Profits from law departments through patent licenses and enforcement

According to a K&L Gates ad in Inside Counsel, Feb. 2008 at 90, the law department of American Express has “worked hard at …the generation of revenue, typically through [patent] license fees.” Those Amex lawyers may have worked hard, but to claim that their toil has generated corporate revenue goes too far. The decision to out-license a patent rests with a business manager, not with a lawyer. The lawyer merely helps execute the business decision.

It is no more justifiable for a law department to claim it has generated revenue from patent licenses than from any other activity of its business clients.

To underscore the point, consider an even broader claim. All revenue of all companies depends at some level on a contractual basis, and lawyers probably worked on many of those contracts. Even so, that nexus with lawyers doesn’t mean that the law department can boast responsibility for all corporate revenue.

In general I question efforts of law departments to create the impression that they are profit centers. The desire understandable, the motive admirable, but efforts to bring in money distort the proper mission of a legal department (See my posts March 12, 2005: funded matter management system in return for reductions in reserves; Nov. 25, 2005: settlement funds and recovered amounts; Feb. 8, 2006: DuPont’s collection efforts; Nov. 28, 2005 and Feb. 16, 2006: IP recoveries; March 15, 2006: litigation recoveries; March 28, 2006: profit center at EMC; March 17, 2006: Autodesk; March 15, 2006: insurance reimbursements; May 19, 2006: crediting recoveries; June 15, 2006: releasing reserves; Oct. 29, 2006: Qualcomm and billion-dollar profits; Jan. 14, 2007: GE and business earnings; Feb. 14, 2007: SAP and customer usage under licenses; May 4, 2007: Holcim and legal team ROI; Dec. 10, 2007: DuPont and recoveries of class action settlements; Jan. 1, 2008: recovery of in-house attorney’s fees; and Jan. 30, 2008: DuPont and asbestos recoveries.).

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