Ethics Opinions Allow Foreign Legal Outsourcing By Steven J. Mintz, Litigation News Associate Editor

Lawyers and clients must weigh cost savings, quality, duty to supervise

Bar committees in New York City, San Diego County, and Los Angeles County have ruled, expressly or implicitly, that lawyers may contract with foreign lawyers not admitted to practice in any jurisdiction in the United States, or with nonlawyers outside the United States, to perform legal work for U.S. clients. These authorities hold that foreign legal outsourcing does not constitute aiding the unauthorized practice of law. NYCBA Formal Op. 2006-3; SDCBA Formal Legal Ethics Op. 2007-1; LACBA Ethics Op. 518.

The New York City bar opinion notes that outsourcing overseas “has begun to command attention in the legal profession, as corporate legal departments and law firms endeavor to reduce costs and manage operations more efficiently.” Some market research firms project that tens of thousands of U.S. legal jobs soon will be outsourced to low-cost countries, with the majority of jobs going to India.

"Outsourcing ‘will expand exponentially because of discovery costs."

The opinions maintain that foreign legal outsourcing should be subject to the same ethical requirements as domestic use of nonlawyer services, in particular targeting the following functions for the U.S. lawyer: Supervise the foreign lawyer’s work, preserve client confidences, avoid conflicts of interest, generally bill only for the direct cost of outsourcing, and obtain advance client consent in certain circumstances.

But the opinions emphasize that a U.S. lawyer who outsources work “must at every step shoulder complete responsibility for the nonlawyer’s work” (NYCBA opinion), and “under no circumstances may the non-California attorney ‘tail’ wag the California attorney ‘dog’” (SDCBA opinion). The NYCBA opinion also states that a “New York lawyer must be both vigilant and creative in discharging the duty to supervise,” which might require background and reference checks into outsourcing companies and interviews of foreign lawyers by telephone or Web cast. The San Diego opinion further requires that “to satisfy the [California] duty of competence, an attorney should have an understanding of the legal training and business practices in the jurisdiction where the work will be performed.”

The rulings “take settled principles and familiar rules and apply them to a slightly different setting,” says Bruce A. Green, New York City, professor at Fordham University School of Law and member of the Section of Litigation’s Council, referring to the New York City bar opinion. “Sending legal work abroad makes the supervision more challenging and raises the liability risks,” he explains, but as long as a U.S. lawyer remains responsible to both the client and the ethics rules, any additional risk “will only give lawyers added incentive” to closely supervise the delegation of work.

Foreign legal outsourcing “will expand exponentially because of discovery costs,” agrees Robert R. Simpson, Hartford, CT, Cochair of the Section’s Corporate Counsel Committee. He cites the new federal civil rules on electronic discovery and “sophisticated clients who see legal outsourcing as one vehicle to consider in keeping costs down” as driving demand for outsourcing. Law simply may be “a step behind the curve” of businesses that have set up call centers and technical support abroad, he notes.

But questioning whether the cost savings of foreign legal outsourcing outweigh the difficulties of supervision and concerns about the quality of work product yields differing opinions among Section leaders. “The problem with having foreign lawyers do U.S. legal work is that most of what you get is not going to fit the assignment,” says Louis F. Burke, New York City, Cochair of the Section’s International Litigation Committee. In Burke’s experience, the areas in which he practices, including securities, options, and futures, are too complex for foreign lawyers to substitute effectively for U.S. lawyers.

Quality may be an issue now, but “as the services offering foreign legal outsourcing become more sophisticated and experienced, people will begin using them for more subjective functions,” predicts Simpson. He agrees, however, that law may be less readily amenable than other businesses to foreign outsourcing because of the “additional level of supervision that is required by lawyers. Lawyers are often poor managers. ‘Out of sight, out of mind’ is the problem. It is hard enough to manage people in your department,” he says.

http://www.abanet.org/litigation/litigationnews/2007/july/0707_article_outsourcing.html 

Process Patents in the Wake of 'Bilski' By Richard Raysman and Peter Brown

This past summer, the U.S. Supreme Court issued its decision in Bilski v. Kappos, an appeal that posed the large questions of whether methods of doing business were patentable and what prevailing test should be employed when evaluating the patentability of process patents.

Despite the numerous amicus briefs and the fervent lead-up to oral argument, Bilski was more subdued than monumental. In its wake, the decision clarified certain aspects of patent litigation. However, it also created uncertainties for inventors who seek to patent software methodologies and financial processes; generated strategic concerns for certain patent licensors and licensees; and ultimately left the task of fashioning patentability standards to the U.S. Patent and Trademark Office and the U.S. Court of Appeals for the Federal Circuit.

This article discusses Bilski generally, the USPTO's response, the interpretation of the decision by subsequent courts, and some considerations about the effect of the future, post-Bilski landscape.

In Bilski v. Kappos, 130 S.Ct. 3218 (2010), the Supreme Court ruled that the Federal Circuit's machine-or-transformation test is not the sole test for patent eligibility under §101 of the Patent Act because any ordinary, contemporary meaning of "process" under the act would not necessarily require it to be "tied to a particular machine" or "transform an article."

The Court affirmed the circuit's holding of unpatentability and found the patentee's claims, which sought to patent both the concept of hedging risk and the application of that concept to energy markets, were attempts to patent abstract ideas, not patentable processes.

Most notably, the Court rejected the Federal Circuit's holding[FOOTNOTE 1] that the "machine-or-transformation test" is the exclusive test for determining patentability of a process under §101, instead holding that the test remains a "useful and important clue," but not the "sole test" for determining whether an invention is a patent-eligible process under §101.

Instead, the Court stated that the inquiry should be whether the claimed invention falls within the definition of statutory subject matter and is not merely a law of nature, physical phenomena, or an abstract idea.
Yet, the Court did not offer an example of an invention that would not be tied to a machine or transform an article and still pass the subject matter test, limiting its holding to the fact that the patent-at-issue disclosed an abstract idea and was invalid.

The Court also refused to interpret the Patent Act to categorically exclude business methods: The act "leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter under §101."[FOOTNOTE 2]

The Court noted that even if a particular business method fit into the statutory definition of a process, such a claim must still clear the statutory requirements for patentability, namely that any claimed invention be novel, nonobvious, and fully and particularly described.

In closing, the Court reiterated its cautious approach to avoid imposing limitations on the Patent Act that are inconsistent with the text: "The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable 'process,' beyond pointing to the definition of that term provided in -- the Patent Act and looking to the guideposts in [prior Supreme Court decisions]."

USPTO RESPONSE
To aid patent examiners in determining subject matter eligibility under 35 U.S.C. §101 in light of Bilski, the USPTO issued its "Interim Guidance for Determining Subject Matter Eligibility for Process Claims in View of Bilski v. Kappos," 75 Fed. Reg. 43922 (July 27, 2010). The interim guidance represents the USPTO's current understanding of the law and may be looked to by courts, but it does not constitute substantive rule making and does not have the force of law.

Generally speaking, it states that the machine-or-transformation test will remain a useful starting point for determining whether a claimed method is a patent-eligible process under §101.

The interim guidance also provides additional factors to aid in the determination of whether a claimed method that fails the machine-or-transformation test can nonetheless be patent-eligible, and whether a claimed method that meets the machine-or-transformation test can nonetheless be declared patent-ineligible.

Interestingly, the guidance also notes that the presence of a general concept can be a clue that a patent claim is drawn to an abstract idea, particularly in the face of the following factors: (1) the extent to which use of the concept would pre-empt its use in other fields; (2) the extent to which the claim is so abstract and sweeping as to cover both known and unknown uses of the concept; (3) the extent to which the claim is a statement of the problem versus a description of a particular solution to the problem; (4) whether the concept is disembodied or whether it is implemented in some tangible way; (5) whether the performance of the process is observable and verifiable rather than subjective or imperceptible.

According to the guidance, claims directed to abstract ideas were not patentable prior to Bilski, so subject matter eligibility outcomes are not likely to change in most cases, though in some rare cases, "factors beyond those relevant to machine-or-transformation may weigh for or against a finding that a claim is directed to an abstract idea."[FOOTNOTE 3]

It is anticipated that the factors will be modified in the face of new precedential case law and that new factors may be developed in the future, particularly for emerging technologies.

THE LOWER COURTS
The wisdom in Bilski was couched more in the negative than the positive -- the machine-or-transformation test is not the sole test for patentability of process patents, the patent-at-issue was not patentable because it was directed to an abstract idea.

The issue of what software and technological processes are patentable will now be fleshed out by the lower courts and the Federal Circuit. For example, in Ultramercial, LLC v. Hulu, LLC, 2010 WL 3360098 (C.D. Cal. Aug. 13, 2010), the patent-at-issue disclosed a method for allowing internet users to view copyrighted material free of charge in exchange for watching certain advertisements. The court granted the defendant's motion to dismiss based upon invalidity, finding that the plaintiff's patent did not disclose patentable subject matter, failing both the machine-or-transformation test and the prohibition against patenting abstract ideas.

The court rejected the patentee's argument that the patent was tied to a machine because of its application to the internet and certain programmed computers. It stressed that the machine must limit the invention in a meaningful way, and that in this case, the concept of advertisement-media exchange does not become patentable simply because the patentee allegedly limited its application to the internet.

Lastly, the court ruled that, much like the patent in Bilski, the plaintiff's patent reciting a method allowing an internet user to sit through a sponsored message in lieu of paying to see media, was an abstract idea, a concept that "public television channels have used -- for years to provide free (or offset the cost of) media to their viewers."

In another post-Bilski decision, a district court declined to use the machine-or-transformation test because not only was it no longer the exclusive test of patentability, it was also not necessarily an appropriate way to assess the patentability of product claims.

In Chamberlain Group Inc. v. Lear Corp., 2010 WL 4884448 (N.D. Ill. Nov. 24, 2010), the plaintiff asserted infringement claims against the defendant over patents covering garage door opening systems. The defendant proffered, among other defenses, that the asserted claims are directed to unpatentable subject matter.

The court stated that the principal question was whether the claimed subject matter fell within at least one category of statutory subject matter. The court held that the plaintiff's claims constituted patentable subject matter because the mathematical algorithms underlying the asserted claims were directed at a physical product (i.e., garage opener transmitter and receiver) that was used for a specific purpose.

Echoing the USPTO's interim guidance, the court also noted that the patentee did not purport, in any way, to preclude the use of the mathematical algorithms that operated within the garage door opener system for other purposes or other fields of use.

ANOTHER FEDERAL CIRCUIT CASE
Most recently, last month in Research Corporation Technologies v. Microsoft Corp., 2010 WL 4971008, the Federal Circuit reversed a lower court ruling of invalidity of the plaintiff's patents, which concerned a process for rendering a "halftone image" in digital computer displays and printer images.

Taking a wide look at Bilski, the court stated that the Supreme Court emphasized that the §101 patent-eligibility inquiry is only a threshold test, a "coarse eligibility filter," and should not become a substitute for a patentability analysis based upon an analysis of prior art or other substantive statutory requirements.

In quoting Justice John P. Stevens's concurrence in Bilski, the court stated: "In other words, Section 101 does not permit a court to reject subject matter categorically because it finds that a claim is not worthy of a patent."
As in Bilski, the Federal Circuit focused its inquiry on whether the plaintiff's patent was an unpatentable abstract idea. Echoing the Supreme Court's reluctance to provide a rigid formula or definition for abstractness, the court also refused to define abstract beyond recognizing that any disqualifying characteristic should "exhibit itself so manifestly" as to override the broad statutory categories of eligible subject matter.

The court held that the plaintiff's software patents were not abstract because they presented functional and palpable applications in the field of computer technology. The court recognized that while the patents incorporated algorithms and formulas that controlled the digital displays, they did not make the invention so abstract as to be unpatentable because patents do not lose eligibility if several steps of a process use a mathematical equation.

Importantly, the court noted that the patentees did not seek to patent a mathematical formula for any and all future uses, but rather only for a process of half-toning in computer applications.

LOOKING AHEAD
While the U.S. Supreme Court did not explicitly ban business method patents, going forward, it is likely that software-related and financial service patents will be more scrutinized, with increased focus on whether such patents are unpatentable abstract ideas.

Accused patent infringers may recalculate their strategies concerning whether to litigate and seek a re-examination or invalidation of the plaintiff's patent or settle on a reasonable royalty.

Similarly, in the patent licensing arena, licensors of many method patents were certainly relieved by the Court's limited ruling, yet some patent licensees may seek to renegotiate licensing fees or offensively move to invalidate a licensor's patents.

On the judicial side, following Bilski, courts and patent examiners are left to develop workable standards for determining patent eligibility beyond the machine-or-transformation test. In the end, modern inventions may call for new inquiries and the challenge will be in applying the machine-or-transformation test or other similar tests to software processes and emerging technologies.

As Justice Anthony Kennedy stated, courts face a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others could discover by independent, creative application of general principles.

The Supreme Court may take up other important patent cases in the near future. Indeed, it has accepted the appeal of the Federal Circuit's decision in Microsoft Corp. v. I4I Ltd., 598 F.3d 831 (Fed. Cir. 2010). The appeal concerns the legal standard litigants must meet to successfully challenge a patent, namely whether the appeals court erred in holding that Microsoft's invalidity defense must be proved by clear and convincing evidence.

Commentators are also watching the Federal Circuit's consideration of Fort Properties, Inc. v. American Master Lease, LLC, 609 F. Supp. 2d 1052, stay lifted by No. 2009-1242 (Fed. Cir. Dec. 1, 2010). In that appeal, the circuit will review the lower court's pre-Bilski ruling that the defendant's patent, which discusses a business method for creating an investment instrument out of real property, did not satisfy the "transformation" prong of the machine-or-transformation test.

Richard Raysman is a partner at Holland & Knight and Peter Brown is a partner at Baker & Hostetler. They are co-authors of "Computer Law: Drafting and Negotiating Forms and Agreements" (Law Journal Press).

::::FOOTNOTES::::
FN1 In Re Bilski, 545 F.3d. 943 (Fed. Cir. 2008). Regarding the Federal Circuit's State Street [State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F. 3d 1368, 1373 (1998)] test, which the Federal Circuit repudiated in its Bilski opinion, the Supreme Court's majority opinion in Bilski neither explicitly endorsed nor rejected it, writing that "nothing in today's opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street, 149 F. 3d, at 1373 -- " Bilski, 130 S.Ct. at 3231. However, the two concurring opinions (which were signed on by five justices) explicitly rejected the State Street "useful, concrete and tangible result test." For example, Stevens wrote that it "would be a grave mistake to assume that anything with a 'useful, concrete and tangible result,' may be patented." Id. at 3232, n. 1.

FN2 It should be noted that Stevens, whose concurring opinion was joined by three other justices, would have found methods of doing business to be unpatentable: "In the absence of any clear guidance from Congress, we have only limited textual, historical, and functional clues on which to rely. Those clues all point toward the same conclusion: that petitioners' claim is not a "process" within the meaning of §101 because methods of doing business are not, in themselves, covered by the statute. In my view, acknowledging as much would be a far more sensible and restrained way to resolve this case."

FN3 The Board of Patent Appeals and Interferences, which reviews adverse decisions of USPTO patent examiners, issued several post-Bilski decisions. While commentators might argue over whether the board has taken a hard line interpretation of the proscription against patenting abstract ideas or rightly rejected certain applications based upon vague, inexact claim language, it is clear that the board's approach is clearly being informed by the Supreme Court. See Ex Parte Proudler, No. 2009-006599 (B.P.A.I. July 7, 2010) (Board found the software inventor's application that contained general recitations to computers and other abstract functionalities was insufficient to bring the claims within the ambit of statutory subject matter); Ex Parte Birger, No. 2009-006556 (B.P.A.I. July 12, 2010) (Board rejected a software, digital communications-related invention because, among other things, the claimed invention was abstract and not directed to statutory subject matter).

http://www.law.com/jsp/lawtechnologynews/PubArticleLTN.jsp?id=1202477737985&Process_Patents_in_the_Wake_of_Bilski

ABA Urges Obama Administration to Ask India to Ease Restrictions on Foreign Lawyers -- By Rhonda McMillion

The ABA is urging the federal government to take steps to ensure that U.S. lawyers have appropriate access to the legal services markets of its key trade partners.

The ABA’s effort is another nod to the growing impact of globalization. A global economy is making it increasingly important for U.S. lawyers to be able to give advice and other assistance to clients around the world.

ABA President Stephen N. Zack recently focused on the importance of access for American lawyers to clients in India, the 14th-largest trading partner with the United States. Zack outlined the issue in a Nov. 3 letter (PDF) to President Barack Obama and urged him to raise it during his trip to India, which began Nov. 6. Zack said the provision of legal services is critical to increasing the level of trade between the United States and India. “Such services of lawyers well-versed not only in the laws of the United States and India but also cross-border transactional matters are plainly essential for such an increase,” wrote Zack, who is administrative partner in the Miami office of Boies, Schiller & Flexner.

India, for its part, has sent conflicting signals on its willingness to accept foreign lawyers. In March, the United States and India signed the Framework for Cooperation on Trade and Investment to strengthen bilateral cooperation and build on the rapidly growing trade between the two countries, which has doubled in the past five years. The framework includes the launch of an initiative called Integrating U.S. and Indian Small Businesses into the Global Supply Chain, intended to expand trade and job creation for U.S. and Indian companies.

In September, however, the Bar Council of India announced that it had decided not to permit foreign lawyers in the country, although the decision is still under final study. In addition, a private Indian lawyer has filed a lawsuit in the High Court of Madras seeking to restrict travel to India by foreign lawyers for purposes of giving advice about their domestic laws to Indian clients or advising clients from their own countries about doing business in India. (Currently, U.S. lawyers may visit India on a temporary basis only to advise clients on home country law.)

POINTING TO PRECEDENT

Zack’s letter requests that President Obama urge the Indian government to adopt a rule similar to the ABA’s Model Rule for Licensing and Practice by Foreign Legal Consultants (PDF), which has been adopted by more than 30 U.S. jurisdictions.
The rule allows a licensed lawyer from outside the U.S. to maintain an office in this country after registering with the local bar or court. This allows the lawyer to advise clients about the law of their home country without passing any exams or undergoing training in the United States. The ABA supports principles under which U.S. lawyers may secure the right to practice from offices abroad.

“U.S. lawyers want no more than the rights Indian lawyers have in the United States—a reciprocal opportunity to advise clients on the laws of their home country without presuming to advise on the law of a country where they are not admitted to practice,” Zack’s letter states.

The issue apparently was not addressed during Obama’s India trip, but raising it was an important first step for the ABA’s advocacy efforts. The ABA’s Governmental Affairs Office will continue to promote enhanced foreign market access for U.S. lawyers as Congress considers other possible free trade agreements with other countries, including Colombia, Panama and South Korea, in the near future.

http://www.abajournal.com/magazine/article/aba_urges_obama_administration_india_ease_restrictions_on_foreign_lawyers/

Facing ‘Unrelenting’ Price Pressures, Law Firms Turn to Outsourcing, Innovation-- By Debra Cassens Weiss

Law firms faced with “unrelenting” pricing pressures from clients are beginning to outsource basic legal work, create new categories of lawyers, and take a “loss leader approach” to pricing.

In an article for the Am Law Daily, Dan DiPietro and Gretta Rusanow of Citi Private Bank's Law Firm Group base their conclusions on roundtables with managing partners at more than 150 law firms, both here and in London. Law firms are trying to save money so they can compete on price, the article says, and they are trying to please clients with approaches that go beyond alternative fees and discounted rates.

Some law firms have already moved back-office functions to cheaper locations, either within the United States or overseas, according to DiPietro and Rusanow. Sometimes the firms are hiring offshore service providers and sometimes they are creating their own captive offshore operations.

Now some law firms are going further, the article says, and are beginning to outsource basic legal work. Within firms, new categories of lawyers are being created to do work at lower cost than traditional partner-track associates.

Firms taking the “loss leader” approach heavily discount fees early in the client relationship to get a foot in the door. The hope is that the client will accept higher fees after it sees a difference in quality. Some firms are also offering discounts to start-ups in hopes of a long-term profitable relationship.

Firms are also offering “value beyond price,” the article says. In some cases, associates are sent to work in the offices of corporate clients for a negotiated price. Some clients are being offered a set amount of free telephone consultations. Other firms are offering “knowledge tools” such as a database of client work product, or access to research help.

“Firms are embracing the challenges they've faced in this soft demand market,” the article concludes.

http://www.abajournal.com/news/article/facing_unrelenting_price_pressures_law_firms_turn_to_outsourcing_innovation/

Vee Technologies Launches New Website

New York, NY – Vee Technologies, a Strategic Services Company based out of Bangalore, India that offers world class quality in transactions processing is pleased to announce the launch of their newly redesigned website.

From Insurance to Engineering, Vee does it all. www.veetechnologiesusa.com will act as Vee’s new online store front, offering visitors a wealth of information about Vee’s various services and offerings. Visitors can now access brochures, videos, read client testimonials and see firsthand why Vee Technologies is the World’s Smartest Strategic Services Company.

About Vee Technologies – Vee Technologies is part of the Sona Valliappa Group – a name that is renowned in the Indian business firmament for over seven decades. The group was a pioneer in bringing IT to India. The group owns and runs a group of colleges from which it feeds talents in to Vee Technologies. Today, the BPO division of Vee Technologies has grown to over 700 FTEs and processes over 40,000,000 transactions annually.

http://www.veetechnologiesusa.com/resources/press-releases/120-vee-technologies-launches-new-website.html

Will U.K. Management Trends Influence U.S. Law Firms? by Gina Passarella

Editor's note: This article is part of a weekly series from The Legal Intelligencer examining how law firms adapted during the last two years and where they are headed as the economy recovers.
Between new players looking to provide legal services and pushback from clients over paying for routine work, law firms potentially have less to do.

In response, some firms have looked to retool their business models, adjust the roles they play for their clients and, in some instances, get out of certain businesses altogether. For many firms, staying ahead of the curve will mean recognizing these challenges and figuring out creative ways to adapt, consultants say.

"Underestimating your opposition is a really bad idea," Edge International consultant Jordan Furlong said.
Furlong recently heard a general counsel say that her job is not to produce or deliver services to her clients but to manage solutions -- a role law firms would be served well by if they chose to embrace the concept, he said.

Firms should think of themselves as the managers of solutions and recognize they will do some of the work and send some out to other providers, he said.

"Smart firms will say they still want to manage the process and sit at the client's right hand," Furlong said, adding however, that they need to realize there are some things the firm is good at and other things a legal process outsourcer (LPO) may better handle.

The real battleground for law firms in the near future will be over who will serve as the quarterback, or the solutions manager, Furlong said.

Law firms in the United Kingdom seem to have been the early adopters of this model. Furlong pointed to Lovells, now Hogan Lovells since its merger with U.S.-based Hogan & Hartson. Lovells had gone out to find regional firms to do certain work at a lesser charge while Lovells would serve as the guarantor of the smaller firm's quality and liability.

Hogan Lovells London-based partner Michael Stancombe said the firm created what it calls its WAVE process eight years ago after some large clients started asking for some of the "smaller" work to be handled in a more cost-effective fashion while keeping Lovells involved in the oversight of the whole matter


The firm came up with the idea of having clients give it all of the work, as opposed to the portion it had prior, and the firm would manage it with the goal of decreasing the client's legal spend by 20 percent. All matters came through Lovells and anything below a certain threshold would be sent out to two pre-selected regional firms to handle at a lower cost. In turn, Lovells was able to increase its rates for the high-end work it was doing given the fact that the clients were still saving money. That also made up for sending out some of the work, Stancombe said.

The clients could theoretically just contract with the two smaller firms and cut out Lovells, but they want the management capabilities and high-end work from the firm, he said. The key factor in the WAVE concept is that the lead firm maintains oversight of the entire matter. So far, around 9,000 matters have been handled under this system, Stancombe said.

Since Lovells merged with a U.S. firm, WAVE is still implemented, and Stancombe said his legacy firm is working with its new colleagues across the Atlantic to see if such a system might make sense for their clients.
London-based Berwin Leighton Paisner took that concept a step further. Rather than utilizing a variety of lower-cost regional firms, Berwin Leighton created one that it controls. Lawyers on Demand is a subsidiary of Berwin Leighton that provides less expensive, though still highly trained, lawyers to serve on an interim basis within a client's law department. The freelance attorneys have the support of, and are under the control of, Berwin Leighton, but they operate under a different cost-structure


"We understand that work volumes are increasing yet many clients are coming under pressure to reduce legal costs," the firm said on its website. "All LoD fees are agreed in advance using a daily rate that reflects the expertise of the lawyer."

Other firms in the United States are using a distinct, internal attorney tier in an effort to reach a similar result. Adam Smith Esq. partner Janet Stanton called the concept a "light division" of attorneys. These lawyers are still part of the same firm but are perhaps resident on a different floor or office building and have no anticipation of becoming partner.

The idea is to combat the competition from temporary staffing agencies and keep as much of the commodity work in-house as possible, Stanton said. But this is just one type of service model and not suitable for every firm, she said. Some firms may choose to give up that work altogether and let the LPOs handle it.

Other firms are providing certain outsourced services themselves rather than let an e-discovery or document review LPO do it, Stanton said. They have created "e-discovery mills" or information centers in which lower-cost attorneys are working in lower-cost markets to handle work formerly done by more expensive junior and senior associates.

In an effort to make the work of junior associates more palatable to clients, the Practical Law Company is looking to team up with firms rather than work against them. Ian Nelson, head of the company's U.S. business development, wouldn't jump to call his company an LPO and said it has never looked to compete with law firms, though it does have some law department clients.

PLC provides online support for law firms, mainly in the transactional realm, that includes drafts of documents such as letters of intent, acquisition agreements or closing checklists. The goal is to stop lawyers from spending hours of research on how to draft these documents and instead focus on the legal services that can't be outsourced.

"There's a level of information that all lawyers at a certain level should have," Nelson said. "Clients shouldn't be paying for it."

Most of PLC's attorneys are former large-firm lawyers. Nelson said this isn't a lesser alternative but just a different way of training and providing services. Now that clients are interested in working with smaller firms, Nelson said, they are still expecting the same caliber of responsiveness and resources. Companies like PLC look to get lawyers up-to-speed faster, he said.

As with many LPO services, some firms have found a way to bring this research function in-house. And as with many business of law innovations, the concept hails from the United Kingdom

Professional support lawyers started in the United Kingdom more than 10 years ago and some consultants say they may be migrating into U.S. firms. The role of a professional support lawyer is to serve the firm or a specific practice area by staying up-to-date on changes to the law and assisting or providing drafts of legal documents all in an effort to prevent younger associates from billing the clients for hours spent doing the same thing


This attorney, who isn't billing time and can often work on a flexible schedule, might focus on researching new laws, draft documents and manage document systems, hold training sessions for younger lawyers and answer questions for billing attorneys on institutional knowledge within the firm.

The role is a cost center for law firms, as these positions are generally paid at a senior-associate level, but they can also be viewed as a way to combat the unwillingness of clients to pay for younger lawyers to learn on the job.

In February, London-based Clifford Chance was seeking a professional support lawyer for its New York office to work with the mergers and acquisitions and corporate finance practices. Some of the job descriptors included gathering and disseminating "know-how," collecting precedents and creating, updating and managing standard legal forms.

Regardless of whether firms are bringing the competition in-house, working with outside vendors or holding tight to the traditional law firm model, clients have an increasing number of options when it comes to service providers.

"There used to be one monolithic legal services provider -- the law firm," Furlong said. "Now there are many and clients will choose among them."

The "huge role" for law firms, he reiterated, is the quarterback.

http://www.law.com/jsp/article.jsp?id=1202474333189&rss=newswire

Smaller Firms May Soon See More Laterals, Fewer Young Lawyers by Zack Needles

Just as the recession caused more large companies to turn their attentions toward smaller firms, it had a similar effect on lawyers who traditionally might have been thought of as "big firm material."


Slashes in compensation and questionable job stability at megafirms sent more top-tier law school graduates to midsize and small shops.

Similarly, increasing rate pressure drove some big firm partners to smaller firms.

Still, while the number of young, well-pedigreed job candidates has remained high at small and midsize firms over the past few years, the number of big firm laterals migrating to smaller firms has not reached the heights many first predicted.

But some in the legal community believe the apex of large-to-small lateral market activity is still on the horizon, along with a shift back to big firms for many young lawyers.

LATERAL MOVEMENT? NOT YET
It was widely predicted that the recession would cause a number of large firm partners to jump ship for smaller firms.

The logic was simple: General counsel at big companies would be operating with tighter budgets and big firm lawyers would find it more and more difficult to justify their high rates, so they'd move to smaller shops where there's less overhead.

But some in the legal community reported that, so far, this scenario has played out more in theory than in practice.

Peter R. Spirgel, managing shareholder of Flaster Greenberg in Cherry Hill, N.J., said he's been "surprised" by the lack of big firm lateral interest his firm has experienced over the past few years.


"I'm trying to figure out why and I've called some placement firms we've used and asked, 'Is it me?,'" he said. "But they said no. In fact, they see that partners with nice-sized portable books are less likely to move in troubled economic times. It's just another risk factor they don't want to bear."

Recruiter Frank D'Amore of Attorney Career Catalysts agreed that's part of it.

"Some people have decided, I think, that because of the uncertainties associated with the recession, 'If I can hold my own where I am, maybe now is not the time to take a risk,'" he said.

Both Spirgel and D'Amore said that much of the big-to-smaller firm movement that has occurred over the past few years has involved attorneys who were forced out of big firms because their practices couldn't be supported in tough economic times.

Big firm partners with solid books of business, however, have largely stayed put, according to D'Amore.
Those lawyers, he said, have recently been "protected in a cocoon" in which they've been allowed to offer their clients significant discounts and creative alternative fee arrangements as their firms fought to maintain business and weather the economic storm.

But a healing economy may prove to be worse news for big firms than an ailing one when it comes to losing partners, D'Amore said.

As the economy begins its upswing, he said, megafirms will likely try to return to something resembling their pre-recession selves by scaling back discounts and other client concessions and eventually increasing rates again.

General counsel, however, aren't likely to be as eager to go back to "normal."

If that happens, D'Amore said, partners who stuck it out with their firms over the last few years will have to decide whether they'd be better off somewhere smaller.

"Decision day will come for people who have kind of been in abeyance," he said.

In addition, he said, the recession forced many large firms to define their identities, leading to a market where international, national and regional firms are more clearly demarcated.

Because of this, according to D'Amore, partners with more rate-sensitive practices may increasingly begin feeling like they no longer belong at a firm whose overhead includes, for example, an office overseas.
Partners in certain practice areas may also begin to feel out of place at megafirms.

Patent prosecution and trusts and estates, as well as labor and employment work focusing on the public sector, employment practices liability insurance and individual cases are a few examples D'Amore gave of practices that may become harder to sustain at large firms.

BIG LAW BECKONS AGAIN
While the lateral partner movement has been sluggish, a number of midsize and small firms across Pennsylvania said the last few years have brought a wave of resumes from the type of highly credentialed young lawyers big firms typically scoop up first.

"In this year's summer class of 2010, we had representatives of the University of Virginia, Penn, Duke and George Mason," said David M. Kleppinger, chairman of Harrisburg-based McNees Wallace & Nurick. "In a typical year, we may have seen one or two from those types of schools. This year, it was the entire class."
Spirgel said he's had a similar experience.

"We were always very particular about who we hired," he said, explaining that his firm has long strived to hire attorneys who did well at top-ranked law schools.

The difference now, Spirgel said, is the firm has been hearing from "way more" young lawyers who fit that criteria.

Spirgel attributed this phenomenon to two factors: The shrinking compensation gap and the widening job-security gap between megafirms and smaller firms.

But as the economy begins to recover and large firms become more comfortable, D'Amore said, an increasing number of young lawyers may once again find themselves drawn to big firm life.

D'Amore said a number of large firms are beginning to "wade cautiously" into hiring again, planning summer programs with the hopes of bringing on new attorneys in the fall of 2011 and the fall of 2012.

Likewise, compensation may start to rise again, catching the eyes of both new graduates and young associates currently working at smaller firms, he said.

"When people have been [at a smaller firm] for three or four years and they graduated with a lot of loans and obligations and the market starts to go back, maybe firms won't be going crazy with starting salaries but the edge up will become very attractive," he said.

Kleppinger, however, was reluctant to solely credit the recession with the uptick in well-qualified hiring candidates at smaller firms.

Another component of it, he said, is generational.

"People know that the work requirements in some of the larger city firms are a lot larger than they are here in terms of time commitments and more and more young people are coming out of law school saying, 'I don't want that, I don't need that,'" Kleppinger said.
 
But D'Amore said that while this can be true, the workloads at midsize firms and large firms are not always that different.

For example, he said, while an attorney at a megafirm may be obligated to bill significantly more hours than a smaller firm counterpart, it will often be easier for the large firm attorney to find time to bill.

So the amount of effort required by each attorney in that scenario is basically equal, according to D'Amore.
More solid selling points for smaller shops hoping to sway young lawyers from going to big firms, he said, are the ability to offer more hands-on experience, a faster partnership track and greater flexibility in terms of work schedules.

http://www.law.com/jsp/article.jsp?id=1202474331627&rss=newswire

The City slowly discovers legal process outsourcing (LPO)

Following in the footsteps of the banking industry and their counterparts on Wall Street, a number of leading City law firms are beginning to seriously consider outsourcing as a way to further cut costs. However and while adopting some form of business process outsourcing (BPO) has become increasingly the norm, legal process outsourcing (LPO) has yet to significantly catch on.


According to a recent article in Legal Week, eight firms among the top 30 City firms are or were currently looking at introducing some aspects of LPO. These firms included Allen & Overy (A&O), Eversheds, Freshfields Bruckhaus Deringer, Linklaters, Lovells, Pinsent Masons, Wragge & Co and Simmons & Simmons while CMS Cameron McKenna and SJ Berwin are in the process of identifying what areas they would like to outsource. Meanwhile, another eleven of the top 30 firms said they had no plans to begin any type of LPO work and some of these firms had already looked at LPO as an option and had discounted it. Nevertheless, more than half of the firms in the top 30 had told Legal Week that they already outsource at least some of their back office functions.

So why is BPO more popular than LPO among City firms? A recent (November 2009) Legal Week Big Question Survey of partners from City firms in London found that half of those surveyed thought that the general standard of work on offer by LPOs could be better. In fact, no one rated LPO services as excellent while 14% rated such services as good, 27% thought they were ok and 7% rated the services as poor. Meanwhile, 36% of responding partners thought that service levels were “much better” in the UK than the standards abroad and another 38% thought that such services were merely “better” while 19% thought there would be “no difference” in terms of outsourcing location.


Despite some doubts though, a clear majority of City partners thought that the traditional law firm model will need to change or evolve substantially. In fact, 58% of City partners said that law firms will need to re-engineer their business models by considerably improving IT infrastructure and process management over the next 10 years while 24% foresee a “massive need” for such changes. However, there was unanimous agreement that outsourcing legal work as opposed to back office functions was much harder to credibly outsource. Hence, only 13% of City partners saw major prospects for the expansion of LPO into commercial legal services and another 34% predicted “considerable” expansion while 53% expected little to no growth.

However, The Times has recently pointed out that attitudes are likely to change given that a new recruit at a leading City law firm can expect a starting salary of about £60,000 which can rise to more than £90,000 at the best paying firms. The Times pointed out that there are studies that suggest that there are already 10,000 lawyers in India who are working for outsourcers and the total revenue for the LPO sector is expected to double in 2010 to US$1 billion and rise to US$4 billion within five years

In other words, LPO will likely catch on in the near future as the recent Legal Week piece had quoted one City law firm partner as saying that the days of paying for all types of work by the hour and having all of those hours under the same roof no matter what the task was are long gone. In fact, the partner even went on to say that there will only be one “profession” (the world’s oldest!) that will soon be left doing that.

http://outsourceportfolio.com/city-slowly-discovers-legal-process-outsourcing-lpo/

Legal Process Outsourcing (LPO): Giving lawyers a case of their own medicine?

For certain the legal profession, long despised for its sky high fees, is one profession that few Americans would be sorry to see outsourced to India resulting in large scale job losses – at least for lawyers that is. Hence, will the emergence of Legal Process Outsourcing (LPO) finally cut the legal profession and its fees down to size? Maybe. Or maybe not.


Fortunately or unfortunately depending on how much you love lawyers, the legal profession is one profession that seems to be largely protected from the full blown effects of outsourcing. After all, a lawyer in one country generally cannot practice law in another country as the legal profession is governed by intricate licensure and ethical rules that are set by jurisdiction. Hence, Forrester Research is quoted in the Wall Street Journal as estimating that only 35,000 USA based legal jobs will be moved offshore by 2010 and 79,000 by 2015 – only a tiny fraction of the estimated 1.2 million lawyers in the country.

Moreover, don’t expect any US$500 an hour lawyer to have his or her job outsourced to India any time soon as the brunt of any job shift will be felt by paralegals and junior lawyers as LPO type of work typically includes basic legal research, documentation writing and review and the drafting of legal briefs and pleadings. In other words, routine legal and corporate secretarial type of work that no US$500 an hour lawyer would do themselves.


However, the potential cost savings from LPO are enormous with a recent USA Today article stating that some LPO companies will charge only US$25 an hour for work that would otherwise cost more than US$125 an hour if it were done in the USA. Moreover, starting salaries for new associates at big law firms in the USA can be more than US$200 an hour or US$160,000 per year at large and prestigious law national firms while the national average annual salary for lawyers according to a 2007 Altman Weil survey is US$318 per hour and US$550 per hour at large New York City law firms. However, an experienced lawyer in India can be bill at US$75 to US$100 per hour, roughly what some experienced USA based paralegals charge; while a indian lawyer with five years of experience can be hired for just US$30,000 a year including benefits, half of what an experienced USA based corporate paralegal would earn. And not to mention there is the cost of office space in New York verses Mumbai or Manila.

Nevertheless, don’t expect much in the way of cost saving to trickle out of large law firms or the legal departments of large multinationals. However, LPO does have the potential to significantly level the playing field for smaller law firms, smaller companies and individuals who can now have an amount of legal work done that could not be affordably attained in the USA. In other words, LPO has the potential to free up and leverage resources that will allow lawyers and Americans in general to do what they have almost always done best: sue each other.

http://outsourceportfolio.com/legal-process-outsourcing-lpo-giving-lawyers-case-medicine/

Growth of Consumer Debt Litigation Keeps Small Firms Busy -- by Zack Needles

A logical chain of events has occurred over the past few years: The recession has caused more consumer debts to go unpaid which, in turn, has led to more legal battles between consumers and their creditors.
On one hand, debt collectors are suing consumers to collect the unpaid debts. On the other, consumer debtors are filing suits claiming debt collection harassment.

Attorneys across Pennsylvania said both types of litigation have been on the rise in the state over the past few years and it's typically been small firms and solo attorneys that have benefited.

Pittsburgh solo attorney Eugene D. Frank, whose practice includes defending consumer debtors against collection actions, said he's seen an uptick in debt collection suits against consumers in recent years, but not necessarily by the original creditors.

"I am seeing more and more of that as we move along, primarily because you're having a lot of junk debt buyers purchasing these delinquent accounts and using more and more aggressive tactics, including lawsuits," he said.

The term "junk debt buyer" refers to an agency that purchases charged off debt from creditors, often in bulk and for pennies on the dollar, and then attempts to collect from the debtors.

Philadelphia solo attorney Michael P. Forbes said this form of debt buying became an industry unto itself during the savings and loan crisis of the 1980s and 1990s and has grown considerably during the most recent economic downturn.

Forbes said junk debt buyers are filing suits against debtors at an increasing clip and, while he has seen his caseload increase, "most people don't know that they can defend the case and can probably beat it."
According to Forbes, these agencies often have poor documentation or no documentation at all to prove they own the debt and to confirm the amount of the debt.

Frank agreed, saying that because junk debt buyers purchase debt in bulk, they often fail to obtain or retain the necessary records.

Documentation tends to become even more shoddy when those agencies resell the debt to other debt buyers, Frank said.

As a result, attorneys defending debtors in collection actions can often get cases thrown out on the grounds that the collection agencies violated civil procedure.

In addition to the more aggressive collection tactics increasingly being used by junk debt buyers, Frank said debt settlement programs are also partially to blame for driving up collection lawsuits.

Often, the programs advise consumer debtors to stop making payments while a settlement is negotiated, operating under the premise that most creditors won't resort to a lawsuit until the four-year statute of limitations has nearly expired, according to Frank.

Typically, however, debtors find themselves being sued within a year or so of discontinuing payment, Frank said, adding that most suits go unanswered and result in default judgments for the creditors.

Both Frank and Forbes said it's often in the debtor's best interest to hire an attorney to fight collection suits because default judgments can result in bank garnishments and liens against real estate and personal property.
"There's no such thing as judgment-proof," Frank said.

Frank said that because consumer debtor defense work is "more volume-based," it's typically handled by smaller practitioners.

Forbes agreed, saying the defendants in those cases are usually represented by solo attorneys or two-lawyer practices.

The same can be said about the attorneys representing the collectors in those cases.
According to Forbes, most of the firms representing plaintiffs in collections actions against consumers have five or fewer attorneys.

Noah P. Fardo, managing partner of four-attorney Flaherty Fardo in Pittsburgh, which represents creditors and debt collection agencies in collections actions, said there's "no doubt" collection activity has increased over the past two or three years.

"I've said it for the last couple years: The worse the economy gets, the busier we get," he said. "Collections is a recession-proof business."

But while both Frank and Forbes blamed the recent spike in collections actions on so-called junk debt buyers, Fardo said his firm usually draws the line at taking those agencies on as clients.

"We've represented some of the debt buyers and those cases are so picked over, so worked, that I don't like to represent those types of clients," he said.

According to Fardo, debt buyers are "typically looking for lawyers on a strict contingency basis and we don't believe the success rate warrants taking on those types of cases."

Part of the reason for that, he said, is the difficulty many of those agencies have in documenting debt that is often four or five years old.

"We have typically stayed away from aged receivables without proper documentation," he said, but added that he has noticed more and more of the creditors his firm represents inquiring about debt-selling opportunities.

And while he said his firm's creditor clients are "very organized," he has witnessed poor record keeping by both debt buyers and original creditors from the other side of the aisle, defending debt relief companies from creditor law suits.

Fardo said his firm has recently seen an influx of those types of cases, which it accepts provided there are no conflicts with its existing creditor clients.

Through the course of doing that work, Fardo said he's also noticed a trend of creditors failing to present witnesses at arbitration or trial in hopes that debtors will testify against themselves.

"We will often instruct our clients who we represent not to attend hearings with us," he said, explaining that, without a witness, the creditor is unable to prove its case. "We're winning verdicts because credit card companies can be lazy."

But there's another type of creditor-debtor litigation that has kept both plaintiffs and defense lawyers busy recently: debt collection harassment suits.

Both Forbes' and Franks' practices include filing law suits in state and federal court on behalf of debtors who claim their rights have been violated by aggressive debt collectors.

Under the federal Fair Debt Collection Practices Act, consumers can sue third-party debt collectors, but not original creditors, alleging the use of abusive collection tactics.

Frank said those types of cases have remained "pretty consistent" in recent years and Forbes said he's been filing more of those suits since the recession hit.

Like debtor defense work, debt collector harassment claims are mostly filed on behalf of consumers by small firms and solo lawyers, according to Forbes.

But while debt collectors also tend to hire small firms to represent them as plaintiffs, Forbes said he's seen everything from two-lawyer shops to megafirms serve as defense counsel in debt collection harassment cases.
For example, Philadelphia-based Marshall Dennehey Warner Coleman & Goggin, which has more than 400 attorneys, has a consumer and credit law practice group devoted to defending lenders, financial institutions and debt collectors against consumer debtor lawsuits.

Philip B. Toran, a shareholder at the firm and chair of its executive committee, said the practice "has been busy in the last few years."

http://www.law.com/jsp/law/sfb/lawArticleSFB.jsp?id=1202472943270&Growth_of_Consumer_Debt_Litigation_Keeps_Small_Firms_Busy