Articles Posted in Non-Law Firm Costs

IP Review, Iss. 24, Winter 2008/2009 at 22, describes insurance policies of SAMIAN Underwriting Agencies, working with CPA Global, that offer clients “insurance for up to 10 patent families when clients are renewing patents. This allows clients to enforce their rights through legal expense insurance” (See my post of Oct. 31, 2007: insurance against litigation risks with 7 references; May 13, 2007: municipal insurance; and July 4, 2006: insurance and fixed fees.).

The article explains that SAMIAN provides (1) infringement liability insurance, (2) “pursuit cover,” and (3) business interruption cover, “protecting against the risk of IP impairment to the insured.” I mention these insurance policies because general counsel should understand where they might protect their company and departmental budget against expensive IP litigation.

Little is known by me about the cost to a company of processing a law firm invoice (See my post of Nov. 5, 2006: “processing invoices”; Sept. 14, 2005: estimate of costs; April 6, 2008: multiple payment destinations.). Yet the cost to the company can probably be significant. After all, few law departments insist on Automatic Clearing House (ACH) payments to their law firms

Most law departments want law firms to submit a single each matter on a separate invoice. That requirement, obviously, multiplies the number of checks that must be written. If the cost to the company is $10 per check written and the law department (with 200 matters billed monthly) generates 2,400 checks a year, $24,000 to simply send out a check is not chump change. Many law departments would easily surpass that number of requests and my $10 figure may be risibly low.

Perhaps with some of its primary law firms, a law department might make one payment each quarter and then reconcile that amount against the bills submitted during the quarter (See my post of Jan. 7, 2009: retainer billing and payment with 7 references.). If a general counsel could claim some of the savings from a more efficient system, sufficient incentive might be at hand to change routines.

Government agencies use budgets instead of revenue for their basic comparative metric. For example, the FBI has a $6 billion budget, according to Diversity & The Bar, Jan./Feb. 2009 at 42. Its office of the general counsel, headed by Valerie Caproni, has 180 attorneys, which means its lawyers per billion dollars of budget is 30. That figure dwarfs the counterpart for any $6 billion dollar corporation, which would likely have approximately five lawyers per billion dollars of revenue.

Is the difference accounted for by lower compensation levels for the FBI attorneys? If FBI lawyers make two-thirds of what a comparable lawyer makes in a multi-billion dollar private corporation, that would possibly account for hiring more of them for approximately the same total cost.

Is the difference explained by the likelihood that the FBI lawyers do nearly all the agency’s legal work, with litigation done by the Department of Justice and very little by outside counsel? If the typical $6 billion company did nearly all of its non-litigation work internally, its lawyer ranks might double, given the 40/60 ratio of inside to outside spend that is normal.

An ad in Corp. Counsel, Vol. 16, Feb. 2009 at A2, with text by John Augustyn, a shareholder in Leydig, Voit & Mayer, refers to how “Companies obtain opinions of patent counsel with respect to specific patents and products for several reasons, including the potential use of the opinion in response to an allegation of willful infringement.” The quote got me thinking.

These opinions represent some unknown level of frequency and cost for law departments, or at least unknown to me. If anyone has a sense of the typical cost range for such opinions, readers would be interested. Likewise other metrics, such as for every 100 patents applied for by major US corporations, about how many opinions of patent counsel do those corporations obtain? Any metrics and background explanations would be welcome (See my post of March 25, 2008: patent activities except litigation with 49 references.).

Almost 90 percent of 1,400 lawyers who responded to a recent survey said “e-discovery is too costly and is increasing litigation costs, causing cases to be settled on cost rather than merit.” This conclusion, from a study conducted by the American College of Trial Lawyers (ACTL) and the Institute for the Advancement of the American Legal System (IAALS), is in Info. Mgt., Vol. 43, Jan./Feb. 2009 at 12.

It’s news to me that law departments feel forced to settle unmeritorious cases because they fear the costs of discovery. Undoubtedly, discovery has become much more complicated and expensive in recent years, but to some degree both sides bear those additional costs. And judges can mitigate burdensome demands for discovery. Further, some research suggests that e-discovery accounts for only about half of the documents subject to discovery (See my post of Feb. 7, 2009: metrics on the larger the company, the more documents stored electronically.).

We hear all the time about e-discovery, but what proportion of all document discovery does it constitute? It sounds like 60 percent might be a rule of thumb. These findings come from a survey of 235 mostly-US companies by the IT Policy Compliance Group (IT PCG) as reported in Info. Mgt., Vol. 43, Jan./Feb. 2009 at 10.

From a Symantec news release (Semantic provides funding for the IT PCG): “The study also reveals the amount of information subject to legal requests that is electronically stored information (ESI). Among large enterprises, ESI accounts for 50-70 percent of the data, 35 to 50 percent among midsize firms, and 20-35 percent among small businesses. But while greater levels of ESI mean higher confidence in accessibility, completeness, and accuracy of data, this advantage can only be leveraged to respond to legal requests if the data is indexed for rapid search, protection, preservation, and production.”

It is interesting, but not surprising once you think about it, that size of company correlates to percentage of records stored electronically. Newer companies, I suspect, have more of their documents online.

These findings about litigation holds come from a survey of 235 mostly-US companies by the IT Policy Compliance Group (IT PCG) as reported in Info. Mgt., Vol. 43, Jan./Feb. 2009 at 10. Several posts refer to this survey (See my post of Feb. 6, 2009: savings from the various practices; Feb. 7, 2009: costs of litigation hold practices; Feb. 7, 2009: interactive online tool; and Feb. 2, 2009: best practices for litigation holds.).

As stated by the Symantec press release, “The most helpful technologies identified [by the survey] to improve results with the lowest expense include:

Backup and archive

The findings discussed below come from a survey of 235 mostly-US companies by the IT Policy Compliance Group (IT PCG) as reported in Info. Mgt., Vol. 43, Jan./Feb. 2009 at 10 (See my post of Feb. 6, 2009: savings from the various practices.).

The author of the survey, Jim Hurley,explained part of the methodology in an email to me. “The participants and organizations involved in the survey portion of the research were randomly selected from a pre-screened list of more than 4,000 organizations. The participants had to qualify and answers from non-qualifying participants (beyond the 235 reported) were dropped.

According to a post on the Group’s blog, seven-in-ten companies are spending 5-to-6 times more on legal settlements, legal fees, and internal expenses to find, produce, protect and preserve information in response to legal requests for information.”

A recent survey found that, “regardless of size, companies following best practices when it comes to compliance issues spent a smaller amount on legal fees than those following the worst practices.” Companies that follow what the survey describes as “normative” practices [the middle state between poor practices and excellent practices] “still spent just roughly a third of what their less-diligent counterparts spent.”

These findings come from a survey of 235 mostly-US companies by the IT Policy Compliance Group (IT PCG) as reported in Info. Mgt., Vol. 43, Jan./Feb. 2009 at 10. IT PCG conducted their interviews between October and November 2007.

This data deserves careful attention. First, to make sure the methodology supports the claims and second, because the conclusions clearly suggest what law departments ought to pursue as best practices. Further posts will delve deeper.

Some people use the term “total legal expenses” to stand for what I refer to as “total legal spending.” I define total legal spending as the sum of a law department’s internal expenditures and what it pays outside counsel and other vendors (See my post of Aug. 21, 2008: total legal spending as a percentage of revenue with 9 references and one metapost.).

A broader term, “total legal costs,” encompasses not only what I refer to as total legal spending but also resolution payments such as fines, judgments and settlements.

The terminological difference seems logical to me. “Spending” suggests some degree of discretion and management; “cost” sounds like it extends to impositions and requirements. For that reason, with these definitions in mind, I will try to use “total legal costs” as the term for everything a company pays out that are law-related.