In their bid to reduce legal fees, many law departments auction off their legal business. In a law department auction, law firms compete to be selected to handle a company’s legal work. First, the law department describes the work likely to be needed. The firms then propose how they will handle the work and for what fees. This system has worked well for companies such as Pfizer, Tyco, Ingersoll-Rand, Disney and Schering-Plough.

As an example, in 2001, Viacom chose one law firm from among 20 competing ones to handle its patent prosecution work and to be one of its top IP litigation firms. On a larger scale and with a different objective, General Electric conducted an online auction in which about 142 law firms competed against one another to provide GE with their lowest rates in seven practice areas.