San Diego Biotech Lawyers Thrive Despite Economic Downturn

Daily Journal Staff Writer

SAN DIEGO - Although many businesses are reeling from the ailing economy, the area of intellectual property appears to be thriving.

One place where that phenomenon stands out is San Diego County, where biotechnology start-ups rose from 47 companies in the first quarter of 2008 to 76 in the second quarter, ranking second to Los Angeles County statewide.

According to San Diego-based BIOCOM, a trade organization representing 575 life sciences company members, service providers and research institutions, the area's life sciences community employs 40,000 people at 700 companies in biotechnology, medical devices, diagnostic and technology businesses and institutes.

With that kind of growth, the need for lawyers to handle the new companies' patent work hasn't been far behind.

"Patent prosecution in some ways is a more recession-proof business because anybody interested in innovation is investing in a time horizon that is much longer than any current downturn in the economy," said Richard L. Blaylock, a partner and intellectual property attorney in San Diego County's Carmel Valley office of Pillsbury Winthrop Shaw Pittman.

But although business looks good now, some lawyers expressed concern that if the economy continues to weaken it may drag down their business, too.

"The work level is the same, but everyone feels more nervous," said Richard E. Campbell, who heads the patent prosecution and counseling practice group in the San Diego office of Procopio, Cory, Hargreaves & Savitch. "It's not good for our ulcers."

Meanwhile, John C. Phillips, managing principal in the San Diego office of Fish & Richardson, said his firm is "as busy as ever."

"So far, so good, knock on wood," Phillips said. "We have survived other economic events."

This year, Fish won four major victories for Microsoft Corp., including getting a $1.5 billion verdict set aside. That case involved infringement allegations on two patents for audio coding in Windows Media Player and other MP3 devices. A San Diego federal jury found for Alcatel-Lucent, awarding it more than $1.5 billion in damages. Six months later, Fish attorney John Gartman and his team got the judgment tossed and the verdict set aside. The U.S. Court of Appeals for the Federal Circuit affirmed the ruling in September.

West Coast-based Knobbe Martens Olson & Bear also is experiencing growth. Joseph Mallon, a registered patent attorney in the San Diego office, said the firm has grown about 8 percent to 10 percent a year, pulling in work from around the world.

In one major transaction this year, Mallon and fellow partner Brenden Gingrich obtained several key patents for Orexigen Therapeutics, a San Diego-based biopharmaceutical company focused on the development of treatments for obesity and other central nervous system-related disorders.

In another transaction, Knobbe Martens patent attorney Eric Furman obtained two patents for Cytori Therapeutics, a San Diego start-up with technology for separating and concentrating a patient's own mature stem cells and regenerative cells for delivery back to the same patient in a single surgical procedure.

"I am optimistic that San Diego, with its resilient economic base, will come out at least as well or better than other regions of the country," Mallon said, noting the economic downturn.

One element that is bolstering the fortunes of intellectual property practices is a trend toward focusing more on the design of a product, rather than on the manufacturing side of the business, said Alan Blankenheimer, an intellectual property lawyer who recently departed Heller Ehrman for the newly opened San Diego office of Covington & Burling.

"You don't need an enormous capital investment to create wealth but a few really smart people to create ideas - and some good lawyers to help," Blankenheimer said.

James J. Mullen, of counsel in the San Diego office of Morrison & Foerster, and a member of its intellectual property practice group, said his office has been kept "insanely busy" by the technology-driven economy in the city and is hiring more lawyers.
"It is good to be a patent attorney," he said. "We have pretty solid job security."

In the last two months, the firm added three associates to its patent group, and made offers to two students for its 2009 summer associates program.

But not everyone was as upbeat about the future health of their firms.

Campbell noted that the battered real estate and financial industries could have a trickle-down effect on legal work, including intellectual property.

"If the economy slows down, the companies we work for could slow down, and we would feel some of that," Campbell said.

Mitchell P. Brook, a partner in Luce Forward's IP practice in San Diego, had a similar cautionary outlook.

"In our practice, the IP field is reasonably busy now," Brook said. "Our clients are still actively protecting their IP. Whether that will be true in 12 months is purely a guess."

Amar L. Thakur, a partner in the San Diego office of Sheppard Mullin Richter & Hampton, and co-chair of the firm's intellectual property practice group, also expressed concerns about the future.

"If the economy is in a complete depression by March of next year, we will be very concerned," he said.

In the meantime, he said, "We anticipate meeting our profitability target this year."

One area driving profitability, he said, is that intellectual property work has a "long window" to reach completion of a matter.

"People have filed cases early in the year, and if they are deep into a case moving forward, they won't abandon the case," he said. "We have a pipeline that goes well into the next year."

But, Thakur added, with the economic "free fall" now in play, clients who haven't yet filed might decide to wait.

But, generally speaking, Thakur said, "Litigation seems to be holding up. In moments of turmoil, people start pointing fingers."

Thakur has seen his group grow from two to 20 in the last four years.

"This year has been the busiest, a phenomenal year," he said.