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With the economy mired in recession and the federal government poised to spend $60 billion on new information technology this year, some law firms are betting they’ll be able to cash in on new, deep-pocket federal agencies. To some, the Department of Homeland Security seems like a glimmer of hope in an economic wasteland. This vast new bureaucracy comprises 22 federal agencies — including the Bureau of Citizenship and Immigration Services and the Transportation Security Administration — and is in the market for new IT products to use in everything from day-to-day operations and database infrastructure to security-related projects. Robert Sherry, a partner in the San Francisco office of Kirkpatrick & Lockhart, believes the Department of Homeland Security will create a lot of new business. Sherry, who specializes in handling federal deals for technology companies, said his firm is marketing a new homeland security practice group featuring 150 attorneys in Kirkpatrick & Lockhart offices around the nation. “Companies are going to the federal government looking for funding — and people in government are looking for new technology for their projects, ” Sherry said. He points to a 25 percent revenue increase in Kirkpatrick & Lockhart’s public sector technology and government contract practice groups last year as one reason it decided to launch the new group. And he expects more revenue this year as the Homeland Security Department continues to evolve from an idea launched after Sept. 11 into a powerful entity. While Sherry conceded that technology companies have often looked to the federal government for military and defense contracts, he said many companies that sell commercial technology products — like Hewlett-Packard and BEA Systems — have shied away from government procurement in the past because of strict regulations and intellectual property concerns. Despite these concerns, local government procurement lawyers say companies are now eager to work with the new department — mainly because the agency has more relaxed procurement rules. “The Homeland Security Act has a provision that allows for limited competition. It relaxes traditional competition rules so [the department] can send out a lot more money more easily,” Sherry said. Other government procurement attorneys are seeing the same, unprecedented interest from technology companies. “For tech companies, here’s an opportunity to have access to government funding to help assist them in development of a product which is purely for the government — without having all the consequences that come with working with the federal government now,” said Neil O’Donnell of San Francisco’s Rogers Joseph O’Donnell & Phillips, which has a large government practice. And the San Francisco office of Gray Cary Ware & Freidenrich has also seen a spike in government work. Many of Gray Cary’s traditional clients are makers of commercial products — Adobe Systems Inc., Cisco Systems Inc. and Qualcomm Inc. are a few. With more homeland security dollars to go around, companies like these are trying to secure research and development money that will allow them to develop products for government and military use. “For our clients, it’s finding ways to put their products together for homeland security and how to [find military uses] for their commercial products,” said Kimberly Welch, an associate who handles the firm’s government contract work in the Bay Area. There’s been an increase in the amount of intellectual property matters she’s had to deal with as well. “IP rights are our clients’ chief assets,” she said. “We tell them to not to panic and give away stuff just to get the deal. We don’t want them to reveal any IP secrets.” The government is also aggressively courting business from Silicon Valley companies. On May 29, Norman Lorentz, the federal government’s chief technology officer, is scheduled to visit Mountain View to meet with technology leaders and discuss how they can get government contracts — with special emphasis being placed on the procurement regulations and IT needs of the department. “Tech companies are clamoring for any opportunity to work with the government,” said Taryn Lynds, a spokeswoman for the American Electronics Association, the IT industry group that is hosting Lorentz. She said many of the 3,000 technology companies in the electronics association nationwide — which range from Microsoft to startups — are devoting more marketing and sales resources and hiring more in-house government procurement lawyers, trying to capitalize on the potential new revenue. MOVING TARGET But while government procurement lawyers are expecting a new source of revenue from the department, uncertainties about its new procurement regulations also leave lawyers somewhat confused. Gray Cary’s Welch, who recently worked on a deal for a company that provides new screening technology for airports, said simply figuring out new regulations has made doing deals more difficult and time consuming. “Everyone’s being cautious. [The regulatory changes] are making life interesting until they become interpreted. This is uncharted territory, and there are lots of liability issues when dealing with commercial products,” said Welch. Even for O’Donnell, who has been handling government procurement work for more than 20 years, the Homeland Security Department’s evolving regulations are a challenge. “All this is happening pretty fast. Sometimes it’s hard to figure out what rules to operate under,” said O’Donnell. “Everybody is figuring out what to do on both sides.” Those uncertainties can also lead to more business for lawyers, as interested companies turn to outside counsel for help. “Every client understands there are opportunities in homeland security now,” Welch said. “They look for different things from us; they want to know how they can sell products to the government and how I can get them research and development money to develop commercial products for government use more.” Not everyone is convinced that homeland security will present a significant boost to law firm business. “This has not been that big a practice [so far], but a little more work can make a bit of difference in a bad economy,” said law firm consultant Peter Zeughauser, explaining why he thinks Kirkpatrick & Lockhart is aggressively marketing its new practice group. “A homeland security practice group is an interesting and creative idea, and it is client friendly. It parallels what some other firms have done generally, creating industry-related practice groups,” he added. But Sherry, who is clearly optimistic about future possibilities of his homeland security practice, thinks Bay Area government procurement lawyers are in the right place at the right time. “For companies that are not current clients, they eventually recognize that the group of lawyers in the Bay Area that is well versed in public sector technology contracts and homeland security issues is a very small community indeed,” he said. ” If you’re making black boxes, it may not be much of an opportunity. But if you make bomb or metal-detection equipment, retinal-scanning technology or smart-card technology … the market opportunities are abundant and almost obvious.”

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