An IP litigator at Ogilvy Renault, Patrick Kierans, understands the relationship between the length of litigation and the fees paid: “The cost of litigation is directly proportional to the length of time it takes to complete it.” This quote, from Lexpert (Guide to Leading Cross-Border Litigation Lawyers), Nov. 2009 at 24, leaves the math wonk in me unsettled. I don’t doubt that litigation fees rise over time but I do doubt that the increase is a smooth linear relation. Periods of dormancy, settlement negotiation, court-ordered schedules, and frenetic activity mix together to disrupt a smooth climb (See my post of March 5, 2008: cycle time with 18 references.).

That said, with a group of similar lawsuits it does seem sensible to talk about average monthly burn rates (See my post of May 3, 2009: burn rates of outside counsel with 6 references.). If burn rates make sense, then some formula can capture the upward slope of spending.

One of the selling points for matter management systems is that astute managers can comb through the data collected and spot issues before they boil over (See my post of March 19, 2009: matter management system data needs analysis.). Unfortunately, human nature and our mental machinery work against that promise.

Many obstacles slow trend spotting. We are lazy. Then too there is lots of “noise in the system” – in retrospect a trend loomed right in front of us, but at the time so did a confetti parade of other data. False positives come from our genetic predisposition to find patterns that aren’t there; we want to find logic, connections, rational sequences of events even if fortuity and randomness rule. Our tendency to the self-confirming bias means we spot the patent litigation wave coming and forget we are a patent litigator.

Anyone can see a long list of blinders, blind spots and being blindsided is long. Still, better to try to find meaning in metrics.

A report from BNA, HR Department Benchmarks and Analysis 2008, pronounced that “Outsourcing of HR functions has become a widespread practice. Three out of four employers have outsourced one or more HR activities. The single most important motivation for HR outsourcing is access to greater expertise, although for the largest organizations, cost savings is the most important factor.”

General counsel primarily outsource work to law firms for expertise; they offshore work generally for cost savings; and they unbundle services for the combination of cost, expertise, and efficiency (See my post of April 11, 2009: services of law firms that can be separated out with 12 references and one metapost.). Different goals for each technique, I propose.

An article in Met. Corp. Counsel, Vol. 17, Dec. 2009 at 28, covers the usual points about an Indian-based legal process outsourcer. The particular company is Bodhi Global Services, yet even so the interview of its CEO, Arihant Patni,turns up a few points that stood out for me.

One point is that the firm is backed by AZB & Partners, one “of the largest law firms in India with almost 300 attorneys across three cities.” The other backer is the Patni Family, “a well established IT group in India” with revenue approaching $1 billion. “The idea behind Bodhi Global is to create an amalgamation of law and technology.”

A second point is that “Bodhi Global was one of the first LPOs in India to receive an ISO 27001 certificate, an international data security standard that helps us identify, control and minimize a vast array of threats to which digital information is regularly subject” (See my post of Nov. 25, 2009 #4: ISO 9001 certification of an LPO; and April 28, 2009: ISO and other certifications in the legal industry.).

Third, the lawyers hired by Bodhi Global “undergo almost a month-long training program, which includes training modules in U.S., UK and Indian law.” Specifically, a US law school professor has designed a litigation training module.

My final gleaning was about the advantages and disadvantages of the time differential between the US and India. This article of course touts the 24/7 cycle that allows work to go on all the time. Another article in the same issue, by a domestic provider of similar services, pooh-poohs that claim: better to be able to speak to your co-workers in real time, it says.

A recent book provided ample grist for this blog mill. David Galbenski’s Unbound: How Entrepreneurship is Dramatically Transforming Legal Services Today (2009) elicited eight posts (See my post of Oct. 12, 2009: lawyers not admitted in the US as GCs of US companies; Oct. 12, 2009: finance staff do not negotiate fee arrangements; Oct. 15, 2009: international revenue and formula for overseas lawyers; Oct. 15, 2009: “global” department if more than 25 percent are on two other continents; Oct. 25, 2009: LPO market at $4 billion; Dec. 1, 2009: growth in offshore legal service providers; Dec. 13, 2009: Johnson & Johnson; and Dec. 15, 2009: best-in-class processes.). For that outpouring, I decree it a blog book review.

Nestled in this blog are five other blog book reviews (See my post of July 30, 2009: Leigh Dance book; Aug. 5, 2009: Laura Empson book; Aug. 12, 2009: Ann Page and Richard Tapp as well as Peter Leeson; and Aug. 26, 2009: Robert Haig four-volume series.).

The metaphorical difference between a thermometer, which gives you a figure but doesn’t tell you what to do about it, and a thermostat, which gives you a figure and then adjusts the heating or cooling appropriately, applies to benchmark figures. It’s a thermometer to know that most law departments in the United States have three lawyers per paralegal. That factoid gives little guidance.

It’s a thermostat if the data shows for every 20 percent increase in the ratio of lawyers to paralegals, total legal expenses as a percentage of revenue drops 10 percent. It that finding were true – and I suspect some kind of correlation like that but lack sufficient data to confirm or reject it – you would have a clear direction to follow, at least to some point.

Jay Shepherd, who blogs at The Client Revolution, attacks the term "alternative billing." His comments are at least clever, if not correct. A shortened version follows:

“It's a terrible term; one that does injustice to the concept. As I've said before, it has a seamy connotation to it, like "alternative lifestyle." It seems vaguely Berkeley or Brookline or (gasp) Vermont, which makes tradition-bound lawyers very uncomfortable. We need an alternative for "alternative."

And I don't like the "billing" part any better. First, it makes it seem like the issue is about invoice styles, which makes it more boring than the Tax Code or, say, professional soccer. ("Woo! Another one-nought blowout!") Second, it places the focus on the law firm and its administration, rather than on the client and the value it is getting.”

Shepherd continues. “The main idea, of course, is that lawyers should price their services based on their value to the client. But my quibble is that the word "value" has Walmart-y connotations. People often connect "value" with "discounted," and that's missing the point entirely.

I propose a different approach: Open-price lawyering.

What we're talking about here is legal services where the price is known to the customer ahead of time, so that the customer can make an informed decision about the worth of those services to him or her before actually agreeing to buy them. In other words, the price is out in the open. There is a fair exchange between lawyer and client with the client having as much knowledge about the price as the lawyer.”

Some general counsel hold their cards close to their vests; they hide their staff numbers, how much they spend on outside counsel, the litigation load they face, locations of lawyers, everything. Yet mighty United Technologies didn’t mind sharing detailed benchmark metrics about its number of lawyers, caseload, spend on external counsel, and distribution of cases by type. All of them I have written about, and gratefully, because we have such spotty information publicly available (See my post of Dec. 22, 2009: offices and countries with lawyers; Dec. 23, 2009: distribution of lawsuits; and Dec. 27, 2009: three metrics, including law firms retained per billion.).

What can a competitor do if it knows how many lawyers you have or what you spend on the legal function? Nothing. Nor can plaintiff’s attorneys.

I have the sneaking suspicion that general counsel favor secrecy and opacity mostly so that their own CFO and other internal executives are kept in the dark. Keep every figure under wraps and no one can attack you or your budget with any specificity.

A chart in a presentation recently about the legal function at United Technologies gives the numbers of firms the manufacturing giant retains in the US and outside the US. If we take the most recent year’s total (418 firms in 2008) and the UTC revenue given in the presentation ($58.4 billion), the company retained just a bit more than seven law firms for every billion dollars of its revenue.

During the four years starting in 2005, the total number of law firms retain stayed between 401 and 421. During that time, US law firms accounted for about 40 percent of the firms retained.

Another slide shows that in 2008 about 56 firms accounted for $125 million of the company’s total spend, which was 75 percent of the total spend. Therefore, about 13 percent of the firms commanded three quarters of the spend. In 2007, about 46 firms accounted for $137 million of spend, again being 75 percent of the spend, so a somewhat lower percentage of the firms.

Finally, the presentation states that the company spent 0.22 percent of its revenue in 2008 on outside counsel ($127 million on revenue of $58.7 billion).

I wish I could corroborate the three metrics: seven firms per billion, 40 percent domestic firms, and 15 percent or so accounting for 75 percent of the external spend.

Here are some findings about the health benefits of an environmentally sound offices. Not that general counsel have much say as to their office environs, but a first step is to know more about options and benefits. Bus. Week, Dec. 7, 2009 at 15, describes a large study of tenants in buildings that have been awarded EPA Energy Star labels or LEED certification. "The survey found that employees took an average 2.9 fewer sick days each year in their environmentally sound offices than in their previous, nongreen workplaces -- a cost savings to their employers of roughly $1,200 per worker, based on average salaries.”

The study also found that a bit more than half of the tenants reported a rise in employee productivity in their green digs -- "adding up to 5% average increase worth $5,000 per worker annually." Mens sana in corpore sano de aedficio sano?