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It’s called the Legal Model, and it’s become a concoction so tempting that lawyers from 160 companies have made the pilgrimage to Wilmington, Del., to test its cost-cutting powers. Chemical-producing giant DuPont brewed the Model as a way to shrink its legal budget, and Thomas Sager, DuPont’s chief litigation counsel, sounds almost like a medicine show pitchman as he hawks the Model’s healing powers. It has cured polluted communications, poor-quality work, and most importantly, has saved DuPont $8.8 million in legal bills last year alone. “There’s a groundswell building and over time, you’re going to see a shakeout,” Sager said. “Until we impose more discipline and rigor on these firms, they’re going to continue to charge exorbitant rates to corporate counsel.” The magic behind the Model is simple: Send a portion of your legal work to someone other than attorneys at law firms. In DuPont’s case, lawyers from a temporary agency handled relatively simple tasks like initial witness interviews, exhibit collection and document review. Any formula that slices legal budgets is likely to seduce in-house counsel — particularly when the higher-ups at a company are looking to trim the bottom line. And outsourcing — diverting legal work to companies other than law firms — is exploding in popularity among corporate counsel. Sager says he’d like to see other companies adopt the model to put pressure on firms to change their billing policies. The trend is two-fold, with companies sending work to agencies in the United States that do discovery, document review and due diligence and pulling in foreign outsourcing companies — particularly in India — to perform tasks like legal transcription and basic patent research. For law firms, there’s an obvious downside: They lose billable hours and training opportunities for young lawyers on less-complicated legal tasks like document review. And all is not rosy for in-house counsel. They give up some control over work assigned to outsourcing agencies, and if an agency is located overseas, confidentiality, security and cultural issues may arise. Take, for instance, the case of UCSF Medical Center’s recent scare over patient medical records. A woman in Pakistan hired to transcribe patient records threatened to reveal patient information if she was not paid money a sub-contractor owed her. “This is something that’s still very much in its formative stages,” said Sanjay Prasad, chief patent counsel at Oracle Corp. The risks, however, aren’t posing much of an obstacle to outsourcing’s growth. DuPont isn’t the only company to see millions of dollars in savings. Cisco Systems Inc. estimates it has saved millions of dollars through outsourcing discovery work. And Sun Microsystems Inc. believes it can save up to $1.5 million by doling out patent work to lawyers who don’t punch the clock at a law firm. “It’s catching on,” Sager said. “A lot of people don’t like to talk about it.” He added that law firm partners “are concerned about the quality issues, but the other issue is that law firms don’t want to have to admit they have to deal with this.” INDIA BOUND One of the companies aggressively looking to expand its use of outsourcing is Redwood City, Calif.’s Oracle. It’s not clear, however, how quickly the company will export work to outsourcing agencies. Daniel Cooperman, Oracle’s general counsel, said he’d like to see more of the company’s legal work — especially on patents — done by lawyers located closer to facilities in places like Bangalore, India. For several years, India has been a hot spot for companies looking to find cheaper labor for tasks from fielding customer service calls to designing software. So why not take it one step further, asks Cooperman, and move some basic legal services there, too? Getting an outsourcing agency to do work in a foreign market is one of the chief ways the practice saves money, Cooperman said. “I would rather grow in India,” he said. Prasad, the Oracle patent counsel, began researching this summer whether to use lawyers in India to work on patent applications for technology the company develops in the United States or another country. He said he’s recommending to move some work on a trial basis to India. But he’s not sure if they will be able to handle the work or do it as well as the firms Oracle currently employs, such as Hickman Palermo Truong & Becker in San Jose, Calif. “It would require a significant amount of training” of lawyers, Prasad said. “It’s not clear if you can get work done at the same quality for significantly less money.” Prasad said he favors a conservative approach to using outsourcing overseas. Protecting trade secrets is one issue, he said. He is wary of moving sensitive intellectual property from one part of the world to another, which could expose the company to additional breaches in security. “It’s something you have to watch carefully,” Prasad said. A few law firms have tried to capitalize on the trend toward internationalizing basic legal services. Howrey Simon Arnold & White, for example, is considering ways to take advantage of the increasing movement of legal work from firms to overseas operations, particularly in India. And London’s Allen & Overy decided in September to open a document production facility in India. But many firms see outsourcing as dangerous — and not just to the bottom line. “I will officially be a skeptic,” said Keith Wetmore, chairman of Morrison & Foerster. He said companies and their outside legal teams should develop a rapport to avoid misunderstandings and to keep quality high. Moving basic work to low-paid temp workers in a far-off outpost seems to invite trouble, he said. “Potentially, what kind of caliber of person do you get willing to do that kind of work for their whole career?” Wetmore said. “It has a nasty colonial taste to it.” Paul DeMuro, a Latham & Watkins partner who regularly represents health care facilities, said poor-quality work by an outsourcing agency could cost companies in litigation. They will take the hit for botched work. “The company that sent the work there … is going to be looked to as responsible by the plaintiffs bar,” DeMuro said. A few firms, however, are starting to accept the idea. Reed Smith partner James Wood balked at first when a major client ordered him to use research prepared by Los Angeles-based legal research company LRN, the Legal Knowledge Co., in a major products liability case. He was leery of having to base parts of his case on a stranger’s research. He and his partners also worried about losing billable hours for younger associates if the firm wasn’t permitted to perform certain research projects. “My initial reaction was skepticism,” Wood said. “I thought ‘nobody could do research better than we can,’ and the first reaction among many of my partners was, ‘Hey, that’s taking work away from us.’” Grudgingly, he sat down with LRN and the client, Cardinal Health Inc., and discussed how the system would work. “In a heartbeat,” he said, “I was persuaded.” Wood said the research he got back was solid, and it gave his associates a place to start when preparing trial documents tailored for the case. He said preparing case documents was the most valuable experience for his associates, not performing the raw research. “Associates coming out of law school know how to research,” Wood said. “The real training is taking what they’ve learned in the books and turning it into a persuasive piece of writing, and LRN couldn’t replace that.” Winthrop Rockwell, a partner at Minneapolis’ Faegre & Benson, which is one of DuPont’s 40 preferred provider law firms, said that the money DuPont saves in using outsourcing companies means less revenue for firms like his. But Rockwell said a willingness to work with a client to shrink the cost of litigation helps his relationship with the client, which translates into more billables down the line. Gordon Davidson, Fenwick & West’s chairman, said his firm’s budgets don’t rely on document work on big cases to produce revenue. Fenwick is primary outside counsel for Cisco Systems, which has begun using an outsourcing company for some discovery work. Davidson said the money saved by clients doesn’t translate into an equal amount of lost billables. “Frankly, when you use your own associates, you have to discount.” MODEL WORK At DuPont, where the Legal Model has been in place for 11 years, a group of nine outside providers is used for a variety of services. The companies range from LRN to Kelly Law Registry, which provides a team of temp lawyers. Those two companies are part of the growing niche of non-firm legal providers. John Mullenholz of Washington, D.C.-based Staffwise said his company employs a team of lawyers to do document production, review and coding. The attorneys, he said, are generally part-timers who have decided they want flexible schedules to raise families or pursue other careers. Axiom Legal Solutions Inc., a New York-based network of freelance lawyers, started three years ago with “a handful of big-firm associates,” said Mark Harris, the company’s CEO. Business has increased by 300 percent since then, he said, and the company has 50 lawyers on assignment. Outsourcing, Harris said, “is becoming more mainstream.” For Sager, the reliance on outsourcing has allowed him to cut his lawyer headcount from 175 to 127. Sager has been systematically shuffling work to what he calls “the lowest, most appropriate level.” The biggest concern for DuPont’s in-house team was convincing the outside law firms that quality wouldn’t suffer with the use of outsourcing companies, Sager said. “The biggest paradigm shift we’ve had to overcome is the notion of quality, that quality suffers when you use temps,” Sager said. “But in fact the quality improves.” Sager said the temporary agency he works with uses many of the same lawyers repeatedly, so they have come to know and understand DuPont’s methods. Plus, attitude seems to play a role in quality, he said. Lawyers working as temporary employees are usually doing the document work by choice, whereas law firm associates are not, he said. “This is the lowest form of work that a new associate or young partner would choose to do,” he said. “This is the furthest thing in their mind as to what practicing law is.” John Croll, Sun’s general counsel, is sending one of his lawyers to study DuPont’s legal operations. His department is looking to trim $1.5 million, and he’s hoping the Legal Model will be the tonic he needs to make that happen. “When you’re in a high-tech company as I am, there is a client expectation that over time, things become more efficient and cost-effective,” Croll said. “This is something that legal departments try to do all the time, but in lean times, you have to do it.”

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