November 12, 2015
By Emily Field
NEW YORK – A better economy translates into a declining market for bankruptcy matters, according to a recent survey of corporate counsel at large companies, who also say they see a decreased need for intellectual property litigation than in previous years.
In addition to bankruptcy and IP litigation, the BTI Business Development Opportunity Zones report by BTI Consulting Group, which surveyed about 300 legal decision makers at companies with at least $1 billion in revenue, identifies government investigation work as a shrinking area for 2016, even though the after-effects of the financial crisis have still yet to fully settle.
After a period of fairly active bankruptcy activity, the area is set to tail down a bit, BTI President Michael Rynowecer said.
A combination of low interest rates, years of cutting costs and easy access to financing has put the brakes on a once fast-paced market, according to the report, and the market size forecast for 2016 is down to $1.36 billion, from $1.44 billion in 2015, in spending for outside counsel.
“When the economy is strong and growing, bankruptcy is almost non-existent in some firms,” legal recruiter Larry Watanabe of Watanabe Nelson said. “Today, any firm that wants to bill that practice, they’ll just have to wait and see.”
However, all hope isn’t lost, as there are still some spots for opportunity identified in the report.
According to BTI, falling oil prices have had an impact on the more leveraged oil and gas companies, and traditional retailers — particularly ones smaller than the companies interviewed by BTI — are struggling to compete against online retailers and “big box” distributors.
Bankruptcy attorneys should be spending more time building their profiles, networking and building on their relationships with existing clients, legal management consultant Peter Zeughauser of Zeughauser Group said.
“[M]ake sure you’re doing whatever you can to enhance and strengthen the relationship so you don’t lose the relationship to a competitor,” Zeughauser said.
IP litigation’s bright star may be on the wane, according to report, as patent litigation filings have slowed down since Alice Corp v. CLS Bank and damage amounts have fallen with fewer big cases over the past several years.
Rynowecer attributed the anticipated decline in IP litigation to clients who are more inclined to settle issues sooner, with less of an appetite to bring cases or spend significant resources in defending them.
But the anticipated decline is slight — from a market size of $2.76 billion in 2015 to $2.72 billion next year, according to the report — and there are still strong opportunities in industries fueled by innovation, such as biotechnology and pharmaceutical.
The telecommunications industry will also continue to have more IP issues than many other industries, the report said.
And consumer goods will also still dominate IP litigation case loads, according to BTI.
“And the patent trolls are still very active bringing suits,” Robert Denney of management consulting group Robert Denney Associates Inc. said.
Spending in this practice area is also expected to go down next year, with a projected market size of $1.29 billion in 2016 from $1.32 billion in 2015, even though fallout from the 2008 crisis hasn’t fully settled, according to the report.
“There’s a lot of regulatory interest and enforcement, but big high-profile investigations are not providing impetus for new ones,” Rynowecer said, which he believes is due to limited staff on the government’s side.
The areas that corporate counsel anticipate being high concerns for next year are anti-money laundering compliance, corruption and bribery investigations under the Foreign Corrupt Practices Act and corporate social responsibility claims against companies and their business partners, according to the report.
Vendors will also have to be scrutinized more to avoid fraud liabilities and embezzlement, the report said.
However, some legal industry experts were doubtful that there will be a drop-off in investigations work in 2016, saying they hadn’t seen any signs that government oversight will wind down.
“If the Republicans get the White House and Congress, that could happen, yes, but that’s where politics get involved,” Denney said. “Who knows what will happen after the election?”