New York Times, Microsoft Shifts From Paying Outside Lawyers by the Hour:
Companies have long chafed at law firms’ practice of billing by the hour.
Now, a huge corporation, Microsoft, is taking steps to move away from the traditional billing arrangement.
David Howard, Microsoft’s deputy general counsel, said that under a program begun last month, the software giant planned to rely much more heavily on alternative fee arrangements. Microsoft is aiming to move 90 percent of the company’s legal work to such arrangements within two years, he said in a phone interview this week.
The company’s legal department has been examining its relationships with law firms over the past year, said Mr. Howard, who oversees litigation for Microsoft, an area in which expenditures are several hundred million dollars a year.
The company’s review, he said, found that it “would benefit from moving further away from a transactional model to one that encouraged deeper engagement between our lawyers and key trusted advisers.” As a result, “we’ll do more work with firms on a retainer basis,” he said, an approach that will “embed our firms much more deeply in our work.”
He emphasized that the move was less about saving money than it was about deepening relationships between Microsoft and the law firms that execute its legal strategy. “We want to create a situation that encourages our lawyers to be able to pick up the phone — without going through bureaucracy or worry about how to pay for it — and talk to the law firm about whatever is needed,” he said. “A firm usually handles a case, then you don’t hear from them about legal developments in an area of concern, and we want to change that.”
The change in Microsoft’s relationship with its law firms could help spur more companies to abandon the billable hour method of charging for legal services. ...
The firms that will be part of Microsoft’s revised program are Arent Fox; Covington & Burling; Davis Wright Tremaine; Fish & Richardson; Greenberg Traurig; K & L Gates; Latham & Watkins; Merchant & Gould; Orrick; Paul, Weiss, Rifkind, Wharton & Garrison; Perkins Coie; Sidley Austin; and Simpson Thacher & Bartlett.