When your software company hires a big overpriced law firm, never go it a…

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If you want to better manage outside counsel, take charge of the relationship and don't go it alone.

If you want to better manage outside counsel, take charge of the relationship and don't go it alone.

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  • 1. !! !!!!!!!When!Your!Software!Company!Hires!a!Big!Overpriced!Law!Firm!.!.!.!!!!!Never%Go%It%Alone!!!!ByMark D. WaltersGENERAL COUNSEL TO GO™ PLLCwww.gctogo.com425.688.7620
  • 2. !!!When%Your%Software%Company%Hires%a%Big%Overpriced%Law%Firm%.%.%.%%Never%Go%It%Alone!%%%% !!!!1 of 5© 2013 Mark D. WaltersFeel free to share this document.Please pay it forward.88.Software Companies Rock the Law Firm HouseSoftware companies are fantastic law firm clients. First of all, they are incredibly funto work with because they have big ideas, they have tons of talent, and they are hellbent on changing the world. Their enthusiasm is infectious. Secondly, softwarecompanies are frequent consumers of legal services. They hire law firms to set upthe corporate entity, to prepare the Stock Option Plan documents, the Buy-SellAgreement between founders, file trademark and patent registrations, prepare thecore business contracts (NDA, Employment Agreement, Independent ContractorAgreement, Software License Agreement, etc., etc.). As software companies grow,they look to their law firms for guidance on employee issues, licensing transactions,and risk management.Let there be no doubts: software companies are highly desirable clients for law firmsbig and small.Hiring a Big Overpriced Law FirmWhile a big overpriced law firm should not be the first law firm your softwarecompany hires, sooner or later, you’re going to consider hiring a big expensivelaw firm. In many cases, the founders will consider hiring the company’s first biglaw firm when it begins to raise capital. This often makes sense becauseinvestors are familiar and comfortable with the big overpriced law firms thatwork in their world. It also makes sense because, ultimately, your softwarecompany will pay the legal fees with investor funds, so investor comfort with thesoftware company’s legal team can help close the round. (But this does notmean investors are not interested in conserving cash; of course they are).
  • 3. !!!When%Your%Software%Company%Hires%a%Big%Overpriced%Law%Firm%.%.%.%%Never%Go%It%Alone!%%%% !!!!2 of 5© 2013 Mark D. WaltersFeel free to share this document.Please pay it forward.Whatever your reason for hiring a big overpriced law firm, there’s one thing youknow: you are going to pay more—likely a whole lot more—than you want to. Theodds are high—indeed a near certainty—that you will end up feeling ripped by thelaw firm-billing machine. You will likely rationalize that overpriced lawyers are simplypart of doing business in the technology sector, and there is nothing you can doabout it.There is a Better Option:Hire and Manage Your Big Law Firm the Same Way LargeEstablished Software Companies DoDid you know that the business teams at large established software companiesalmost never directly hire outside counsel? These companies have staff attorneys,or General Counsel, that hire and manage these important and costly relationships.Most every General Counsel has law firm experience. They know how law firmsoperate and how lawyers bill, and they use this inside information to protect theircompany from the law firm-billing machine. Indeed, the business team often usesthe General Counsel as a “bad cop” to manage outside counsel and help ensure thecompany is getting more value for its legal spend.You can and should do the exact same thing.Altman Weil has conducted and published annual surveys on the legal market formany years. Its 2012 Chief Legal Officer Survey, reports the results of its survey ofover 200 General Counsel working in-house at corporate law departments.The survey asked Chief Legal Officers what they have done inthe last 12 months to control costs – their highest managementpriority as reported in the 2011 Survey.
  • 4. !!!When%Your%Software%Company%Hires%a%Big%Overpriced%Law%Firm%.%.%.%%Never%Go%It%Alone!%%%% !!!!3 of 5© 2013 Mark D. WaltersFeel free to share this document.Please pay it forward.The number one answer, from 71% of respondents, was tonegotiate price reductions from outside counsel.There is no reason why your software company should not be doing the exact samething. Hire your own General Counsel and assign him or her the job negotiatingprice reductions from your law firm. Legal fees and legal costs will be a topexpense item, so there is no reason you should not control it. And don’t you alreadythink your paying far too much for legal services? This tactic can save the companymany tens if not hundreds of thousands of dollars.Some software company executives worry about offending their law firm if they“lawyer up” to negotiate price reductions from their law firm. If you share thisconcern, keep the following in mind:Software companies are killer law firm clients.Big and small law firms across the United States aresearching for new software company clients, and thesoftware company’s purchasing power gives itleverage.The big law firms know full well that their competition isequally hungry for new software company clients.When your software company is hiring a big law firm,never forget that it’s a buyer’s market.
  • 5. !!!When%Your%Software%Company%Hires%a%Big%Overpriced%Law%Firm%.%.%.%%Never%Go%It%Alone!%%%% !!!!4 of 5© 2013 Mark D. WaltersFeel free to share this document.Please pay it forward.If you’re not convinced and fear offending your law firm, consider this: hiring aGeneral Counsel to select and negotiate a price reduction with your law firmwill give you cover. Just like law departments in larger corporations where this is atheir highest management priority, your software company can use its own GeneralCounsel as the “bad cop” to do the necessary dirty work of striking a better dealwith your law firm. If you get any blowback, simply tell your law firm that yourcompany uses its General Counsel to hire and manage this importantrelationship—just like large established software companies do—because yourcompany needs to conserve cash. It’s impossible to argue with this strategy andgoal. Also keep in mind that large law firms are hearing the exact same messagefrom their larger corporate clients.A second reason why your software company should have its own General Counselhire and manage its relationship with outside counsel is this: software companieswith General Counsel are sometimes viewed more favorably and treated morefavorably than software companies that do not have a General Counsel. It’sprobably not fair, but it’s a reality. The attorneys at big law firms may give moreprofessional courtesy to lawyer colleagues than non-lawyer executives. After all,they speak the same language, they share the same life-altering experience ofattending law school, and they share the same rite of passage of taking and passingthe Bar Exam. Thus, the odds are high that your General Counsel can achieve abetter result.A third reason why your software company should have its own General Counselhire and manage its relationship with outside counsel is this: let’s face it;oftentimes dealing with the law firm is a huge distraction. With a GeneralCounsel on staff to deal with the suits, the executive team can stay focused ongrowing the business.
  • 6. !!!When%Your%Software%Company%Hires%a%Big%Overpriced%Law%Firm%.%.%.%%Never%Go%It%Alone!%%%% !!!!5 of 5© 2013 Mark D. WaltersFeel free to share this document.Please pay it forward.A fourth reason why your software company should have its own General Counselhire and manage its relationship with outside counsel is this: attorneys at the largelaw firms know that General Counsel have seen the big law firm sausagefactory from the inside. Because of this insider information, your softwarecompany’s General Counsel can be far more effective when negotiating feeagreements and fee reductions with these law firms. In short, your General Counselcan call bullshit on the law firm’s bullshit.So, if you want to get a better deal and more value from the law firm-billingmachine, and if you want to stop feeling so frustrated and ripped off by your lawfirm, your software company should employ the tactic and strategy that the largeestablished software companies do when they hire big overpriced law firms.Hire your own General Counsel to negotiate a price reduction. Make this a topmanagement priority, and never go it alone!
  • 7. ! !!!!!!!!© 2013 Mark D. WaltersYou are free to share this document.Please pay it forward.About the AuthorMark D. Walters provides General Counsel legalsupport to owners and executives of softwarecompanies in the greater Seattle area and acrossthe United States. Mark also sits on the AdvisoryBoard of a advertising agency, where he providesguidance related to business strategy, intellectualproperty protection, employment law issues and riskmanagement.Mark represents established software developmentcompanies. He helps them get price reductions with big law firms, and he helpswith software development and licensing deals, together with employment law,intellectual property protection and risk management. Mark has alsorepresented companies in lawsuits involving contracts, trade secrets, copyright,and trademark issues. In the Spring of 2011, Mark represented WashingtonState Supreme Court Justice Faith Ireland (ret.), who was appointed Guardianad Litem for Michael R. Mastro in Washington’s largest bankruptcy proceeding.This unique blend of litigation and transactional work informs Mark’s businessapproach to law.Mark is writing a book entitled, Disrupt Legal Billing Once and For All – Winningthe economic battle with your law firm, that will be published in 2013. Mark isalso a frequent speaker on topics dealing with law and business.For pre-booking inquiries and speaking fees, please call 425.688.7620.!