How Many Law Firms Do I Really Need?

Contrary to common perception, for privately held IT companies, one law firm for the company may not be the right fit; at least from the view of a software licensing attorney. The founders have a relationship with one law firm that usually handles all the legal issues. I have found that too often it is more economical to find specialized lawyers at small firms (they usually provide better service for smaller companies too). These firms will inherently have more reasonable hourly rates/fee structures. On the other hand, it makes a lot of sense to have a corporate lawyer from a larger firm if you are venture backed (as corporate law issues can be quite complex in those situations), but that may not be the case in other areas: for employment, trademark, copyright, patent, litigation or licensing issues. The hourly rates of some of the larger firms have increased dramatically over the last few years (in fact some attorneys bill at $1,000 an hour), but that does not necessarily hold true for smaller firms.   When thinking about rates, I have also talked to many CEOs that would not make the call to a $550 an hour attorney for advice on a potential dispute, but would probably make the call if the attorney were $200 something an hour (I suggest that not making a call to a good, reasonably priced,   lawyer for advice could be a missed opportunity to avoid a dispute).

For example in litigation matters, often the total legal fees incurred (and expected to be incurred in preparation for trial) will have a significant impact on the settlement value of the case; in other words, the lower your legal fees the better you will probably fare in any settlement negotiations (in fact, if the other side has a large law firm representing them, then that may induce productive settlement discussions early on). Also, I think that there are some really good litigators at smaller law firms that can help smaller IT companies through the litigation morass. Keep in mind too that according to a 2009 global litigation survey, companies are generally expecting an increase in litigation– with the most common types being contract and employment   (see page 12).

Remember to:

(1) get referrals, (2) interview the firms, (3) ask them about their rates, (4) search on the Internet, and (4) read what the attorney’s publish; and you don’t necessarily have to hire one law firm for all your matters.

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