Marketing New Normal Firm: Shouting Still Necessary

Posted on November 30, 2010 by David Bohrer

The shift in the balance of power towards consumers means less “shouting” (marketing) about your product or service, according to Jeff Bezos, Amazon founder.

"Before if you were making a product, the right business strategy was to put 70% of your attention, energy, and dollars into shouting about a product, and 30% into making a great product. So you could win with a mediocre product, if you were a good enough marketer. That is getting harder to do. The balance of power is shifting toward consumers and away from companies...the individual is empowered... The right way to respond to this if you are a company is to put the vast majority of your energy, attention and dollars into building a great product or service and put a smaller amount into shouting about it, marketing it. If I build a great product or service, my customers will tell each other."

See the Bezos interview and transcript.

The legal services industry has seen a similar shift in power from lawyer to client and a correspondingly greater emphasis on providing better quality legal service for less money, as described, among other places, by author and lawyer Pat Lamb in Alternative Fee Arrangements: Value Fees and the Changing Legal Market.   This is the "new normal" to which most law firms must adapt or die.  But does this mean that the need for shouting by the new normal firm is significantly reduced?  For now at least, the answer is no.

Here's why.

New Normal Firms Need Early Adopters

For new normal firms to continue to gain traction and thrive in the current market place, they need to expand the pipeline of work in their respective practice areas.  The reality is that the group of clients who currently are most likely to hire these firms, i.e., the early adopters, tend to be less sophisticated consumers of legal services.  Think emerging growth or early stage technology companies with no in-house legal department and a history of little or no litigation.  Often for the first time, they are confronted with litigation challenging their ownership and use of the software, processes or other intellectual property the business needs to survive.  Making matters worse is that the business-threatening litigation has been filed in  a "plaintiff friendly" venue outside the client's home forum.

Early Adopters Need Help Finding New Normal Firms

With little or no experience hiring outside counsel and even more limited connections, the early adopters tend to fall back on subjective and anecdotal information provided by a limited group of non-lawyer engineers, scientists or early stage angel or VC investors whose knowledge is typically limited to "old normal"  firms using hourly based fee structures.  The old normal firms further confuse matters by proposing discounts on hourly rates or capped hourly fees and falsely describing them as "alternative"  "value" or "client-focused" fees.

Not surprisingly, the early adopter clients tend to come to the new normal firm after first having been channeled through an hourly firm only to come to shocking realization, usually after a month or two of billings, that the old normal way of doing things is far too expensive - it does them no good to ultimately win on the merits where the cost incurred in obtaining this result have run the business into the ground.  The slow trickle of early adopters that limp into the new normal firms in these circumstances is not of a sufficient rate to create a robust contribution to the overall pipeline of firm business.

On-line Shouting: Google AdWords

So shouting is necessary, but simply shouting through more traditional channels such as papering the market with carefully vetted (= too long and boring) white papers, being interviewed in the local legal publication,  speaking at lawyer associations or playing golf with the in-house lawyers etc. won't work because this does not reach the target audience - it literally does not put new normal firms on the early adopter's screen.

Which brings us to Internet search.  ALL early adopters use this resource, which means new normal firms may need to shout in this on-line space using pay-per-click (PPC) advertising such as Google AdWords.  In its simplest form, with AdWords an advertiser (such as a lawyer) targets the words that prospective clients might search using Google (e.g., "IP litigation attorney").  When someone searches using these words, the lawyer's 4-line advertisement may show up above or to the right of the search results.  The lawyer does not pay for the ad to appear but does pay when someone clicks on the lawyer's ad and then is whisked away to the lawyer's website.

Make no mistake, shouting is not the exclusive requirement for expanding the new normal firm's pipeline.   A good case has been made for use of social and professional networking to reach interested clients.  Also crucial is investing the money and effort necessary to achieve results that delight the client and create goodwill necessary to attract more business.  Nonetheless, shouting is a necessary bow in the new normal firm's business generation quiver.

Still to Come:

Before we spend any more time on Google AdWords, is it even allowed under current professional ethics rules?  See future installment Shouting (Part II).

Assuming it is allowed, is shouting through Google AdWords worth the time and money?   See future installment Shouting (Part III).
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Fee Sharing With Foreign Lawyers

Posted on February 15, 2010 by David Bohrer

 A Japanese IP firm has expressed interest in sharing fees with CLP on US-based IP litigation, prompting us to ask ourselves whether this is ethically permissible.

We already knew that here in California or elsewhere around the country the rules of professional conduct permit fee sharing between US based lawyers who are not members of the same law firm.   (Keeping in mind that local requirements can vary as discussed in the postscript below.)

The ABA’s 2009 paper, “Joint Responsibility: Sharing Legal Fees Between Lawyers Not in the Same Firm,” confirms the wide-spread acceptance of fee sharing and provides some good examples of the different state rules.

Fee sharing is part of CLP’s DNA because it allows us to scale with expert patent and IP transaction lawyers without bearing the incredibly high overhead of keeping all this great talent under one roof. We’ve had to become fluent on the applicable ethical rules. Prospective clients are less willing to hire CLP unless they are comfortable, in their words, “with how this [fee sharing] works.”  

For example, a recent CLP pitch deck included the following slide explaining how the client enters into one engagement agreement signed by each of the fee sharing attorneys, as well as how the agreement discloses the fee arrangement and otherwise obtains the client’s informed consent in compliance with applicable ethical rules.

So CLP gets fee sharing. We use it successfully with other stateside lawyers and firms. Yet could we take it overseas?   We were highly incented to do so based on the big-time benefits of fee sharing for all concerned: the client; the referring Japanese firm; and CLP. 

  • The client, a Japanese technology company, would get cost-effective and expert patent trial counsel from CLP, and also would receive continuing advice, counsel and guidance from its trusted Japanese counsel (which, as any US lawyer who has litigated on behalf of an Asian client will tell you, is crucial to enjoying timely and effective communication between US lawyer and their Japanese clients). 
  • The Japanese firm would retain a valued client relationship and would capture fee revenue that it otherwise would lose to other firms. 
  • CLP would enlarge its pipeline of core IP patent litigation.

We therefore were delighted to learn that yes, we could share fees with our Japanese colleagues.

 

 With respect to our investigation, the key question was whether our Japanese lawyer colleagues were “non-lawyers” with whom fee sharing is not allowed under Rule 1-310 of the California Rules of Professional Conduct (“Cal RPC”), or whether they are “lawyers” with whom fee sharing is allowed under Cal RPC 2-200(A).

California, like virtually every other jurisdiction that has examined the issue, allows its attorneys to divide fees with attorneys or law firms in other states assuming the out-of-state counsel’s ethical obligations are comparable to those of California lawyers. See Sims v. Charness, 103 Cal. Rptr. 619 (Cal. Ct. App. 2001); California Opinion 1986-88; see also ABA/BNA Lawyer’s Manual on Prof. Conduct 41:712 (2007).

Although we found no authority in California for extending the same conclusion to foreign lawyers, this has occurred in New York. The New York State Bar Opinion 806 (2007) states that a New York law could share fees with an Italian law firm in handling legal matters in New York referred by the foreign firm. The test, which was satisfied by the Italian firm, was whether “the foreign firm’s lawyers have professional education, training and ethical standards comparable to those of American lawyers and the firm.”

Better yet, the New York State Bar, in its Opinion 646 (1993) stated that Japanese lawyers pass muster:

A New York lawyer can form a partnership with Japanese Bengoshi, since the educational requirements for admission to practice law appear to be no less rigorous in Japan than in the United States and moreover, the standards of professional conduct and discipline in Japan appear to be sufficiently similar in relevant respects.

(New York has similarly blessed lawyers in Great Britain, Opinion 542 (1982) and Sweden, Opinion 658 (1994).)

CLP therefore has been able to pursue the opportunity with the Japanese firm. Even bigger picture: there is major blue sky regarding the mutually beneficial expansion of fee sharing between AFA firms and their like-minded foreign counterparts.

Postscript:

As mentioned above, fee sharing requirements vary across jurisdictions, e.g., some jurisdictions ban payment of referral fees (California does not), while others require lawyers to assume either joint financial or legal responsibility, or both, as if the fee sharing lawyers are part of the same partnership (again, California rules are not so stringent).

What if your foreign partner in fee sharing is owned in any part by non-lawyers?  Might the ability to fee share under Cal RPC 2-200 provide a back door to partnering with non-lawyers otherwise prohibited by Cal RPC 1-310?

 
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