I was commenting recently on the problems of bringing patent counsel into a university technology transfer operation. Arguments in favor are cost savings, direct control over patent work, consistency, and convenience. But the reasons for not doing so are stronger. As I worked through the matter, I realized it was not just an argument, but a list. So here goes:
- Internal pulls talent out of circulation. The in-house counsel sees what the university sees, while an outside specialist sees the varied work of a lot of clients who have actual products, markets, and agendas. This sense of perspective is hugely valuable in framing patent work. I want someone who is in circulation. Catch and release–good for both trout and patent counsel.
- Inside counsel appears to cost more when all expenses are fully accounted. An attorney with a firm has access to a range of resources that goes well beyond whatever rate is charged for work. The software, the communications, the database, the subscriptions, the professional development, the insurance, the technical drawings, the connections with other specialists are already developed in a good law firm. Going it alone means rebuilding all that infrastructure on top of the marginal costs of more staff.
- Inside counsel makes patent work political. Outside counsel is not so nearly exposed to university politics. So a dean or chair doesn’t like a particular inventor or invention. Outside counsel doesn’t care and just does the best job possible with the patent work. But inside counsel is party to the politics and has to decide who has got the power in the organization. There will be favorites.
- Outside counsel covers the work better and is easier to choose and to change. Working with a firm means not having everything wait when someone goes on vacation or gets sick. Folks can cover for the work. Furthermore, every inventor is not well matched with any particular counsel every time. Sometimes an attorney who is great on one technology area turns out to be not so good on another. If one is using outside counsel, one has more choice in where to place a case, and if things aren’t working out, can move the case. With inside counsel, one is rather stuck with who one has got–unless, of course, one decides to use outside counsel some of the time (or fire inside counsel every time things go badly). In-house counsel makes it harder to match inventions with a specialist with inventor. It’s not possible to hire everyone to be type-O.
- With internal work, you can lose attorney-client privilege and enable public disclosure discovery. University in-house patent work may take the form of a patent agent, which doesn’t have standing for attorney-client privilege. And an attorney writing patent applications may not have standing to provide 0ther legal services to the university (if not authorized by general counsel, or not part of a state legal team, in the case of some public universities). Communications with such folks–employees with legal training but not attorneys–may be discoverable, and at a public university, discoverable by means of a public records request. It may be a good thing for the public to know this stuff anyway, but it’s not necessarily what folks are thinking about when they decide to drop their outside law firms.
- Outside counsel gives better protection in case of a dispute. So let’s say someone messes up when you are using your own in-house patent drafting. Missed a bar date. Did a lousy job on the drafting. It’s all on your head. But if it’s outside counsel, then there’s some chance for dealing with your law firm’s liability insurance and with other firms to get things right, rather than having to defend your own office.
- Inventors may get a better, independent picture from outside counsel. Given the politics, the money, the university claims of ownership, the administrative overhead, and the uncertainties, a good outside counsel provides a sense of perspective. For inside counsel, there’s always the party line, and that’s not necessarily the thing that gives inventors confidence in the work.
- There is value in choosing law firms to do work based on future licensing considerations and due diligence. Your in house counsel may be good, but likely doesn’t carry much name recognition for investors and possible licensees. But if one is using a firm with a solid reputation, then that’s something to add to the non-IP intangible assets (NIPIA) created in the process of obtaining the patent.
- Cost recovery may be complicated by use of in-house counsel. For outside work, one has a budget and billing records–even better if it is a fixed fee structure. But accounting for internal expenses is much more difficult. One has to have a timekeeping system, has to include benefits and other overhead, and may have to also include supervisory and direct report expenses. For all that, some universities have license income sharing policies that allow recovery of out of pocket expenses (like outside counsel) but not for their own expenses. A big oops there if one is using internal counsel.
- Outside counsel makes easier the transition for inventors and entrepreneurs. If outside counsel has started the effort, then as an invention develops, those working with counsel can continue to do so, even if they leave the institution. Yes, there may need to be an ethics waiver to represent both the inventors and the institution, but that transition is not going to happen at all with internal counsel.
There is another area in which the analogy to company treatment of IP breaks down. While a company may use in-house counsel to protect trade secrets, to consider aggressive company strategies that folks may not want to become known, and to gain a remarkable expertise with company products, markets, research, and competitors, universities and especially public universities have little to none of this. Universities do not have trade secrets (or have a harder time justifying research trade secrets for long), do not have robust marketing strategies for technologies that are secret, and especially don’t have markets or products or, rightly, competitors (except, perhaps, for recruiting star athletes and faculty). Universities require something different. It’s no good trying to adopt this “best practice” from industry. To try to play at being just like industry requires a change in university culture, all right–but that change would leave the university as no longer a university.