&A transactions—the term “recordal” is used to describe recording the change of ownership of IP assets with patent and trademark offices around the world. The term applies to recording a name and address change, as well as security interests and licences.
The recordal process is gruelling, boring, and essential.
These projects are an administrative burden that a company’s IP department must address after M&A. However, many departments don’t have the resources to take on the recordal project with speed and accuracy, both of which are essential for maintaining a solid and profitable IP portfolio. For this reason, IP departments have typically sought help from their outside counsel. This is especially true in the life sciences industry, where the IP portfolio drives the business value and stock price.
What makes a recordal project so taxing?
Recordal projects typically include 11-plus steps for each country where you record a change. It is a rudimentary, but lengthy, process. These steps include:
- Verifying data before filing;
- Preparing all forms;
- Engaging local agents;
- Obtaining translations when necessary;
- Notarising (where needed);
- Legalising (where needed);
- Filing all forms;
- Paying all official fees;
- Receiving official certificates;
- Verifying official certificates; and
- Correcting errors that may arise on these certificates.
Now imagine multiplying these steps by each country you have an IP right in and for each right itself. This list alone creates a substantial reason for corporations to want to simplify and fast-track this process.
What options are out there?
Many companies just don’t have the necessary resources within their departments to handle such a draining project. Law firms have long been the go-to resource that provide recordal services post-merger. They offer trusted legal expertise and the convenience of being a one-stop shop for all legal post-merger activity. However, you then pay law firm pricing for a gruelling, but straightforward, process, which can be steep.
"MANY COMPANIES JUST DON’T HAVE THE NECESSARY RESOURCES WITHIN THEIR DEPARTMENTS TO HANDLE SUCH A DRAINING PROJECT."
An alternative has emerged with specialist IP service companies that provide solutions to streamline this post-merger process. These companies provide more cost-effective and time-efficient recordal services. This has also rooted a trend of law firms outsourcing their recordal projects to these companies for their clients.
Recordals down to a science
Specialist IP services companies—CPA Global, Dennemeyer, Brandstock, and Valipat, to name a few—offer an enticing alternative with offerings of competitive fixed costs, quick turnaround times, and the comfort of working with staff who do hundreds of recordal projects. With extensive expertise in local and foreign jurisdictions and strong established agent networks, companies such as Dennemeyer and CPA Global are able to negotiate competitive fees due to higher volume. These companies ensure fast and accurate services, thus mitigating the risk of errors.
CPA Global asserts that law firms will typically charge an hourly rate that racks up prices to extreme levels. It also points out that law firms have less negotiation leverage with foreign agents and may be inexperienced with each jurisdiction’s local procedures. These factors create a huge damper on efficiency and escalating costs, so one might ask: how are law firms still in business for recordal services?
Dennemeyer recently held a webinar discussing its recordal services. By outsourcing the work and acting as the intermediary for the client, the law firm is able to increase profits. Dennemeyer’s recordal services’ efficiencies and expertise are applied to the project, which result in a much lower cost than that from a typical law firm.
How much does outsourcing these services typically cost?
According to the recent Dennemeyer webinar, a law firm can charge anywhere from $600,000 to $940,000 for the global, post M&A recordal project described in the webinar. The price will vary based on a number of factors such as the number of IP rights, number of countries, and quality of data.
An example scenario from the webinar showed a recordal project with approximately 1,000 IP assets in 115 countries, not an unusual size for a global life sciences company. A law firm quoted $638,402 for its services. Dennemeyer would have charged $208,310 for the same project. Dennemeyer attributes the cost savings to its scale, work efficiencies, and extensive agent networks.
For this same project, it was estimated that the law firm would have made approximately $243,100 in profit if it did the work itself. If this example is typical, it is difficult to understand why corporations would work with their traditional law firm as opposed to outsourcing the recordal process to firms such as Dennemeyer or CPA Global.
Is it wrong to pay higher fees to traditional law firms?
Leon Steinberg, managing director, North America for Dennemeyer, points out that Dennemeyer does recordal projects for law firms and corporations. He states: “As corporate legal departments become more budget-conscious, they are more likely to outsource recordal projects to specialised entities like Dennemeyer.”
According to Steinberg, “the days are coming to an end when corporations will pay their law firm’s high rates when more cost-effective alternatives exist that provide the same or higher levels of service and reliability.”
The reality
Life sciences companies need a provider with a global reach to handle their often extensive IP portfolio changes. The reality is that most life sciences companies’ IP departments do not have the internal expertise or bandwidth to do the recordal projects themselves without affecting other vital activities.
The use of outsourcing creates a more efficient and effective recordal project. This saves the life sciences company time and resources and also saves them from potentially costly mistakes such as losing an IP right through process errors. Rather than internal resources being fatigued with the recordal project, they are concentrated on harnessing the company’s IP for growth.
Dennemeyer paid for the placement of this article. Dennemeyer also provided editorial input to the author.
Melissa Pillote is the chief content officer at DoveMed. She has a master of science law degree from Northwestern Pritzker School of Law in Chicago and a bachelor’s degree from the University of Illinois at Urbana-Champaign. She is also a freelance writer. She can be contacted at: mpillote@dovemed.com
