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.


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Join the Discussion

6 comments so far.

  • [Avatar for screwedbylaywer]
    March 23, 2010 10:16 pm

    this firm has left many people hanging and did not do a very good job in serving their clients near the end at the very least.

  • [Avatar for Another Old Timer]
    Another Old Timer
    March 20, 2010 04:08 pm

    I agree fully with what Old Timer writes: “Darby is folding for the same reason that all the other Bigtiques have folded. The money in this business is in litigation, not prep/pros.”
    I was in contact with Darby & Darby way back in 1984, when it had its offices at the prestigious Chrysler Building in Manhattan. I was then a patent attorney for a European corporation that entered the US markets that year through a joint-venture deal with a big consumer electronics outfit in the US. Darby’s professionals helped us admirably in our search for possible patents infringements. I found their services helpful, while at the same time being very friendly and cordial. This old venerable IP boutique combined professionalism with a touch of warm personal service- a rare quality in present day mega-law firms, who are more interested in milking their clients with a $400+/hr rate, than in offering a warm human touch to the rather boring patents business.

    With an ongoing boom and explosion of patents litigation in the US- especially in the mobile phones business – it is a pity that old established names like Darby & Darby are vanishing from the scene. One would expect that this boom in patents litigation would provide more work for patent lawyers with experience in that particular area. Darby really had experience in this area.

    Or has the business of patents litigation become so large in volume, that such IP boutiques like Darby & Darby simply cannot compete with those big law PLLs that have 1000+ staff? Are law firms becoming some kind of “WalMart” department stores, that offer you everything you need in legal services but without that essential human and personal touch? What a pity!

  • [Avatar for OldTimer]
    March 17, 2010 05:59 pm

    Darby is folding for the same reason that all the other Bigtiques have folded. The money in this business is in litigation, not prep/pros. Their litigators have been leaving to go to big GP firms where they can build a bigger empire and make more money. Every time a litigator leaves the high-margin litigation part of the pie shrinks and the low-margin prosecution part of the pie grows. The last time I checked Darby had 40 some lawyers and 20 some patent agents. You can’t run a NY law firm with those kinds of numbers.

  • [Avatar for Jerry Stanton]
    Jerry Stanton
    March 16, 2010 04:13 pm

    I’m not sure if I believe Darby was done in by competition from full service firms, which is the premise underlying Gene’s conclusion of the beginning of the end of the boutique patent firms catering to corporate patent work. I recall reading of a large and storied general practice firm in San Francisco that closed up shop last year. They’d gotten into the habit of taking a loan to pay bonuses and oeprating expenses at the beginning of their fiscal year, which in recent years took them 9+ months to pay off. As the economy tanked a few partners got cold feet and left, too many, which violated the terms of the loan. The bank called it in, even more partners left, the firm couldn’t pay and had no choice but to close their doors.
    Now I have no idea whether Darby was so boneheaded as to pay bonuses out of a loan and my own bias is that a boutique patent firm is likely a bit more conservative cash-wise than the average large GP firm, but apparently partners have been leaving Darby over the past few years. The business of lawyering is relationship based and each partner has a good shot at taking his own clients and a few extras with them when they leave. A few of those defections and any firm would be in dire cash straights trying to manage high-dollar asssociate payroll while keeping some consistency for remaining clients.
    Why those Darby parners left I think is the key to why Darby’s closed up. I’ve seen Darby’s NYC rates and they didn’t leave because they could bill much higher from the offices of a general practice firm. Maybe the GP firms saw it was easier to expand by pirating talent with thier own book of business from Darby than by organically growing it themselves, or maybe the defecting partners saw some writing on the wall early on. Whatever the reason, I think the evidence is not in to conclude that Darby is closing because corporate America/Europe wants one stop legal shopping.

  • [Avatar for old curmudgeon]
    old curmudgeon
    March 13, 2010 01:07 pm

    It seems bizarre to have now outlived, just in the past few years, several of the most famous patent law firms of our patent law youth, the prestige leaders in IP litigation for so many generations. [Besides Darby & Darby, it has been Pennie & Edmonds; Fish & Neave; Morgan & Finnegan; and Kenyon & Kenyon, as I recall? All in NYC?]
    [Of course many [but by no means all] former partners and associates have been absorbed into giant GP law firms [which no longer refer any client IP work out to specialized IP firms unless the clients do it themselves].
    I believe that this is further exacerbating a great divide between PTO practice and patent litigation, in which fewer and fewer attorneys doing patent litigation seem to have ever had any working knowledge of what goes on in the PTO in obtaining patents, and don’t care as long as they can produce enough litigation billing hours to meet the ravenous billing demands needed to retain their jobs in those giant impersonal businesses of 1000 or more attorneys. This trend of patent litigation by those who have never practiced before the PTO or even the CAFC does always not bode well for clients who need, for example, reexaminations, reissues, Board appeals, CAFC appeals, etc. While, on the other hand, most of those now preparing and prosecuting patent applications these days have not had any direct litigation experience and too often lack appreciation of how their PTO work may affect their patents if they are ever litigated, and are now often [unlike litigators] under severe cost constraints precluding adequate training, supervision or review. Many of the patents now being obtained as cheaply as possible will never be infringed or otherwise be fit for litigation, except from conciencious senior members of low overhead small firms.

  • [Avatar for patent leather]
    patent leather
    March 13, 2010 02:14 am

    Those who previously predicted the demise of the small to mid sized IP boutiques were flat wrong. With companies cutting their legal budgets, the huge overhead at the big firms (both IP and general) means partners with billing rates of $400+. Darby & Darby is (was?) a great firm, but can they really write a better patent application than a competent lawyer at a smaller firm? My answer is, generally speaking, no. I already see lots of work being sent to smaller firms and I think the trend will continue.

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