IP Law Fills Legal Niche; Patent Lawyers Hustle to Keep up With Business

Patent law must be the only legal sector that discourages more business than it pursues.

The antithesis of their ambulance-chasing cousins, intellectual property (IP) lawyers routinely point potential clients to less-expensive resources or advise against seeking patents, copyrights and trademarks altogether.

They can afford to be so magnanimous. The demand for IP counsel in Arkansas is rising, and there are only 20 licensed patent lawyers and seven patent agents in the state. Patent agents are licensed by the federal patent office bar, and patent lawyers are licensed both by the patent office and a state bar.

Local estimates for the IP market range from $750,000-$1 million in Northwest Arkansas and $1.7 million-$2.5 million statewide. But that does not include in-house IP work at corporations or out-of-state IP business done by large firms such as Wright Lindsey & Jennings LLP in Little Rock. With three patent lawyers, including Chris Daugherty in Fayetteville, WLJ operates the largest Arkansas-based IP practice group.

The firm declined to say what percentage of its business is IP related.

From filing to approval, one local 24-month patent process costs $7,000-$10,000. The cost rises if complex disciplines such as nanotechnology are involved. In a market like Dallas, the norm is closer to $15,000-$20,000 per patent.

IP litigation is billed locally from $150-$250 per hour, and there’s plenty of trademark, copyright, licensing and franchise work to supplement patent filings.

Robert R. Keegan is a patent lawyer with the Fayetteville office of Head Johnson & Kachigan, an IP boutique based in Tulsa. Keegan said when he opened his original practice here in 1973 it was a rarity to see an Arkansas-based patent appear in The Official Gazette of the Patent Office — once the industry’s premier trade journal.

But Keegan, 74, said times have changed.

According to statistics from the United States Patent & Trademark Office in Washington, D.C., Arkansas inventors have received 3,937 patents since 1970. During the 1980s, the state’s annual average was 104 patents. But that average jumped to 203 during the 1990s.

And through the first six months of 2002, 118 patents have been obtained by Arkansas inventors — putting the state on pace for 236 this year. More than a third are expected to come from the six-county northwest corner.

The University of Arkansas alone, which farms out its patent business to a roster of IP firms, averages 12-15 approved patents per year in Fayetteville. Scott Hancock, the UA’s technology licensing manager, said that figure will grow because of the amount of research now being done on campus. Lately the UA’s patent applications have totaled 30 per year.

“The pipeline is pretty full,” Hancock said. “And we should be reaping the fruits of that in the years to come.”

Friendly advice

Allen Bennett, a patent agent with HJK in Fayetteville, said small business owners stop by often to ask about trademarks and patent rights. Especially if the firm is just starting out, Bennett tells them how to get basic IP protection on their own.

State trademarks, for instance, only cost $35 and are available through the secretary of state’s Web site. Basic copyrights are inexpensive, too.

“Some IP attorneys try to get as much money as possible out of everyone who walks through the door,” Bennett said. “But if we help someone, then maybe when it’s time for them to get a federal trademark or do some licensing they’ll come back and see us.”

Patents are a little harder to come by.

Most often, Bennett said, people think a patent is needed to manufacture a product. All a patent does is help prevent other parties from copying and profiting from an invention or concept without compensating the inventor.

Infringements can be unintentional, and willful infringement must be proven to win punitive damages. Typically, a $100-$200 cease-and-desist letter stops any problem.

The biggest mistake inventors make is believing a patent guarantees success.

“The natural assumption is that you get a patent for something and go cash it in for a million dollars,” Keegan said. “But if you get your business going and have a patent, then you’ve got something. If you don’t get your business going, what you have is a piece of paper to hang on the wall.”

Sold on local

Arkansas is still a babe in the patent game. California inventors, for instance, have received 272,786 patents since 1970. But inventors don’t hesitate to use local practitioners.

Jake Bushey, president and CEO of Canadian-traded Delta Systems Inc. in Rogers, said he would recommend dealing with a local IP firm whenever possible. HJK, one of four local IP shops, helped Delta acquire two patents and the trademark rights to its SoftFlow software. Delta has a third patent for its packaging machinery pending.

“It’s much easier to sit in front of the lawyer and explain what you do,” Bushey said. “We’ve tried patent attorneys in Toronto and New York, and it’s difficult to get your message across from a distance.”

David Harris, president of Harris International Laboratories in Fayetteville, invented a rust elimination product called Evapo-Rust and applied for a patent in late 1999 through HJK. He has since filed for an extension but said getting everything done right was worth it.

“We felt like a patent gave us a little bit of credibility,” Harris said. “Whenever you have a product that’s new and revolutionary, people may tend to think it’s snake oil. And even though it may be 2003 before we’re done, having a patent pending has helped prevent a bigger company from coming in and duplicating our product for someone like Wal-Mart.”

Patent vets

Keegan wrote the original patent for inventor Gordon Gould’s 1959 creation — the first laser. Keegan, a Lawton, Okla., native, was with the Darby & Darby firm in New York from 1956-1973 before moving to Fayetteville. He merged with HJK in 1995.

Jim Head and Paul Johnson — two of Keegan’s Alpha Tau Omega fraternity brothers from Oklahoma A&M University (now Oklahoma State) — were running HJK, and the fit seemed natural.

Keegan said business has always been good, but because Arkansas was mostly a well-kept secret until the 1990s many of the largest firms didn’t see the need to pursue patents. They simply enjoyed the anonymity of the Midwest and opted to establish trade secrets protection by limiting access to their formulas and processes.

Half of HJK’s business today is patents. Another 30 percent is trademarks. The 50-year-old firm’s Randy Head is the only patent searcher in Arkansas.

Head verifies existing patents and helps companies avoid infringing on them. Patent searches run $600-$800.

Trent Keisling, a registered patent lawyer in Fayetteville, left HJK to start his own firm last year. He said IP litigation work and hunting equipment patents keep him the most busy.

“I do a lot of work for Wal-Mart vendors,” Keisling said. “There are a lot of companies on the East and West coasts that have patents that they feel cover certain intellectual property rights. Of course, Wal-Mart doesn’t like to back down from many fights.”