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It isn’t easy to turn an ocean liner. But Microsoft Corporation’s lawyers have changed the direction of the mother ship. After years of knockdown litigation, the law department has settled a remarkable number of big suits. But we’re not honoring it as a finalist just because the attorneys have learned to beat swords into contracts. Their achievement is greater than that: They’re at the center of a companywide strategy to turn adversaries into partners, and, in doing so, improve relations with the industry and its regulators. Since 2003, under the leadership of GC Brad Smith, the software giant has settled 17 lawsuits for a total of $7.3 billion. Among the longtime antagonists it made peace with are America Online, Inc., RealNetworks, Inc., and Sun Microsystems, Inc. After the antitrust onslaught � including the case brought by the U.S. Department of Justice in the 1990s � the temptation was to “hunker down,” says Mary Snapp, whose 18 years at Microsoft make her the longest-serving lawyer. Instead, the attorneys reached out to adversaries. They met with rivals and searched for ways to bridge divides. Take the Sun settlement: It incorporated a collaboration agreement that extended beyond the disputes to ensure that the companies shared key technical protocols. “It was the first very visible showing of a real change of culture for the company and the legal department,” says Snapp, who spearheaded the effort, “both in terms of our willingness to forge relationships that had not been forged before, and to take risks.” Now, she adds, “our starting point is: ‘Let’s find a way to collaborate.’ That doesn’t mean we always will.” There are still plenty of donnybrooks. The company is enmeshed in a protracted antitrust suit in the European Commission. There’s another pounding headache farther east in South Korea’s Fair Trade Commission, where Microsoft faces another antitrust suit. And patent infringement claims await at home. The caricature, says Smith, is that Microsoft used to fight everything, and now “we work everything out.” Neither is true, he argues. Rather, they aim to avoid litigation, and when they can’t, the company tries to conduct itself “in a principled way and leave the door open for future negotiations.” Microsoft is also working to polish relations with current and future partners in other areas. One effort that caught our eye looks to make legal documents less jargony. Lawyers on this project are using a little-noticed feature built into Word 2003. It’s called the Flesch Reading Ease tool, and it rates documents on a 100-point scale � the higher the score, the easier the document is to read. For general reading, a score of 60 � 70 is considered appropriate (the article you’re reading clanged in at 50.3). Microsoft hopes that within the next three years all its legal documents will score at least a 40. A collaboration with the American Bar Association produced a noteworthy pro bono program, too. Lydia Tamez, who heads the in-house immigration practice, helped design Volunteer Advocates for Immigrant Justice, which was launched in 2003. The group’s lawyers represent immigrants held in detention in Washington State and Oregon. A half-dozen company lawyers are involved at any one time, and a handful of law firms have also signed on, according to Tamez, who is contacting other businesses to expand the attorney pool. The one area of collaboration in which Microsoft seems to lag, compared to our other finalists, is alternative fee arrangements. It has a preferred provider list, but the company is largely stuck on billable hours. The reason, says litigation chief Tom Burt, is that so many cases, even on its slimmed-down docket, are large and groundbreaking. Fewer than 20 of the 200 pending are relatively minor, he says. But he also acknowledges that the company can do better: “For some time the approach was, ‘Let’s hire the best lawyers we can,’ and we didn’t work hard at the economic management.” Now they’re trying to build more effective partnerships that also benefit the bottom line. But they’re not likely to cut corners steering that ocean liner. Company: Microsoft Corporation

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