Articles Posted in Non-Law Firm Costs

A chart in a discussion of data compiled by PriceWaterhouseCooopers, January 2010, Corp. Counsel, March 2010 at 50, shows that during 2002-08, median damages awarded non-practicing entities (trolls) were $12 million, almost three times the damages awarded practicing entities. Note the phrase “damages awarded.”

Perhaps the differential is because companies with ongoing businesses seek outcomes other than just cash payments. Perhaps trolls have no assets of their own so counter-claims cannot lower the eventual award. Perhaps trolls choose their patents and defendants more carefully than do operating competitors.

Besides, I thought the anger of operating companies sued by trolls is the extraction from them of extortionate settlements, not judgments awarded after a trial. Assuming a fair judiciary and jury, a controversial assumption to be sure in some parts of Texas, a court award legitimates the troll’s claim.

The Law Society, Britain’s counterpart to the American Bar Association,closely associates with Lexcel. A Lexcel publication (at page 10) mentions the availability of “guidelines for those wishing to use the services of management consultants.” [Blog author’s note: that would include me].

In an appropriately lawyerlike disclaimer, it cautions: “The guidelines are not intended to be prescriptive or exhaustive, but they should assist in establishing the suitability and competence of consultants.” If you would like to download the guidelines, click here. I have at times held forth on the topic (See my post of Jan. 1, 2008: consulting with 15 references.).

An excellent article in Legal Tech. News, Feb. 2010 at 22-23, explains two ways that legal departments can assure themselves about the levels of control and security LPO vendors offer. The two ways are “a certification program, where the outsourcing vendor complies with a pre-described set of controls. A second is for the outsourcing vendor to be audited, based not on a predetermined set of controls but on the judgment of an independent third-party auditor.”

The author, Thomas Shaw, Thomas@tshawlaw.com writes about the ISO 27001 information security standard as an example of certification and SAS 707 as an example of an evaluation (audit) methodology. If a legal department has to choose between the two forms of assurance, Shaw favors the ISO good housekeeping seal because it prescribes a set of policies, procedures and controls. Additionally, it requires continuous improvement efforts. He closes with some other suggestions regarding confidentiality controls (See my post of June 9, 2009: ISO: 9001 accreditation for legal translation companies; April 28, 2009: ISO certification by a law firm; Nov. 25, 2009 #4: ISO 9001:2008 global quality management certification from Underwriters Laboratories; Dec. 23, 2009: SAS 70 and Serengeti; Dec. 30, 2009: LPO in India to receive an ISO 27001 certificate.).

What do you make of this?

A half-page ad in Corp. Counsel, Feb. 2010 at 14, of hands clapping caught my eye. Under a quote about success being a journey, not a destination, it says, “Wishing our friend and colleague, Richard Egosi, Chief Legal Officer, the best of luck on the next part of the journey at Teva Pharmaceuticals.” Signed by “Your friends from Teva North America.” The website of Teva explains that Egosi became Corporate Vice President and Chief Legal Officer in January, 2010. He has been with Teva since 1995, most recently as Teva’s Deputy Chief Legal Officer and General Counsel of Teva North America.

The ad set me wondering. Applauding the sentiment of congratulation and pride, I wonder about the use of the legal department’s budget (I assume the members of the department did not pitch in to pay the $3,000 cost.). Makes me feel scrooge-like, but in a cost-conscious economy with tight budgets for legal teams ….

Cross-border legal disputes can lead to arbitration, but complaints about arbitration’s costs and delays have increased to the point where the inside attorneys at more than 50 multinational corporations have come together to improve the situation. The group, described in Corp. Counsel, Feb. 2010 at 18-19, calls itself the Corporate Counsel International Arbitration Group. It aims to find ways to shorten elapsed time and reduce costs of international arbitrations (See my post of Nov. 8, 2009: transaction costs of arbitration; adn Jan. 16, 2008: arbitration with 14 references.).

Doing some research, I found that the group formed actually formed in 2006 and was written about here. Aside from its admirable goal, the CCIAG adds to the list I put together of special-interest groups for in-house lawyers (See my post of Feb. 4, 2010: affinity groups.).

In America, Britain and Canada, most commentary on legal process outsourcing refers to providers in India, where English is commonly spoken and the common law prevails. But for in-house counsel whose primary work language is French or Spanish, other countries contend for the work.

For example, European Lawyer, Issue 92, Jan. 2010 at 21, explains that “outsourcers are looking at other regions, such as Morocco and Romania to cater for the French, Italian and German markets and where a full-time equivalent lawyer will typically cost one-fifth of what it does in those European jurisdictions.”

The search for low-cost providers of legal-related services extends to another common language: “They are also beginning to target Mexico, Guatemala and Honduras for the Spanish market.”

Legal-related work that offshore locations can handle are often thought of as routine but necessary services, support activities, commodity tasks, work carried out over and over – in a word, processes. But what is a process?

A three-part definition by the general counsel of GenPact, a process management company, does a pretty good job of it. For the work to qualify, “[t]here needs to be a process, it should be routine and people should be able to use a set of rules and guidelines in dealing with the work.” I cite this from the European Lawyer, Issue 92, Jan. 2010 at 36, because those who weigh whether to send work overseas or not can test the their services that might go against these three criteria: step-by-step work done frequently and governed for the most part by understood decision rules.

Legal-related work that offshore locations can handle are often thought of as routine but necessary services, support activities, commodity tasks, work carried out over and over – in a word, processes. But what is a process?

A three-part definition by the general counsel of GenPact, a process management company, does a pretty good job of it. For the work to qualify, “[t]here needs to be a process, it should be routine and people should be able to use a set of rules and guidelines in dealing with the work.” I cite this from the European Lawyer, Issue 92, Jan. 2010 at 36, because those who weigh whether to send work overseas or not can test the their services that might go against these three criteria: step-by-step work done frequently and governed for the most part by understood decision rules.

When you choose an offshore vendor to provide legal-related services, you shouldn’t base the decision solely on your perception of the ability of the vendor’s staff to do the work. Beyond that, cautions the European Lawyer, Issue 92, Jan. 2010 at 37, you should conduct a site visit of the legal process provider. Security, orderliness, a sense of purpose and discipline, being established and well-run, engaged staff — all can be checked infinitely more confidently when you are onsite. But that is hardly all.

“Importantly, [the general counsel] should make the visit with their heads of information technology and security in tow, as it is those senior staff who will have the specialist knowledge to determine whether the providers can live up to their claims regarding confidentiality.”

Go beyond legal skills and process prowess; ask your specialists to kick the tires of confidentiality and technology strength.

To the extent third parties see litigation as a profitable investment, lawyers in legal departments will face more litigation. Having written about one manifestation of this, so-called patent trolls in the US, it interested me to run across an example of a non-practicing entity (NPE) in Germany (See my post of Jan. 20, 2006: “trolls” drive up litigation fees and in-house patent costs; Oct. 29, 2006: Qualcomm’s business model; May 13, 2007: Microsoft’s litigation against patent trolls; and June 25, 2008: advice against troll litigation.).

A German NPE, IPCom has recently filed claims across Europe against Nokia, according to the European Lawyer, Issue 91, Nov./Dec. 2009 at 29. IPCom “is owned by one of Germany’s preeminent intellectual-property lawyers, Bernard Frohwitter, as well as German packaging and logistics company Schoeller Group and the Fortress Investment group, a New York-based private equity and hedge fund.” Quite a pedigree. Serious players with deep pockets and long-term resolve make for disquieting prospects for in-house litigation managers.