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Harnessing Litigation Legal Fees

You just stepped into your office on a Monday morning and lying in your inbox is a complaint for patent …

You just stepped into your office on a Monday morning and lying in your inbox is a complaint for patent infringement against your company, alleging that your new innovative widget infringes. The dollar signs start spinning around the room – how much is it going to cost to settle this complaint? How much is it going to cost to fight it? How do I keep my employees focused on building and selling more widgets while a lawsuit is going on?

Your first reaction might be to call your corporate counsel or outsourcing partner, explain the situation, and have them take it off your hands. Delegate the responsibility to someone who is familiar with such situations, and go back to making money. While this may seem an attractive solution, you may have just written a blank check to your outside counsel, reducing your widget profitability for years to come. Actively managing your litigation, as you would any other problem affecting your business, will keep costs under control and allow you to affect the progress of the case. The following practical steps will aid you in conquering the challenge of controlling outside litigation legal fees.

Know Your Skeletons.

Once they’ve started to spend real money on litigation, both parties become interested in obtaining a return on investment. As time goes by, they become adverse to settlement. Make it your business to know where the sticky points are as soon as possible.

Back when I was a new associate in a litigation firm, I had a senior partner bestow the following advice: “Clients always lie. Don’t forget it.” I was fresh out of a new client meeting, excited to file a lawsuit to avenge my mistreated client and regain her long-overdue commissions. It sounded like an open-and-shut case. But alas – the partner was right. Only a few short months into the case I discovered the real reasons why she didn’t get paid the commissions, and these potentially valid reasons never came up in our initial discussion.

Through the years, I’ve learned that clients don’t lie. But it’s built into their DNA to view things in a light that supports their theory. Early in the case, you should assign a high level and disinterested manager to get involved in the case and, either alone or in conjunction with your outsourcing partner, commission an investigation to find the most obvious skeletons.

Find an Ally.

Early in the case, before real money gets spent on legal fees, you should identify potential allies. Ideally, they represent opportunity to share costs and information. Regrettably, they can hinder your ability to obtain desired results if left entirely unchecked. Become aware of these parties early on so they can be included in your decision making.

The most likely places to find an ally are in the complaint itself, or in the same court, where the same plaintiff sues more than one party. If more than one person is listed as defendant, it is very likely that your interests are aligned and therefore you can share counsel. Alternatively, if you don’t share counsel, you may be able to work out a “joint defense” agreement to distribute the litigation load among the parties and share information.

For example, I represented a company that was sued by the same plaintiff alongside several other companies. Each company wanted its own favorite litigator for trial, so sharing counsel was out of the question. Pursuant to a joint defense agreement, the case was coordinated through two sets of regular meetings. First, the outside litigators met periodically to coordinate efforts and delegate responsibilities. Additionally, in-house representatives from the clients met monthly to discuss case status and next steps. The companies benefited both financially and strategically by leveraging the strengths and abilities of all parties involved.

Establish Yourself as Boss.

Get involved in choosing the litigation counsel, and reinforce that you are the boss. These two simple steps will reinforce your position of authority and should also improve the results of the litigation.

In choosing litigation counsel, it’s crucial to make sure the lead attorney is the appropriate representative of your company. He or she should be interviewed and assessed in terms of individual qualifications, philosophy, track record and personality fit – both with you and the potential jury. You will need to fight the instinct to pass on the task to your corporate counsel. When I was in-house I made this mistake, sending a complaint to outside corporate counsel for a reference to a litigator in the firm. By the time I found out that the firm did have a litigator, he had already filed an answer on our behalf and assigned two attorneys to start researching and writing lengthy motions. He was accustomed to undertaking these expenses at the direction of his corporate partner, with minimal client involvement until later in the case.

You should meet with the litigation team, or at least the lead counsel, early in the case and then periodically as the case progresses. Communicate the company’s desired outcomes and explore alternatives to achieve them, weighing probability of success and costs.

Watch the Budget.

Once you’ve set your objectives with litigation counsel, you should then set the overall case budget. How much will it cost you to get what you want?

Lawyers often hate this question. You will rarely get a straight answer to this question when you first ask. But think of it this way. Say you were a small inventor or an individual, and all you had to defend yourself was a fixed sum of money in the bank. Knowing those monetary constraints, the lawyer would be very motivated to figure out how to obtain your objectives with the sum of money allotted to the case, wouldn’t she? This principle can be used to manage litigation, as well.

Establish a certain amount of money to achieve your objectives in the case, and have a dialog with your litigation counsel to figure out how to achieve what you want within that budget. At minimum, update spending forecasts once a quarter. Remember, litigation may well be a multi-year endeavor. Have someone you trust internally review the bills and let outside counsel know that someone is watching. Keep the working team as lean as you can; demand justification from those who seek to expand it.

When discussing case strategy and logistics with your litigator, make sure to weigh options and costs. For example, if expert testimony is needed to establish a certain point in the case, do you really need an outside expert? Perhaps you have someone in your company or network of colleagues that you can use as an expert on that point. You may also benefit from having external counsel follow your internal policies, when traveling, for example – or when using third-party vendors, where your procurement manager may well have negotiated better rates for identical services.

Search Yourself.

One of the most time consuming and expensive processes of litigation is “discovery,” the process by which each party in the litigation collects information from the others. Paper and electronic discovery, or “document discovery,” involves searching your company’s computers and files for all documents in response to a list of “document requests” from the other side.

Because this process of searching for documents is painful, management’s response is often to delegate the task entirely to litigation counsel. However, if someone knowledgeable about the company’s file systems and record-keeping performs or assists in the search, the disruption to employees will be minimized.

Size Up Your Opponent.

Whenever you get a chance, you should take the opportunity to get some reconnaissance on your opponent. For example, if a hearing, court appearance or deposition is going to occur, the business manager or someone from the company should try to attend. This will help you decide on next steps and settlement possibilities. Don’t depend solely on the judgments of your counsel. Witnessing the opposition’s dissection of each issue first-hand is the most effective way to assess the probability of success.

Whatever techniques you use to deal with litigation – whether you handle it inside or outside your company – you should remember to keep your hands on the reins and to maintain frank communication with your attorney about expectations and litigation costs. In the long run, this will minimize the pain.

Laura Lee Norris is principal and founder of her law firm in Los Gatos, California ( http://www.corporate-gc.com), focusing on providing business-transaction and general counsel-type services to entrepreneurs, startups, and established companies. As the former Vice President of the Legal Department and Corporate Secretary of Cypress Semiconductor Corporation (NYSE:CY), Laura actively managed all legal affairs of the company through a combination of in-house and external counsel, minimizing the company’s legal risk while maintaining a tight legal-fees budget. Prior to joining Cypress in 1999, she was a patent litigation associate at Arnold White & Durkee in Menlo Park, California, representing a variety of high-tech clients. Laura received her law degree from Santa Clara University School of Law in 1997, while working full-time as a patent agent at Intel Corporation in Santa Clara, California. She received her bachelor of science degree in electrical engineering from the University of Michigan in 1992 and worked as a design engineer at Intel before going to law school.

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