May 31, 2004

THE SAN DIEGO BUSINESS JOURNAL

By Renee Beasley Jones

SAN DIEGO – Major Law Firms Continue to Move In as Industry Here Grows Up

Biotech in San Diego has proved to be among the region’s fastest-growing industries, providing a healthy market for local attorneys.

For the most part, life sciences companies in San Diego County “ at least 400, with more on the way “ remain in their infancy. They need legal help gaining patents and raising money through public offerings. As they mature, they’ll require help with corporate governance and fending off copycats.

By some counts, as many as 16 major law firms have staked out territory in North County where they rub elbows with UC San Diego, other research institutes, and a cadre of life sciences companies.

Besides law firms dealing mostly in intellectual property “ the biggest asset for most bioscience companies – general practice firms also are seeking a piece of the action. They hope to foster long-term relationships with startups in the hopes of later providing other legal services.

Too Many Or Too Few

At least one local life sciences attorney believes too many firms have crowded the market and a shake-out is in the offing, while others say there’s plenty of work to go around.

Either way, there’s no doubt the local legal market is more crowded than ever “ and firms keep coming. Palo Alto-based Wilson Sonsini Goodrich & Rosati, which caters to technology startups, marked the latest addition, arriving earlier this month. Virginia-based Burns Doane Swecker & Mathis, one of the nation’s oldest and largest firms dealing exclusively in intellectual property, made its San Diego debut in January.

In 2003, Townsend and Townsend and Crew moved in on High Bluff Drive, not far from Fish & Richardson’s office. Morrison & Foerster, a general practice firm with a large intellectual property group, is about a mile away.

But there aren’t a lot of out-of-town intellectual property lawyers flooding those offices, so the number of attorneys serving clients hasn’t jumped appreciably. Instead, firms and partners have engaged in a high-stakes game of musical chairs.

Wilson Sonsini started its new office with three intellectual property partners poached off of Pillsbury Winthrop. Earlier this year, Fish & Richardson snatched a large patent prosecution team from Heller Ehrman. Four intellectual property lawyers jumped from Fish & Richardson to Heller Ehrman last year. One of them has since returned to Fish & Richardson.

“There are a limited number of truly experienced, knowledgeable life sciences attorneys,” said David Geerdes, a managing shareholder at Heller Ehrman. “There are attorneys that are wannabe life sciences attorneys and firms that are wannabe life sciences firms.”

Experience Counts

Firms looking to muscle in at this late stage will have a more difficult time, Geerdes said, because many firms are already established here. But he doesn’t anticipate any across-the-board rout. Marginal players may fall off, but those with experience and results will remain in the San Diego market.

Burns Doane had been eyeing San Diego’s biotech scene for a while, said the firm’s managing partner Danny Huntington, but the firm wouldn’t jump in without an experienced local practitioner.

That opportunity came in December 2003 when the international intellectual property firm of Jones Day gobbled Pennie & Edmonds. The merger left Laurie Axford, a local intellectual property attorney, up for grabs. Burns Doane swooped in to pick her up and opened a Downtown office in January. Already, the firm has seen a significant amount of work coming in, Huntington said. Some of it is transferring from other firms with local offices.

Axford has worked in the San Diego intellectual property market for 10 years. She served a stint as president of the San Diego Intellectual Property Lawyers Association. In 1997, the group had fewer than 200 members, she said. By the end of last year, that number had doubled.

She compared that growth to the number of patents issued to local companies, which went from 482 in 1997 to 946 in 2003. The region remains on target to see more than 1,000 patents issued this year, Axford said.

Enough For All

Growth in the number of local intellectual property attorneys and patents seems proportional, she said.

“I don’t see any drop in business. I have always believed there’s enough work for everyone,” Axford said.

Larry Watanabe, principal of the local legal recruiting firm Watanabe Nason & Seltzer, thinks a misperception exists. It is believed a large number of San Diego attorneys work in life sciences exclusively. Watanabe estimates only 35 partner-level attorneys handle biotechs’ business in excess of 80 percent of their practices.

“I think there’s enough work to go around,” he said. “If anything, there’s a greater demand for partners who have this expertise.”

As much as 30 percent of the local biotech legal work may be farmed out to firms in New York, Washington, D.C., and Silicon Valley, said John Gartman, managing principal at the local Fish & Richardson office. Gartman believes there are plenty of clients to go around.

He started Fish & Richardson’s office in Silicon Valley before coming to San Diego. He heard it would be difficult to grow an office locally versus Silicon Valley. More work exists in Silicon Valley, but there’s also more competition, Gartman said.

The San Diego office “ the fastest-growing in Fish & Richardson “ has ballooned from 10 attorneys in 1998 to 60 now.

“We have more work than we know what to do with,” Gartman said.

Kate Murashige, a Morrison & Foerster attorney whose entire practice is dedicated to the bioscience industry, said the San Diego legal market for biotech business gets more competitive all the time, but Morrison & Foerster always has plenty of work.

Murashige said local attorneys aren’t confined to working only for San Diego-based biotech companies. Morrison & Foerster’s local lawyers have life sciences clients in Vancouver, St. Louis and Dallas, as well as a Dutch company.

She shied away from saying whether the local legal market in the biotech sector was over-saturated.

“It’s pretty crowded,” Murashige said. “Everybody wants to swim in the same pool. Only time will tell.”