Pat Lamb, in his very good book on value pricing Alternative Fee Arrangements: Value Fees and the Changing Legal Market, says that the fees and costs of a trial should never be built into the fixed fee proposed to a client.  "Never"? Really?

Really, says Pat.  Paraphrasing what he says in his book, virtually all cases settle, so including the cost of trial in the fixed fee is perceived by the client as overpayment, or could dissuade a client from accepting a settlement because they believe they have "already paid" for the trial.  Plus including expensive trial costs and fees might create sticker shock that scares away the client.  Pat also makes the compelling  point that it is not until you are close to trial that lawyer and client appreciate the real costs and risks of trial, such that the determination of the price for taking the case to trial is best left until then.   In other words, carve out trial from the price for your legal services, thereby allowing you to give the client a much lower price than you could if trial was included, and proceed under a fee structure that incents early settlement/resolution of the litigation (the earlier the resolution, the greater the profit made by the lawyer).

I’ve migrated from a first impression rejection of Pat’s recommendation to grudging acceptance of his logic. Check out my thinking process after the jump.


I’m a trial lawyer.  It’s absurd to suggest that I price my services without building into the price the costs incurred for providing the expertise that is at the very core of the legal services that I provide.   Pat would describe this as "muscle memory" – I’ve spent 25 years viewing every new litigation project as one which "may" require a trial to resolve.  Indeed, as a partner in BigFirm IP, I worked under an hourly regime that rewarded me for taking the case through trial.   On reflection, that trial is both so rare and so expensive suggests that I may need to retrain these muscles.

Still, my litigation background is large patent litigations with multiple factual and legal issues that require significant development through discovery, claim construction, dispositive motions, trial and even post-trial motions.   However, according to the seminal empirical research done by Prof. Moore on the trial of patent cases, Judges, Juries and Patent Cases – An Empirical Peek Inside the Black Box, the number patent cases that went to trial during the 17 year period 1983 through 1999 was 6.9%, ranging from an annual low of 3.3% to a high of 11.3% – a larger number than what is posited for business litigation generally, but still quite low overall.   So maybe I can’t get away with arguing that  "well, that may be true for others, but not for me."   As Pat might respond, yeah, and everyone in prison claims to be innocent.

Perhaps a better argument for building the cost of trial into the price is that in my experience pricing larger IP litigations, the client wants to know at the outset how much it will cost to take the matter through trial.  But how is this different from any other commercial litigation client?  And why can’t we, as alternative fee lawyers, provide a well-reasoned estimate of what something might cost and at the same time defer building the estimate into a current price, particularly where the estimated cost of trial, and the strategic considerations whether to incur the costs of trial, are much better defined at or much closer in time to the trial itself.

We at CLP also have a number of clients whose early and eager adoption of a non-hourly fee structure manifests their inability to stomach the high costs of an hourly regime.   For these folks, there is no life after the pretrial phase of litigation.  If we can’t develop a favorable resolution in this phase, game over.  These folks can’t afford to pay for a trial – even under a lower cost alternative fee – no matter how good their case is on the merits.  Pat’s recommended carve-out of  trial costs, and the related focus on obtaining a favorable settlement/resolution prior to any trial, certainly resonates with this crowd.

Excluding trial costs from the price therefore is starting to make sense to me.  Stay tuned as we try and work the concept into CLP’s pending and new quotes.