Leonard Stein started at data management company Splunk Inc. in April 2011 as the company’s general counsel and only lawyer. Since then, he’s hired nine more and is looking now for another two.
Silicon Valley’s tech giants are also hiring. A quick search of the websites for Google Inc., Facebook Inc., Apple Inc., Yahoo Inc. and Hewlett-Packard Co. show that all have at least five openings for attorneys.
It’s a good time to look for an in-house job. Technology companies across the region are seeking to trim their outside counsel costs by bringing more tasks in house. At the same time, many companies are creating larger business roles for their in-house lawyers, making the jobs more enticing to the Valley’s entrepreneurial-minded lawyers.
"It’s no longer as fun to practice at firms and more attorneys are looking at in-house roles," said Eric Whitaker, general counsel at flash memory maker SanDisk Corp. "The market is stronger than it’s been in years."
The outlook is less rosy for outside counsel.
For the first time in three years, Altman Weil’s annual Chief Legal Officer Survey found the number of companies reducing their outside counsel spend outnumbered those increasing it. Almost 40 percent of respondents spent less in 2012, compared to 34 percent who spent more. "The cost of outside firms is outrageous," said Robert Booth, an associate general counsel at HP, who joined that company through the troubled acquisition of mobile device maker Palm. "Since in-house salaries are not commensurate," companies are trying to do as much as possible themselves.
"The perspective is that large-firm rates are really high, and there is more of a focus on bringing work inside," said Peter Buckland, a partner in the Palo Alto office of Wilmer Cutler Pickering Hale and Dorr who co-chairs the corporate, emerging company, venture capital and clean technology practices.
Of the law departments surveyed by Newtown Square, Pa.-based Altman Weil, 46 percent increased their internal budgets in 2012, compared to 28 percent reporting a decrease. Another 38 percent of companies plan to increase their in-house teams in the next year, compared to just 7 percent planning to downsize.
In the coming year, nearly twice as many companies, 29 percent of the Altman Weil survey respondents, said they plan to decrease their overall use of outside law firms, while 15 percent said they are planning an increase.
"There are a lot of partners with sky-high rates at larger firms and there is a definite trend toward building out in-house departments which can operate much more efficiently and cheaply," said Peter Redgrove, who runs Redgrove Legal Search in Los Angeles.
"Most law firm lawyers don’t really know what their costs are," said Susan Hackett, the former general counsel of the Association of Corporate Counsel, who heads up the Chevy Chase, Md.-based Legal Executive Leadership. They typically just think in terms of billable hours, which don’t constrain costs to the extent that most companies are looking for.
A FLUID MARKET
The rapidly evolving nature of technology companies is helping to fuel a fluid market for in-house talent, and there were a number of prominent moves in 2012.
In April, data storage company Box Inc. hired Peter McGoff, the general counsel at data services company Informatica Corp., about 18 months after the latter was acquired by Oracle Corp. Paul Shinn, an associate general counsel at HP, went to network security company Gigamon this past May. Michael Yang, an associate general counsel at Google, became the head lawyer at scrapbooking website Pinterest last June.
Recruiter Scott Dubin said an in-house attorney has a different operating framework than a firm lawyer and companies generally prefer to hire both staff and lead counsel from other corporate legal departments.
Dubin said his in-house placements increased from just nine in 2010 to 19 in 2011 and 20 in 2012. There are nearly 30 openings currently listed on The Dubin Group website.
Whitaker, who was named general counsel at SanDisk in early January, said he left his previous head legal post, at electric car maker Tesla Motors Inc., without knowing his next move, and very quickly received four job offers.
Upon leaving last November, Whitaker said that in addition to his current employer, he was approached by two different private companies, each about 18 months away from an initial public offering, along with a midsize public company.
Booth said it is a great market for intellectual property lawyers, and that he is "guardedly optimistic" about his opportunities once he leaves HP at the end of August, when the restructuring of the remaining Palm assets is complete.
Booth, who had previously worked in the legal departments of HP, Apple and Iomega Corp. before joining Palm in 2000, said experienced people have a "relatively easy time finding new jobs." There is a much greater willingness in Silicon Valley to risk leaving a post without having something else lined up, Booth said.
HP bought the maker of the once popular PalmPilot for $1.2 billion in 2010, and after an unsuccessful integration, it stopped production on the company’s products and said last August that it will put the remaining Palm business into a new subsidiary called Gram.
The sheer number of startups in the Bay Area has helped buoy the local market for in-house counsel, Whitaker said, but those can often be riskier positions. "The hard part with newer, private companies is whether they will be around in the long-term." A general counsel is usually brought in for the first time within 18 months to two years before an IPO, but a lot can happen over that time and there is a much greater amount of the compensation tied to stock options and company performance.
Still, the chance to join a fast-growing business like Splunk can be a big lure, Stein said. "We are fortunate to be a very desirable place to work," adding that companies like his rarely need recruiters except when looking for very specific skill sets.
A BETTER SEAT AT THE TABLE
For entrepreneurial-minded technology lawyers, an in-house position will generally bring them closer to operational decision making. "There is a history in the Valley of attorneys taking on a much more advisory role," said Buckland, the Wilmer lawyer.
In-house counsel are being brought more frequently into the business decision-making process, according to Cynthia Dow, who specializes in corporate counsel recruiting at the executive search firm Russell Reynolds Associates in New York.
"In-house lawyers at top companies really do have a seat at the table," due to the increasing importance of regulatory compliance and intellectual property issues, Dow added.
As a whole, technology company attorneys are better paid. Median salaries for general counsel around the country have increased slightly, from about $1.51 million to $1.55 million between 2011 and 2012 according to Redwood City-based Equilar, an executive compensation data firm.
However, technology, media and telecommunications companies have the highest-paid head attorneys in the country, with a median income of about $1.68 million, despite having the third-lowest revenues of the eight industry groupings used by Equilar.
Whitaker offers his experience at Tesla as an example of what’s expected of in-house lawyers today.
"A good general counsel will figure out the key points where business and legal issues intersect and doing their job should propel the business forward," Whitaker said. At Tesla, that included coming up with a plan to sell cars in the 27 states where manufacturers are not allowed to sell directly to the public and instead must use separate dealers.
At SanDisk, which Whitaker said has one of the top five patent portfolios in the world, his operational focus is centered on monetizing that through licensing, enforcement and other means.
"Aspirationally, this has always been a goal," said Whitaker, referring to the business roles of attorneys. "But in recent years, internal legal departments have been much more successful in achieving that.
And the technology world, including Silicon Valley, has been much more adept at bringing the two sides together, he said. "It’s no longer sufficient to serve a purely old-school, risk-management function."
This article originally appeared in The Recorder.