Intellectual property makes a significant contribution to businesses in almost every sector. The law is no exception. A law firm’s intellectual property, such as trademarks, reputation, copyright, websites and client relationships, can be considered individually or collectively as the brand. Law firm brands are highly valuable, serve many purposes and can be leveraged in many ways. Similarly, law firms have a large role in developing and protecting the brands and IP of their clients.

How law firms can leverage their own brandsThe legal industry’s attitude towards marketing has historically been rather different to most, largely because it has only been permitted for about 20 years or so. Thinking about law firms as having a brand has therefore been anathema to many lawyers who are more used to thinking about their own personal client and work-generating relationships. This is one of the reasons why developing a law firm brand is so important, to transfer this reliance from the individual to the brand, as individuals come and go and a collective brand is much more valuable in this context than a collection of individual brands.

Many firms have built powerful reputations which enable them to be invited to give advice, command high fees and recruit the best individuals. Deprive a firm of the ability to use a name and the practice would inevitably suffer. The three key functions of the brand are therefore business attraction, fee charging and staff recruitment.

There are three main ways of quantifying brand value. The driving methodology is the relief-from-royalty approach which forecasts the proportion of profits that are directly generated by the brand, by applying a royalty rate to turnover. This calculates how much the law firm is relieved from paying to use its brand because it already owns it. The other ways involve looking at comparable transactions and creation and recreation costs. As a general rule of thumb this can result in values of law firm brands ranging between 0.5 and 1.5 times turnover.

This value can be captured in a number of ways. One option is to charge internal departments and offices in the UK and overseas for using the brand with the royalty rate reflective of the brand’s value within each corresponding area. Another option is to transfer the IP – particularly lead-generating websites which are becoming more popular – into a special purpose vehicle and develop this as a standalone company.

Law firm brands are not recorded as assets on balance sheets in accordance with accounting convention. In fact, it is only listed companies that have to report a value for the brands they own and even then, under International Financial Reporting Standards (IFRS), it is only acquired brands that need to be recognised in this way. However, from October 2011, the Legal Services Act 2007 will permit ownership of law firms by non-legal services, opening up the door for listed companies and others to acquire law firms, thereby putting law firm brands on balance sheets for the first time. As law firms will also be looking at alternative business structures, it is important the value of all assets – both tangible and intangible – are understood and articulated.

Focusing on IP strategiesNot only will law firms benefit from understanding and leveraging their own brand, there is an opportunity to generate additional work from clients. IP is often the cornerstone of most businesses, and should not be the sole preserve of IP departments. There are a number of ways lawyers can increase their relevance with clients by focusing on IP strategies. Here are some thoughts on the top 10:

1. Business development: making IP ownership clear and robust so that it can work harder. 2. M&A: due diligence and integration.3. Risk management: risk mitigation and management.4. Disputes: infringement monitoring and claim management.5. Reduce pension deficits: IP is increasingly being used to reduce pension deficits by being provided as security. 6. Attract finance: well-managed IP can be used to raise finance from banks or investors.7. Franchising: advice on building brands through domestic or international franchising.8. Licensing: extending a brand from its core competency and taking advantage of others’ capability. 9. Restructuring: IP restructuring for tax and other purposes. 10. Internal IP charges payments: systems which encourage commercial value of IP throughout a business.

ConclusionLaw firm brands are valuable symbols of trust, reliability and quality and require constant attention and innovation to maintain and develop. The same is true for many client brands. Understanding how brands generate value and familiarity with existing and new strategies for leveraging this value will not only benefit your clients’ brand, but your own one too.

Thayne Forbes is joint managing director and IP expert witness at Intangible Business, the brand valuation consultancy