E-inVoicinG:
controLLinG
Your iP sPEnd
Domenic Leo provides a guide to e-invoicing
and spend management to gain control of
costs associated with iP assets.
2008 Issue
In the demanding world of intellectual property, corporate IP professionals often overlook an important business aspect of operations: How much does it really cost to develop,
protect and cultivate your portfolio?
Some industries, such as technology and pharmaceutical, can readily trace a return on investment. Consumer product firms can reference branding efforts and the income produced from products to add value to their IP portfolio. However, to fully understand the costs associated with IP spend, analysis must extend beyond these traditional measures.
Spend management, the practice of accessing metrics surrounding legal costs and leveraging that information to reduce costs, has been generally overlooked in the IP world. However, as C-level executives take an even more avid interest in company-wide financial performance and expenditures, professionals from most corporate environments agree that there is a need to explore technology that supports spend management.
Successful legal spend management relies on a variety of factors. Most importantly, it hinges on the first fundamental step: converting paper invoices from outside counsel and agents into an electronic format. This article will focus on the benefits of e-invoicing and the technology you can use to accomplish true IP spend transparency.
Tracking IP spend
Tracking costs relating to IP has been, traditionally, a challenging process. Developing an efficient method to gather and accumulate this information has proven to be difficult based on the variability and globalisation of IP portfolios. Priority filings for patents or trademarks are often complicated, expensive and time-consuming.
The worldwide filings of one trademark or patent can cost hundreds of thousands of dollars, spent in more than 100 jurisdictions over a span of years. By factoring in different languages, subject matter complexities and administrative obligations, it is easy to see that tracking IP cost is difficult.
Starting with standards
A critical component of successful e-invoicing relies on the metadata that populates each invoice line. IP e-invoice systems work best when there is accurate and consistent coding.
The absence (until recently) of industry standards for legal billing codes had led many law departments to create their own codes. This presented a major challenge to law firms and agents. Law firms and agents often need to use different code sets for each client. It is almost as if they need to speak a different language for each client. If IP departments, law firms and agents used the same codes, it would be easier to track IP spend and consistently report on the data.
Fortunately, the Legal Electronic Data Exchange Standard (LEDES), a not-for-profit organisation charged with creating and maintaining open standard formats for the electronic exchange of legal billing and information, ratified intellectual property code sets for billing related to patent and trademark expenses in July of 2007. It is the first of its kind for IP and provides legal professionals with standard, industry-endorsed IP billing description codes that promise to simplify law firm and corpo-rate legal department billing processes. Visit www.ledes.org to view the industry-endorsed IP billing code set.
The Basics
E-invoicing and legal spend management technology has flourished in corporate law departments throughout the past decade. However, e-invoicing and spend management for IP differs greatly from a general legal/litigation-based environment.
The preparation, prosecution and maintenance of IP involve a very different process than that of litigation. For every firm advising a company on a legal or litigation-related function, there is an average of eight firms doing the same for IP. The management of intellectual property includes more matters and firms, and a larger geographical spread.
Since IP e-invoicing is a relatively new practice, many lawyers perceive invoices as simply being a process of payment for legal services rendered. Fundamentally, this is true. But practically speaking, this is akin to seeing only a grain of sand when you visit the beach.
Collectively, invoices have valuable information stored in their line items—from rates to hours to work descriptions—all related to work performed on your IP portfolio. Compiling and analysing this data provides important information not only on how your department’s resources are expended, but also on how your patent or trademark agents and outside counsel are performing for you.
In order to examine the costs associated with assets effectively, e-invoices must be accurate and provide information for cost/benefit analysis. For example, the data gleaned from e-invoices can help identify if the preparation of patent filings costs more for one type of innovation within the company than others.
A good e-invoicing system will automatically check e-invoice data upon submission, validate it against existing corporate billing guidelines, flag any errors, and deliver it to the first person in the approval workflow based on invoice matter and content. It is also capable of processing invoices in multiple currencies—a very important factor for IP portfolios. It then shepherds the e-invoice through the entire workflow process and can deliver the final approved product to accounts payable.
It is important to note that a major challenge of introducing e-invoicing is educating your law firms and agents on the benefits and helping them convert to billing electronically. As with any technology, habits must be changed for the process to be successful.
The primary benefits of e-invoicing for law firms include increased accuracy of billing information and a quicker turnaround in invoice payment. Bills will not get lost in the approval process and, with less human error involved, the billing information stays intact and error-free. Additionally, many e-invoicing solutions allow law firms and agents to follow the status of their invoice online. Now, instead of having to call a corporate client for an invoice’s status, a law firm or agent can quickly gather that information by going online.
A good e-invoicing and legal spend management provider will work directly with the law firms and agents to ensure that they are educated on the process and can submit e-invoices through its system. Other providers take this one step further. For example, DataCert not only shoulders the entire law firm and agent e-invoicing conversion process, but it also regularly holds workshops for both corporate customers, law firms and agents to gather user feedback and share product feature updates.
Reporting
In addition to eliminating the paper shuffle and decreasing the time to approve and pay invoices, e-invoices can yield fascinating information on the spend surrounding IP portfolios, including what type of costs the company wants to incur to protect and cultivate its IP assets.
“The real advantage in e-invoicing is that it allows you to take the expenses and associate them with the individual cases,” shares David Hoiriis, chief intellectual property counsel for Honeywell International.1 “Honeywell has about 25,000 patent files at any point in time. Associating expenses directly with those cases and using consistent methodology to code them enhances our capabilities for expense control and processing.”
Detail-specific reporting leveraged from e-invoicing activity can provide financial, operational and firm transaction data such as invoice charges, hours billed, docket budgets and general legal spend parameters. Foreign filing designations are also available so that IP departments can adjust their portfolio based on their cost analysis from jurisdiction to jurisdiction. These types of analytics help IP practitioners provide information to support the value of their work to management and peers.
Conclusion
Tracking the costs associated with IP spend does not have to be an arduous task. The proper e-invoicing and legal spend management solution will not only automate the process of invoice workflow, approval and payment, but more importantly, furnish analytics based on past spending that help you determine the value of your IP portfolio.
David Hoiriis, chief intellectual property counsel
for Honeywell International Inc., recently
shared his company’s experience with an einvoicing
initiative.1 He stated: “In a large, multinational
company like Honeywell, the elimination
of paper becomes a significant issue,
because we have to move paper place to place to
be reviewed, approved, processed and stored.”
Hoiriis continued by identifying his three goals
for e-invoicing:
• Reduction in low-priority/administrative
billing activities such as handling mail or
copying invoices
• Elimination of billing errors and delays resulting
from paper invoice processing
• Ability to use the data within the e-invoices
to effectively manage expenses and aid
long-term, strategic decision-making.
After implementing his e-invoicing and IP
spend management solution, Hoiriis shared
that his department is successfully processing
close to 1,000 e-invoices a month. “Before implementing our IP e-billing solution,
we would tackle big numbers without having
a lot of time to address smaller amounts,” he
said. “Our IP e-billing solution has enabled us
to address many concerns quickly. We are able
to get a clearer picture of our expenses.”
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Domenic Leo
Domenic Leo, DataCert’s general manager
of intellectual property solutions,
is a respected thought-leader in the intellectual
property (IP) and legal fields,
with more than 20 years of experience.
Leo previously served in senior management
roles at Thomson MDC, a unit
of Thomson Scientific & Healthcare.
As vice president of professional services
and best practices, he worked with
Global 1000 corporations such as AT&T,
ExxonMobil, Honeywell, and Nike.
He is an attorney and member of the
American and Michigan Bar Association
and serves as chair of the Intellectual
Property Workgroup for the Uniform
Task Based Management System
(UTBMS). He is co-chair of the American
Intellectual Property Law Association’s
(AIPLA) IP Assets Subcommittee
for Cost Management. Leo earned
a Bachelor’s degree in political science
and public administration from Oakland
University and a juris doctorate
from the Detroit College of Law (now
Michigan State University). |
1 “Implementing an IP E-Billing Solution Achieves Real Business Benefits”,
Metropolitan Corporate Counsel, vol. 15, no. 1 (January 2007).
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