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The army of law firms once used by Microsoft Corp. is now just a platoon. The Redmond, Wash.-based company is evaluating the more than 100 firms it turns to for legal help. So far 20 are on its “preferred provider” list. That’s good news for the chosen 20 — which in the IP litigation realm includes Arnold & Porter, Covington & Burling, Fish & Richardson, Klarquist Sparkman, Sidley Austin Brown & Wood, and Woodcock Washburn. But any sigh of relief the listed firms let out was probably cutshort when they heard the catch: Firms would have to renegotiate their billing structure, as well as provide detailed data on diversity and staffing, according to new uniform guidelines established by Microsoft. The company also imposed a rate freeze until the program is finalized sometime toward the end of the year. Details of the arrangements are confidential, says Thomas Burt, Microsoft’s head of litigation. “We needed to find ways to control the cost of litigation and at the same time consolidate our work with firms who did the best work for us,” Burt says. He declined to give specifics, but says costs have been increasing across all litigation areas, particularly in the patent and antitrust arenas. Microsoft is currently involved in about 35 active patent cases. Kevin Harrang, the Microsoft deputy general counsel in charge of the program, describes the company’s recent spending on legal matters as the equivalent of a “wartime budget.” Microsoft began making its list last spring, and it’s still a work in progress. Although only preferred providers will get work from Microsoft, local counsel will still be chosen on a case-by-case basis, Burt says. The list is divided into two tiers, one handling the larger volume of work and the other handling regional matters. The selection process was “largely internal,” says John Gartman, a partner at preferred provider Fish & Richardson. “We were not privy to it.” Microsoft hasn’t publicly released the list — Harrang says it plans to at the end of the 18-month process — but the six firms listed above have confirmed that they are on it. These same firms were named by Microsoft as its primary IP litigation counsel in a survey IP Law & Business conducted last year. With the exception of Portland, Ore., IP boutique Klarquist Sparkman and Covington & Burling, none of the firms had appeared in the IPLB survey the previous four years. All six are handling big IP cases for Microsoft. Fish & Richardson is involved in a massive case over a group of patents owned by Lucent Technologies Inc. Klarquist Sparkman is defending the company in a patent case over Windows Media technology, which is on appeal to the U.S. Court of Appeal for the Federal Circuit. Arnold & Porter is defending two patent infringement cases, one involving Excel, and the other over network interface technology. Philadelphia-based Woodcock Washburn, which opened aSeattle office in 2000 primarily to service Microsoft, handles both litigation and prosecution. Covington & Burling represents Microsoft in its global anti-piracy campaign. And Sidley Austin Brown & Wood is defending Microsoft against Eolas Technologies Inc. in a patent dispute over Internet technology that resulted in a $520.6 million loss for Microsoft in November 2003. Microsoft, unsurprisingly, has appealed. Burt says that the legal department is working on lists outside the litigation arena, including one for patent prosecutions. Marshall Phelps, Microsoft’s deputy general counsel for IP, declined to discuss it. However, three of the five firms Microsoft listed as its primary patent prosecution counsel in IPLB‘s survey confirmed that they had been granted preferred provider status or are in the process of negotiating terms. All three-Merchant & Gould, Lee & Hayes, and Woodcock Washburn-have been doing patent work for Microsoft for at least six years, according to the Microsoft billing partners at those firms.

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