Darby & Darby Dissolving after 115 Years in Business

Earlier today Darby & Darby, one of the oldest intellectual property boutique firms in the United States, announced that they are dissolving. The announcement, which seems to have come without much warning, confirms rumors that started swirling last night that an abrupt end was near for the firm that has been in business since 1895. Darby & Darby has offices in New York, Seattle, Washington DC, Palm Beach Gardens and Frankfort. Details remain murky, and no one seems to know exactly when the doors will be shuttered, but here is the text of the announcement:

It is with a heavy heart that we announce that after more than 100 years in continuous operation, Darby & Darby will begin the process of winding down the firm in anticipation of an orderly dissolution. While we continue to have exceptional clients, from individual inventors to Fortune Global 500 Companies, and remain profitable, many of the factors frequently cited in demise of other firms’ have made a similar impact on us.

So why would Darby & Darby elect for an orderly dissolution when they have clients many firms and attorneys would love to have and they remain profitable?  It is unclear, but the reference to the factors cited in the demise of other firms does provide some clues.  Increasingly the IP boutique firm is disappearing.  The first sign of trouble is the mass exodus of attorneys who leave to go to another large firm that has or wants to develop an intellectual property department.

It seems it is increasingly difficult for large IP boutiques to compete in a world where full service mega-firms continue to grow and are capable of providing one-stop-shop services to meet all the needs of a client.  This seems to be true of Darby & Darby as well, and if what they say can be taken at face-value, it seems that the decision to dissolve was made prior to the acceleration of a downward spiral.  Perhaps Darby & Darby just wanted to go out on their own terms, rather than as a result of mounting financial pressure.

According to the homepage of Darby & Darby, the firm describes itself as follows:

Darby & Darby, P.C. is a full-service intellectual property law firm. As one of the oldest intellectual property firms in the world, we have long been an important player in pioneering and precedent-setting IP matters. Our attorneys hold advanced technical degrees and have distinguished academic credentials. We are intellectual property strategists, counseling our clients on how to maximize the value of their patents, trademarks, copyrights, and trade secrets.

There is no doubt that Darby & Darby has been a major player in the intellectual property world for a very long time, and while it is never easy to see the dissolution of such a venerable name, and even harder to watch our friends and colleagues go through the associated stress of such a closing, in time the industry will absorb the attorneys and support staff and the industry will proceed onward.  At a time with such economic upheaval, such a loss could find many looking for work longer than usual though.

Over the last 6 to 12 months there have been a variety of anecdotal reports that business is down everywhere all across the board.  The industry-wide data in terms of patent filings at the United States Patent and Trademark Office do not bear out the level of industry decline that many speak of.  I have no doubt that those who report such a decline are accurately reporting what they are seeing, but the numbers across the industry, at least on the patent side, do not tell the same story.  In fact, fiscal year 2008 saw a record number of patent applications filed at the USPTO, and while down for fiscal year 2009, FY 2009 saw more patent applications filed than any other year except for FY 2008.  Reports emanating from the campus of the USPTO suggest that so far FY 2010 is ahead of the predicted pace, and if Congress would allow the USPTO to keep all of its revenues in FY 2010 the $200 million hole may fill itself simply due to increased filings over projections.  So something is not adding up.

It seems that there is a major reconfiguration within the patent law community.  I know large firms that have patent departments that have an extraordinarily large amount of business that continues to grow despite what many might call exorbitant hourly rates.  I also know many small firms that are also seeing a large increase in business, and some of the patent searchers I talk to tell me they see the same.  So why then are some reporting extraordinary decreases in business?

In the past I have opined that the days of the mahogany table, marble floor law firms is gone.  I think that is too simplistic though.  It seems that there is a growing tale of three sectors of the industry.  There are those that cater to independent inventors primarily and offer extremely low price points.  There are those that cater to entrepreneurs and small businesses primarily and offer a price point much higher than independent inventor prices, but substantially lower than large firm prices.  Then there are those who primarily cater to well established corporations with large intellectual property portfolios.  It seems that in this higher end segment the large IP boutique firms simply can no longer compete with the large mega-firms that can handle anything a Fortune 1000 clients walks in with as an issue.  So it seems to me that where the squeeze is coming, and where the stories of dramatic decline are most prevalent, are in the once dominant large IP boutique firms, such as Darby & Darby.

Even this analysis, however, likely over-simplifies matters.  One thing I have come to realize through my career is the legal IP industry is rarely constant.  Yes, the longevity of the large IP boutiques masked the dynamic nature of the legal IP industry for a very long time, but attorneys are always on the move it seems.  For some time there has been a revolving door at IP firms, particularly patent firms.  Large firms work many associates like slaves and eventually they move on to greener pastures, whether that be in house or out on their own where they can make more money and work half the hours.  Head hunters are always looking for candidates to serve up to large firms, at least before this last recession anyway.  The calls from head hunters are a part of the industry and if you are looking out for yourself and your family you might just take a better offer, which is certainly anything but unheard of.  So there has always been turmoil within the industry, but never before has it been so obvious in light of the number of old and well regarded IP boutiques that have gone under over the last decade.