Last week, I did what I these days rarely ever do: live in the world of corporate and law firm IP lawyers. I traveled to Minneapolis to speak at the Midwest IP Institute and, while there, I was treated to a baseball game in a luxury box, a high end hotel room with cocktails and hors d’oeuvres, a fabulous steak dinner and various other fringe benefits that I have not seen recently. It was clear to me that even in these trying economic times when law firms have folded and merged and lawyers have been laid off in droves from all sorts of law firms, many lawyers are still living the high life. I must say, I was somewhat surprised, because I thought business people were getting smarter about how they spent their money these days and, as a result, would not be impressed with fancy law offices and “bling” provided by their lawyers. And, I also thought that lawyers who saw their colleagues lose their jobs and long-standing law firms collapse would express more humility and caution in their spending habits, but apparently their “near death experiences” had little effect on the way law firms operate. But, the more things change, the more things stay the same in the law firm business, apparently, just with fewer law firms and lawyers to fill them.
A confession is first in order—I was one of these lawyers who received and valued the “bling” accompanying the world of a successful lawyer. I had an obscenely high salary (as least it seems this way now), a fabulous downtown office with a free parking spot, a seemingly bottomless expense account and so on and so on. What I didn’t realize at the time was that none of these accoutrements did anything to create value for my clients. To the contrary, these features only add to the overhead of legal services, and the price I charged. A company hiring one of these law firms pays for these lawyer fringe benefits in the form of higher hourly rates and increased “administrative fees.” These fringe benefits did not do anything to make my work product better and, in reality, likely made it harder to do the right thing for my clients because I needed to fill up my and my associates’ hours to continue “feeding the beast”–that is, pay for the high overhead accompanying my high end legal practice.
I started to realize the disconnect between lawyer fees and value provided when I left life as a law firm shareholder to become a corporate IP lawyer at a multi-national corporation. In this environment, we were required to keep costs low, but there was still a push to hire “appropriate” law firms due to a perception that the level of difficulty of our corporate matters required a level of skill that was only available from law firms. This made little sense from an economic perspective: we were encouraged to hire lawyers who were the legal practice equivalents of Neiman Marcus or Bloomingdales, but we were asking them to charge us Macys or even Walmart prices. Certainly, the salespeople at the high end locations do not appreciate being asked to charge discount prices but, unlike high end shopping establishments, lawyers at high end IP law firms rarely have the ability or desire to let corporate clients take their business elsewhere. We then ended up in an endless cycle of negotiation—and often even conflict–between client and lawyer about legal fees. In other words, clients and lawyers often sat on opposite sides of the table when dealing with their respective financial interests and, as a result, trust is invariably reduced.
The fundamental problem with how lawyers practice in the US, whether IP law or otherwise, centers on the failure of clients and lawyers to put at the forefront of any hiring decision the value that will lawyers provide in a particular situation. For example, as an IP law firm partner, when a client asked me for a confidentiality agreement, I typically would put a first or second year associate on the project so he or she could learn how to draft such a document, and so I could keep them busy. When undertaken in this manner, the final agreement typically took several hours (at a minimum) and often was not legally correct. When I was a corporate IP lawyer, I could not handle matters in this way as I was responsible for doing confidentiality agreements myself. I learned quickly that the best way to create confidentiality agreements was to find a good one and change the parties. Ironically, if I had done this in private practice, I would have lost money, but I would have provided much more value to my client when I used an agreement that had been vetted for legal quality over and over again, as opposed to being drafted by a “green” young attorney.
So, why can US lawyers continue to practice in a manner that ignores the value provided by their efforts? I think the issue historically boils down to the information asymmetry: clients generally possess no real way to collect and analyze information related to the quality and value of legal services provided by an attorney or a law firm. Clients dealt with this information asymmetry in one way by looking at the environment that the lawyer lived in: “of course this lawyer is worth all the money because look at how much money others pay her.” The ridiculousness of this premise should be readily apparent.
But the inanity of a business person’s hiring a lawyer based upon how nice her office is (or how many lawyers the firm employs or what law school the firm hires from or what country club the lawyers belong to etc.) begs the question of how a client should go about selecting an IP lawyer (or any other lawyer for that matter) when he cannot reasonably judge her professional competence. The good news is that today it is becoming easier to for clients to identify and select IP counsel on the basis of matters other than fancy offices and ownership of luxury sporting boxes. Moreover, in these days of tightened corporate budgets and remotely located employees, I submit that corporate decision makers should make such features a reason NOT to select a law firm unless they are sure that that the specific lawyer who will be doing their work possesses the skill set they need to perform their company’s work.
The best advice I can give to business people who know their IP is a critical aspect of their business, but who do not really understand how to judge quality and competence of the myriad of IP professionals who want their business is to read one of the three books that have come out in the last couple of years that discuss how companies can create business value from development and execution of IP and intangible asset strategies aligned with their business strategies. These books are:
- The Invisible Edge: Taking Your Strategy to the Next Level by Using Intellectual Property (2009: Mark Blaxill and Ralph Elkhart)
- Intangible Capital: Putting Knowledge to Work in the 21st Century Organization: (2010: Mary Adams and Michael Oleksak)
- Burning the Ships: Intellectual Property and the Transformation of Microsoft (2009: Marshall Phelps and David Kline)
These books present in a business context how IP and intangible assets can be utilized to create and sustain business value, and present these typically complex topics in a way that makes it accessible to people without legal training and do not require a background in IP management to understand the concepts. I have recommended one or more of these books to business people recently with great feedback.
(What I find interesting about the above books is that none was written by a “real lawyer;” that is, someone who makes his or her living creating IP-related work product for clients. Indeed, only one was written by someone with a law degree—Burning the Ships—but Marshall Phelps cannot be said to be a “lawyer” in the traditional sense of the term. Rather, he is a corporate business person who just happens to have an early career in IP law. The dearth of books by lawyers about IP in how to create business value from IP and intangible should be a clear signal that IP lawyers do not share the same view of the reason for their efforts as their business clients. But this is a subject for another post . . . .)
As business continues to elevate the importance of IP to creation of business success, I have no doubt that those making IP-related hiring decisions will be less impressed with the visual cues that designate to the outside world a “successful” legal career but which have nothing to do with the quality and value of the lawyer’s work product. I am hopeful that my legal peers recognize that this change in coming and that they begin developing the skills and tools that will make them viable in the changing world of IP practice. If they do not change and become more relevant to business, I believe that business will make many—if not most—of them irrelevant. At a minimum, I hope that my peers start reading the books that their clients are increasingly starting to read.