One possible benefit of the economic crisis is that traditional business models are now being exposed as needing significant redesign or even elimination. Leverage or billable time company law firm model is just one of these criticized models of business, and appears to be on the verge of being tossed into the trash of the history of.
Particularly people who earn greatly from the billable hours models, like the Cravath firm’s numerous $800 an hour lawyers, are now recognizing the fundamental absurdity of charging clients for time spent , instead of the value they receive. This alone is a signal that change is in air.
Despite the increasing debate about the need to create alternative model of client service I worry many IP legal firms resist the need to change or react by offering incremental adjustments to their existing ways of offering legal assistance for their customers.
As someone who has extensive expertise in dealing with IP lawyers I believe that unfortunately, the insular nature of many IP lawyers implies that IP firms will probably fall behind in the development of client services. Therefore I’m of the view that many highly regarded and very lucrative IP lawyers will eventually in near future disappear.
I have come to this conclusion as an outcome of several memorable experiences. In one instance instances, a few years ago I approached the managing partner of the well-known IP law firm to suggest ways of ways to cut down the amount of time that were devoted to client issues. At the time, the company was experiencing significant complaints from clients regarding the expense of legal services that were routinely provided.
I suggested at the time to the managing partner how he might cut the cost of less significant e.g. administration of client IP issues by delegating these tasks to paralegals who bill lower. The response to this suggestion: “If paralegals did the job, what would associates of the 1st and 2nd year do?”
Naturally, the primary basis of the response of the managing partner was that to keep the machinery of the firm’s billable hours/leverage model moving smoothly, he had to keep associates in the early stages of billing per hour.
The current model of the law firm demanded that it hire associates continuously to boost leverage for partners and ensure that they successfully bill clients on an hourly basis and a substantial portion of the time each associate is billed directly to the partner’s pocket. The only thing left out of this model was the question of whether clients’ best interests were fulfilled by the system which best served the partnership between the law firm and its partners.
Evidently, the law firm was not properly managed, and this could serve as a justification to the partner’s selfish perception of the client’s IP legal assistance. However my experience as a corporate purchaser for IP legal services also confirmed the billable hour/leverage partnership business model was a system that often placed the client – which was me, at present–after the interests of the law firm.
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In my role as an internal counsel who spent around $100K per year on legal services from a number of reputable IP companies, I often found that whenever I contacted outside counsel for assistance , the first thought that came to the mind of the lawyer was “So happy she called, I wonder how much work this phone call could result in?”
In the majority of cases I had the impression the outside IP lawyers saw my legal concerns as issues that they had to resolve on a per-hour basis, not as concerns which could affect the profitability of the business that I was working for. The distinction is subtle however, the significance for the first is that of a lawyer as a service provider and the latter as an business partner.
Based on these circumstances I was not astonished by what I heard as I discussed my opinions about the leverage model and billable hour with a friend of mine in one of the leading IP specialist legal firms across the US. The partner I spoke to echoed my thoughts regarding the need for innovation with respect to IP customer services.
She also stated that the majority of her company’s partners are unaware that there’s a problem in the way they offer IP legal assistance to clients. According to her, the majority of her senior members have lived with the model of billable hours/leverage and therefore think there is no need to alter their practices. My friend is aware that the law firm she works for is seriously in a state of decline and could soon be suffering from something akin the sudden heart attack.
Unfortunately, she’s not part of her law firm’s management team and, because there isn’t any upper or middle management that recognizes that change is required and is not a good reason for her to voice her concerns with the members who can effect change (and likely not politically feasible to do so).
The inability of these very well-paid IP attorneys to understand the changing winds of their clients’ acceptability of their bill practices – the base of their firm’s business model–reflects the reaction of a long-standing group of interests to technological advances that didn’t fit with their current business model. Additionally the inability of a lot of IP law firms understand the changing climate leads me to think that a lot of these well-known law firms could soon suffer their fate like buggy whip makers should they not be innovative regarding the way they offer the legal assistance to clients.
The analogy is that buggy whip manufacturers experienced their end due to the fact that they thought they were in the buggy whip industry but were actually in the transportation industry. When the buggy whip became obsolete and so did these once prospering producers. In addition, the buggy whip makers had the capacity to change and prosper in the modern world of automobiles.
They had established good business relations with buggy makers who were the first car businesses. They employed skilled craftsmen that could have put their energies to creating leather seat covers , or other parts that are part of automobiles. They had only accept that they had to take advantage of the new technologies happening at the time and reinvent themselves to become suppliers to car manufacturers instead of buggy manufacturers.
As buggy whip producers I think that lawyers have become too ensconced within the law firm industry that they’ve completely forgot that they are in fact legal service providers. As the people who are responsible for ensuring the sustainability of the firm lawyers from law firms often are primarily fee-generating, because the fee is earned from charging clients hourly to provide legal assistance.
The care and nourishment for the firm as well as its partners by making sure that there is continuous creation of billable hours gets the upper hand over the legal requirements of the clients. In a similar way to buggy whip manufacturers, IP lawyers working in law firms are able to evolve to stay ahead of the curve and avoid becoming obsolete.
In fact, they have the required abilities to keep practicing their profession in a different way than the traditional model of law firms. Similar to buggy whip makers lawyers also have established relationships with their customers i.e. clients, which provides them with an advantage over those who want to join the IP legal services market using new, yet unfamiliar model of client service.
Based on the well-known concept of obsolescence that was presented by buggy whip makers more than hundred years ago, think the IP lawyers who understand that they need to be innovative in the manner they provide IP legal advice to their clients are likely to be successful when their clients decide the time to change has come.
However lawyers who think they’re involved in an IP practice of law firms are going to remain behind once new innovations in customer service are introduced to the market that make the traditional law firm model obsolete.
IP lawyers should not assume that they’ll be in a position to anticipate what their clients might want to changes. Similar to the clients of buggy whip producers lawyers’ clients won’t provide the IP lawyer with a of warning before transferring their business to lawyers who can provide clients with new and more personalized services.
In fact, once clients finally have viable alternatives they’ll naturally shift to the option that is most suitable for the needs of their business. This will mean that the day comes when these highly successful IP lawyers will awake to discover that they’re losing clients in a masse to those who succeeded in introduced a revolutionary client-service method to all of the globe. As most lawyers will inform you, once a customer has gone, they’re likely to be gone for ever.
Clients will not only fail to make a public announcement that they are planning to depart from their law firm prior to when they make the decision, but they’ll also fail to tell their lawyers how they could better serve them. Why would they? They’re not engaged in offering legal services.
Therefore, mutually beneficial client service innovations have to be created through and as a result of lawyer actions. However, due to their inherent conservatism, I am of the opinion there are many IP lawyers fail to understand the importance of innovation until it’s too late to protect their clients.
Many might argue that complaints regarding the billable-hour model have been common throughout the years, yet there have been no significant changes until now, which suggests that many clients are mostly bluster and inaction.
Although it’s true that lawyers did not put any significant pressure on lawyers for adjustments in the past things are drastically different in comparison to before. The pace of innovation is changing the world, and a lot of solid models of business, like recordings and newspapers, are currently towards extinction because of.
There are signs that indicate that law IP firms that depend on the model of billable hours/leverage appear to be in danger of experiencing significant pressure from both critics and clients within the next few years. Firms that rely on this model to earn their livelihoods would be best to seek out innovative solutions to tackle the changing landscape.