Partner to associate ratios dropping? Fixed fee arrangements being adopted? Large document review projects being outsourced to contract lawyers and overseas? It’s all part of the plan at O’Melveny & Meyers.
There is some evidence that law firms have been adopting legal outsourcing at a slower pace than their own corporate clients. There are a variety of reasons for this; most obviously, lawyers are not eager to send billable work to another provider, even if the client will save money. As one partner articulated to me in a recent meeting, sending even commodity work to an offshore vendor is a win, win, lose proposition for a law firm (where the corporate client saves on legal fees, the vendor generates the fees the law firm used to generate and the law firm loses revenues but retains the risk associated with the engagement).
There are several interesting articles on the “in-house counsel/outside law firm” relationship in the latest newsletter of legal consulting firm Altman Weil (here and here.) Both consultants talk about ways for in-house counsel to achieve cost reduction by demanding it from outside counsel. They also offer some practical tips about how in-house counsel speak with about the subject with their outside providers. Read the rest of this entry »
Recently, I posted on the need for lawyers to think like attorneys but bill like consultants. The Great Recession has increased the pressure on law firms to come up with more predictable ways to bill and the consulting industry provides a good model.
The tie in with this blog is that many LPOs are able to offer fixed fees for certain services and this in turn can help law firms to get a better handle on what to charge (other than simply setting an hourly rate). That is why I continue to write about alternative billing in this space.
IPEngine, the sponsor of this blog, offers one example. In working with law firm and corporate clients, IPEngine develops an understanding of client expectations. IPEngine will then quote a client on a project basis (e.g. by the patent, by the prior art search, by the office action, by the freedom to operate study, etc.) and over time, the price for future projects will be adjusted based on actual experience with the client.
While the whole idea of project billing may seem mysterious to most lawyers (many will assert that law is different and that the practice of law is too unpredictable and too idiosyncratic to reduce to flat fees) a recent experience I had with a home contractor highlighted for me that the legal industry really has it wrong.
While patent filings may be down, appeals are up. Law.com offers an explanation:
According to the NLJ, patent challenges at the Patent and Trademark Office are up 70 percent this fiscal year, which began last October. The reason for the increase, say some IP lawyers, are stingier approval rates of patents at the PTO. This fiscal year only 44 percent of patents have been approved, compared to 66 percent five years ago. It’s no accident, according to lawyers who say that the agency’s inclination is to curtail the growth of patents.
The article also aserts that this appellate work offers a lucrative alternative alternative for patent lawyers and highlights an unusual alternative billing practice–charging by the page:
…appeals can run from $6,000 to $20,000. Craig Opperman of Reed Smith says that his firm charges $600 per page of an appeal brief.
This trend underscores the importance of being nimble in private practice. As work patterns change, it is important to take note and to adjust your marketing. In other words, instead of fighting for a slice of a shrinking pie, try some other desserts.
At the same time, it is not clear how charging by the page eliminates the uncertainty that comes with hourly billing or how it creates any incentives for counsel to be more efficient (two driving factors for in-house counsel who are looking for billing alternatives). True alternatives offer in-house counsel a fixed price (albeit with some contingencies built in).
A headline in today’s WSJ (subscription req.) Article mentions alternative billing. It does not mention legal process outsourcing.
Paul Lippe, founder of the on-line community Legal OnRamp, has written an interesting piece on change in the legal industry. Lippe asserts that most change in society (whether it is in politics, business, etc.) is not neatly planned out. It is not like the legislative process where all stakeholders come together to discuss issues, document positions and hammer out some sort of compromise. Read the rest of this entry »