N. Alexander Nolte of Nolte Intellectual Property Law Group.

Sometimes, success means taking a pay cut at the top.

Nolte Intellectual Property Law Group has gone from four to 22 lawyers and opened three new offices in less than three years. Alexander Nolte, founder of the small Houston firm, credits the egalitarian compensation system he put in place three years ago.

Nolte said the 22 lawyers at his firm can make more at Nolte than they would under more traditional compensation systems. Touting that benefit has allowed the firm to expand outside of Houston with offices in New York, Palo Alto and Austin, he said.

Nolte said he wanted to “break the mold” when structuring his firm for future growth.

In 2016, when he became the sole equity partner in the firm, Nolte brought together all of the firm's lawyers—there were four at the time—to figure out the future. In two months, they developed a new compensation system and a growth plan, he said.

Before starting the small IP firm in 2009, along with a partner who ultimately left in 2016, Nolte had worked at large Texas firm Haynes and Boone and at IP boutique Patterson + Sheridan. That, and several years of leading his own shop, gave him much food for thought about compensation systems, he said.

Nolte said most firms divvy up income with roughly a third going to overhead, a third to lawyer compensation and a third to equity partner earnings. In contrast, his firm puts equity compensation into a pot with the lawyer compensation, which Nolte said “pushes all of the money to the middle rather than than the top.”

Lawyers at Nolte Intellectual Property Law Group earn roughly 60 percent of the income from work they bring to the firm—if they also do that work, he said. If another lawyer does the work, the originating lawyer earns 10 percent, he said.

As the only equity partner, Nolte said he's personally making a little less under the new compensation plan than he was previously—he bills about $700,000 of work a year—but the firm gets “better people” who are more likely to stay. He said the average lawyer recruit in the past few years had 15 years of experience.

New York lawyer Renee Duff, who joined Nolte as a partner in 2017, said she finds the firm's compensation structure beneficial.

“The way that he looks at the compensation structure, it lends itself to you if you are willing to work hard and go out and do what you need to do. Your options are kind of unlimited,” she said.

Now at 22 lawyers, Nolte expects to add a few more for a head count of about 30. The firm launched the New York office in May 2017, Palo Alto in June 2018 and Austin three months after that. And it may add more offices this year, he said.

While it's an IP boutique, very little of Nolte's work is patent litigation. Much of the patent prosecution, licensing and trademark work is billed at a flat fee, which is 10 to 20 percent lower than the national average, according to Nolte.

Nolte said his efforts at innovation don't end with the compensation model and fee arrangements.

In April, for example, the firm launched a “volume play” initiative, he said. It is working with a data specialist to identify people who have filed patent applications without lawyer representation, and pitching those individuals.

Duff, who manages Nolte's trademark practice, said she's excited to see how much work that marketing effort will reap.

The trademark laywer said she met Nolte at St. Thomas University School of Law in Florida when they were students and previously operated her own firm for about 11 years. She said she jumped at the opportunity to open a New York office for Nolte because of the firm's innovative mindset and the opportunity to “give a really good, a full, IP experience” to small businesses and entrepreneurs.

The boutique's clients range from individuals to large corporations including many technology and oil and gas companies, Nolte said.

And those clients seem to notice when their counsel is nimble.

Neeraj Bali, an in-house lawyer at Hewlett Packard Enterprise in Houston, said he's worked with Nolte and his firm for more than 10 years, including when he previously worked at Dresser-Rand Group in Houston.

“The firm has a very experienced team that produces very high quality work projects. We like them because they are able to spin up on the technology very quickly, because of their experience and because of their technical backgrounds,” Bali said.

Bali said the firm's rates are “very cost-competitive” and it provides good service, to the extent that Nolte gave Bali his cellphone number in case of questions or issues.

“It's rare that the managing partner will give out his cell number and he answers outside business hours,” Bali said.