Risk Management of IP firms

Why Your IP Law Firm Needs A Risk Management Audit

As lawyers, we help clients solve problems, get results, but also advise them on risk.  Clients rely on their lawyers for their expertise in the area—as well as their advice that is generally devoid of emotions.  But who advises lawyers and law firms on their risks?  Following the same thought process, and the adage of a lawyer being a fool as their own client, analyzing risk is not always appropriate as an internal process.  However, a foundational element of any risk management program is a set of appropriate procedures.

In fact, the USPTO Rules of Professional Conduct require practitioners in management positions to make reasonable efforts to ensure that their law firm has measures to conform to the USPTO Rules of Professional Conduct.  See 37 CFR 11.501.  While the USPTO has not explained what those measures are (or what reasonable means), ethics, risk management, and best practices dictate that some procedures are better than none.  Moreover, some insurance policies not only require law firms to have procedures or standardized documents, but some also require a review of those procedures to avail a firm of a policy discount (i.e., by informing the underwriter of risk-based improvements).

IP Firm Best Practices – Reasonable Procedures

The first step to analyzing your firm’s compliance with the rules of professional conduct and best practices is to review procedures, standardized documents, and recordkeeping.  While some firms may not maintain such formalities, a risk management audit can aid law firms in understanding weaknesses, and identifying improvements, including understanding the benefits of robust procedures and standardized documents.

IP firms especially should consider standard documents or templates, as well as policies surrounding topics such as:

  • Engagement (and disengagement)
  • File retention
  • Subject matter conflicts
  • Outside counsel guidelines
  • Intake
  • Billing
  • Cybersecurity
  • Mental health & Wellness

 Risk Management – Reviewing and Improving Procedures

Periodic reviews of procedures should follow and include all levels of the firm, from the partners to the paralegals, and even other support staff (i.e., marketing and technology).  For example, lawyers are responsible for the acts of their support staff.  See, e.g., 37 CFR 11.503. Therefore, in the event a marketing assistant mistakenly publishes advertising material deemed to be improper, law firm management are responsible for such conduct.  Specific to an IP firm, if a docketing assistant fails to calculate extendable time or pay a maintenance fee, the malpractice and ethics risk rests with the practitioner and firm.

Following the same logic, a review and risk analysis should be comprehensive.  A good risk management audit also looks to “soft touch” risks, including client satisfaction.  Are clients not only getting good legal work product, but are they walking away feeling content and satisfied—with an eye towards recommending the firm and lawyer in the future—or are they one step away from filing a lawsuit?  Understanding these issues not only mitigates risk, but also could improve outcomes and profitability.

Effective risk management is not about eliminating all the risks of running a law practice, rather it serves to help strengthen best practices and avoid common issues.  While risks vary from firm to firm and can depend on size, target client, management structure, lawyer pay, etc., the operational risks of IP law firms are extremely unique, as IP firms tend to have specific segmented risk.  An appropriate review by ethics and risk management attorneys who are registered patent attorneys provides an opportunity for law firms to learn and grow—or even simply to help create procedures and standardized documents.

1 thought on “Why Your IP Law Firm Needs A Risk Management Audit”

  1. I can attest to this being a very useful learning tool. We worked with Emil and his team to draft new processes and engagement letters in response to a review.

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