Commercial definitions of industries may obscure more fundamental legal differences between groups of companies

Everyone is comfortable with the trade’s definitions of broad industries: manufacturing, insurance, aerospace and the like. All well and good for many purposes, not so good for legal department comprehension. We may need a breakdown of companies that reflects more accurately the intensity of their legal exposure.

For example, if you sell to consumers a product that can hurt them, your risks dwarf those of companies that provide online services to businesses. If your company operates a common carrier (See my post of Feb. 14, 2011: law departments of common carriers develop different legal structures.), you face a range of legal issues different from those faced by relatively unregulated companies. It may be that wide differences in a company’s mix of domestic and international revenue accounts for equally large differences in the workings of its legal department. The division between create-and-use-IP companies and not-much-in-the-way-of-protected intellectual capital certainly looms large.

My point is that if we rely on the traditional industry breakdowns applied by financial analysts and the press we may be missing telling indicators of legal staffing and spending. Different categories of companies may reveal much more about variations on legal structure and operations.