Tuesday, September 20, 2005


CONTINGENCY AIN'T WHAT IT'S ADVERTISED TO BE? The good folks at rethink(ip) tipped off this recent article from IP Today (written by Joseph Hosteny from Niro, Scavone, Haller and Niro) explaining that, with all the reports of "evil" patent owners and their extremely greedy contingent fee lawyers, one might easily be led to believe that both are enjoying windfall after windfall, made by ripping off big companies. However, according to the article, this is not necessarily the case.

In contingent fee litigation, there is no incentive to run the meter with billable hours and extra lawyers. Due to the fact that such litigation only rewards results, it would seem it's a reasonable
way to conduct litigation without the motive to continue to bill. Either the case is good and can be pursued, or is not good, and can be settled. But it won’t go on and on, ad infinitum.

I frankly can't argue with many of the points made in the article, and I particularly got a kick out of the anecdotes related in the article:

  • In September, 2004, the New York Lawyer reported that US Airways’ trip through bankruptcy cost the company one hundred and twelve million dollars in only nine months.

  • In Chicago, the United Airlines bankruptcy case cost that company two hundred thirty-five million dollars in only 18 months, between December, 2002 and June, 2004. Fees in the United case are now running over eight million dollars per month, with the lead lawyer being paid seven hundred ninety-five dollars an hour. One article reports that, in one instance, three lawyers were sent to do a job that one could have done, and that all three flew first class.

Granted, these are bankruptcy cases, but holy cow! The article goes on to give examples of gold-bricking, where armies of attorneys are dispatched to handle routine matters, and where attorneys needlessly run-up costs by posturing to the opposing counsel via letters and needless motions. And the article goes on to conclude with this biting criticism:


No wonder large companies think litigation is too expensive. Their own need to hire big firms, coupled with runaway legal fees, is the largest part of their problem. A defendant that shoots itself in the foot shouldn’t blame someone else for its own stupidity. Their corporate mentality, which equates size and expense to quality, is the main cause.


Ouch.

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