Large law firms are increasing their share of the lucrative intellectual property litigation market, taking business from smaller rivals as they reduce costs by shifting work to more junior partners, according to a report from LexisNexis CounselLink.

The findings run counter to those of previous reports, which found that some “high-dollar” work in areas like litigation and mergers and acquisitions was shifting away from the largest firms, said Kris Satkunas, director of strategic consulting at CounselLink and principal author of the report.

“To see this particular type of work moving in the other direction was a surprise,” she told Big Law Business.

Firms with 750 or more lawyers, a group CounselLink calls the “Largest 50,” had 61 percent of the IP litigation market at the end of 2014, up from 36 percent in 2011, according to the report, which was based on some $18 billion in legal invoices processed through the CounselLink system.

The biggest firms are cutting costs and winning IP market share by using less senior attorneys to perform their work, the study found. Hourly median partner rates for IP litigation at the largest 50 firms dropped to $622 in 2014 from $656 in 2011, according to the report.

Partners at the largest firms billed fewer hours on IP litigation matters handled by their firms, making up less than one percent on half of all matters in the practice area, the report said. In contrast, the median hourly rate for IP litigation at firms with 201-500 attorneys — dubbed “Large Enough” by CounselLink — rose to $651 in 2014 from $560 in 2011, and partners billed 20 percent to 60 percent of the total hours on more than half of all IP litigation matters, the report said.

Hourly median partner rates for IP litigation at the largest firms dropped to $622 in 2014 from $656 in 2011, according to the report.

“What stood out, when pulling apart the data, was how differently the hourly rates were trending,” Satkunas said. “It’s such a stark difference in what they’re charging, that made us want to pull apart the data a bit more and understand how the different models were working.”

Big firms, she said, could be “realizing they have to be a little bit more creative in how they choose to staff in order to be able to reduce the overall hourly rate,” she said.

“In addition to keeping partner rates down at the largest law firms, they also are staffing their matters with fewer partners, (and) the partners that are doing the work appear to be some of the more junior partners that also carry these lower rates with them,” Satkunas said. “They’re also staffing more heavily with non-partner attorneys and non-attorneys.”

While alternative fee arrangements are growing in popularity for all areas of legal matters, and are especially popular with pharmaceutical companies and professional, scientific and technical services firms, some 98 percent of IP litigation dollars are spent through hourly arrangements, Satkunas said.  "We’re really not seeing the AFA adoption within IP litigation,” though it is popular for other types of litigation, such as patent-related work, she said.

“There is a great opportunity here for corporations that have a lot of IP litigation to be considering forms of arrangements that are not just hourly,” Satkunas said. “We’re hearing a lot of concerns about how much they’re spending on these IP litigation cases,” and AFAs are a way of ensuring predictability, she said.

Some 98 percent of IP litigation dollars are spent through hourly arrangements, Satkunas said.

Insurance, employment and labor and mergers and acquisitions accounted for the largest number of alternative-fee billings, which averaged 9 percent overall, the report said. The number of legal departments using such arrangements has also risen, with 76 percent of legal departments using them, up from 59 percent in 2011. Smaller firms are twice as likely to use alternative billing, CounselLink said.

CounselLink has released trend reports on enterprise legal management twice a year since 2013. While previous reports have focused on a broader set of metrics, the firm decided to “take a pass at something a bit more granular, that we’ve had a lot of interest in from our customers,” focusing on the IP litigation data to help firms with large amounts of IP business manage their spending, Satkunas said.