10 January 2009

Practice: the Future of IP and TMT Services

Happy New Year!

Every time there is an economic downturn businesses look for ways of saving money on legal services, particularly in intellectual property ("IP") and technology, media and telecommunications ("TMT").    The beneficiaries of the last downturn were regional firms such as Addleshaws of Manchester, Eversheds, Pinsents and Wragge's of Birningham, A V Hammond and Last Suddard of Bradford and, above all, Dibb, Lupton, Broomhead of Leeds and Sheffield which grew rapidly because they could provide high quality services for less than City practices.   This time clients will want to make much greater savings given the severity and probably duration of this downturn, advances in technology and Part V the Legal Services Act 2007.  

One of the talking points of several American blogs is "Kill the Billable Hour" by Evan Chesler which appeared in Forbes just before Christmas. It is subtitled "Lawyers should bill the way Joe the Contractor does."   The piece begins with the words:
"I'm a trial lawyer. I bill by the hour. So do the associates who work for me. I have lots of clients, so I can pretty much work, and bill, as much as I want. This needs to be fixed. Yes, you read that correctly."
One reason why the practice of charging by time and disbursements needs to be fixed is that very well established lawyers like Mr Chelser are facing challenges from all sorts of competitors. 

Some of those competitors will be  bricks and mortar firms like Valorem of Chicago which seems to have more in common with a set of barristers' chambers than a conventional legal partnership. They charge by results rather than by the hour and one of the most audacious things they do is to allow clients to adjust any and every bill. They call that the "Value Adjustment Line" and note on their website:
"Some have said that the Value Adjustment Line is extremely risky. We agree. If we aren't willing to risk our own fees on our service, do you really want us advocating for you?"
How many of the Legal 500 dare do that? Valorem also offer a "tool box" with early case assessment, decision trees, monthly case summaries showing the status of a case with charts showing current cost to budget, phases completed and a breakdown of work and cost, adjustable invoices and after-matter assessment and recommendations. Are these people hacving any effect? See "A Brief Look Back. A Sober Look Forward" written on 9 Jan 2009 by the firm's founder Patrick Lamb and find out.

Since businesses are used to getting all sorts of other services over the Internet, a potentially even more serious challenge is presented by virtual law offices ("VLOs") like Kimbro Legal Services, a one woman practice in Wilmington, North Carolina.  In a podcast interview with Ed Poll of LawBiz, the principal a founder of of that practice, Stephanie Kimbro,  described a virtual law office as a web based practice.   Stephanie is also a founder of Virtual Office Technology LLC which developed the application that she uses in her practice.   It seems to be remarkably cheap to run - a set up fee of US$500 and a monthly rental of US$260.  Consequently the fees she charges for her services seem eminently reasonable by our standards - US$150 for drafting a will and US$300 for a commercial lease. In addition to running a law practice and a web 2.0 business, Stephanie somehow manages to find time to teach at the "Solo Practice University".   The University's website describes it as "a revolutionary new web-based educational community that picks up where your legal education left off."   Courses include planning, building and growing a private practice, differentiating oneself from the competition and attracting and engaging new clients more easily.

Of course Stephanie, Valorem, yours truly and, if you are a lawyer, you - have to come to terms with the realities that Richard Susskind first discussed in detail 10 years ago in "The Future of Law" and revisited recently in "The End of Lawyers"- commoditization of legal services, outsourcing services to professionals and paralegals in low cost countries, the use of expert systems et cetera.    I have been familiar with Richard's ideas ever since I served as a member of the Council of the Society for Computers and Law when he was the Society's chair some 20 years ago. They were very much in my mind when I first set up NIPC as a new and very different sort of barristers' chambers in 1997 and they are still at the forefront of my strategy now.    

I remember discussing Richard's ideas with a young instructing solicitor who had just been taken on by Philip Conn & Co., then one of the few firms of solicitors in Manchester with expertise in intellectual property and technology, media and telecommunications law. This young lady had done well at Oxford and indeed well in her firm but she regarded the whole Susskind thesis as pie in the sky. She was not even persuaded by his book which I lent her and which I found to be one of the most incisive and persuasive on any legal business topic that I have ever read.  Ten years later Philip Conn & Co.are no longer with us but NIPC is stronger than ever. 

There is a lot of despondency at the Bar right now, particularly in Manchester, since Peel Court (arguably the strongest criminal set in Manchester) and 8 King Street (once one of the strongest civil sets and where Judge Ford (the first judge of the Patents County Court) started his career) have recently disbanded. However, I think that the Bar has a better chance of surviving the downturn than most so long as we keep agile, control our costs, pass on cost and efficiency savings to the public and make good use of technology. After all, folk like Patrick Lamb and Stephanie Kimbro don't work all that differently from the way barristers have worked for centuries and look how well they are doing in America.

4 comments:

John Flood said...

Jane, you've hit the salient points here. Let me add one more element to the mix.

The rise of inhouse counsel has been tremendous. They've moved from being second class citizens at the beck and call of external counsel to the prime movers in the legal business.

When the board of a company says cut costs, legal overheads are one of the first to be examined. Every inhouse lawyer is aware of that, which means they are keen to find ways of reining in legal expenses and adding value.

Many now demand law firms set firm budgets for work, and be prepared to discount when called on. Moreover, they expect more such as having law firm associates in as interns on secondment.

This movement is further along in the US, but it will happen here. The UK legal profession has to adapt soon or else we will see the collapses of more firms and chambers.

Shireen Smith, Azrights said...

Trying again...
Thanks Jane, nice post.
I spent the holidays reading End of Lawyers and found it very interesting. In running Azrights I am working hard to avoid hourly rate charging, and we have a Sharepoint platform with work flows, document management etc and are also exploring other technologies that Richard Susskind described as ‘disruptive’. We use a small core staff, buying in the legal expertise we need from patent attorneys, solicitors, and other advisers. So by not carrying expensive personnel on the payroll, we are able to charge more cost effective rates, and are performing the role Richard Susskind predicted would arise, of packaging and delivering the expertise clients need.
When I first read the Future of Law I was studying for an LLM and it all sounded revolutionary. But now that I am running my own practice my predominant reaction to the End of Lawyers was that I can already see the writing on the wall. Much of what Richard Susskind predicts is actually taking shape before our very eyes right now. One important point I will be taking on board is the need to gain deep expertise in related disciplines. The need for this is not new to me, but I had lost sight of it in the day to day busy ness of running a law firm as mentioned in my blog post: http://www.ip-brands.com/blog/ I see all too clearly how the unmet need for legal advice means that lawyers are now being largely excluded from advisory work for small businesses who are setting up e-commerce websites. Web designers often sell their clients some documents to post on their websites. Even when they don’t, clients are not too bothered, and the legal niceties of contract formation, and terms of business and privacy policies are ignored. In my experience only well funded start ups will generally bother with solicitors when they are entering into web related contracts. Lawyers are losing ground everywhere it seems.

Jane Lambert said...

Recent support for Professor Flood's comments come from Altman Weil's survey of 1,292 US general counsel (in-house legal advisors) in November as to whether they expected budget cuts and what they expect to do about them. The report can be downloaded from the consultancy's website at http://tinyurl.com/59ltlq . I am also discussing it in the latest IP/IT Update newsletter. Most IP solicitors and patent and trade mark agents with whom I deal regularly should get a copy but if you don't and would like one please call me on 0870 990 5081.

Dave_Tenen said...

Stephanie Kimbro has grasped the concept of the virtual office and she has managed to find a niche` for it. Law. Her prices are remarkably cheap, I have to agree.