FAQs
Q: What is the traditional method used by lawyers to bill for their fees?
Q: What is wrong with billing on an hourly basis?
Q: What is different about how you bill for your fees?
Q: Why are your fees better than hourly billing?
Q: Why are your fees lower than billable hour practices?
Q: How does the success reward work if there is a settlement?
Q: What happens if you exceed your budget?
Q: Isn’t litigation too unpredictable to set a single flat fee?
Q: Why should I be confident that together we can come up with fair price for my case?
Q: What if, at the outset of a case, we don’t know enough to set a price for the entire case?
Q: How do you handle "larger" cases?
Q: How do I know you are good?
Q: Why not use an AmLaw 200 firm that has cut its hourly rates or capped its fees?
Q: Why not use the small firm with very low hourly rates?
Q: What about the associated costs of litigation?
Q: What is the traditional method used by lawyers to bill for their fees?
A: The traditional firm sells hours. It bills hourly for the services of its lawyers. >>back to top
Q: What is wrong with billing on an hourly basis?
A: Hourly billing incentivizes behavior that is not aligned with the client’s economic interest. Increasing profits turns entirely on billing more hours – it is inevitable that the legal team will be larger than needed and more hours will be generated than needed. There is no incentive to lower costs; to the contrary, under the traditional model, working efficiently reduces profit. >>back to top
Q: What is different about how you bill for your fees?
A: Our fee structures incentivize behavior that is aligned with our client’s economic interests. These aligned fee structures can take many forms, but the essential characteristics are that: 1) the lawyer shares some portion – if not all- of the risk of predicting the cost of legal services; and 2) the lawyer has “skin in the game,” that is, the lawyer has the risk that it will not be paid as much for a lesser result than it would be for a greater result.
For example, we often use an arrangement that pays us a flat fee plus a reward for client-specified successful results. This arrangement is described in the following slide:
There is no one fee arrangement that aligns the economic interests of the client and the lawyer. We use the fee arrangement that best fits your situation: retainers; flat fee per project or phase of the matter; flat fees paid in lump sum or by installments; fixed fee for a portfolio of related matters; flat fees or hourly fees with holdbacks, success rewards or contingency fees; contingency fees of all types; performance based bonuses; modified hourly fees (e.g., 80/20 arrangements or caps); to name just a few. >>back to top
Q: Why are your fees better than hourly billing?
A: Our fee structures create huge incentives for outside lawyers to align their conduct with the economic interests of the client while hourly based fees pit the economic interests of the outside lawyer against that of the client. Juxtaposing our flat fee plus success reward structure against an hourly fee highlights this difference:
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Q: Why are your fees lower than billable hour practices?
A: First of all, there is a lot of fat to be trimmed from the traditional billing model. “We had 20+ years of living off the fat of the land, with 5-10%/year rate increases, 5-15% /year revenue growth, and 5-15%/year growth in profit, until we began to think of them as a God-given rights,” according to Bruce MacEwen in his well-regarding blog on the economics of law, AdamSmithEsq.com. This creates opportunities to lower prices by 20-30% or more while still making a profit, see Jay Sheperd, The Client Revolution.
Secondly, we have significantly lowered the cost of delivering our services, resulting in cost savings that we pass on to our clients in the form of lower fees (while still allowing us to make a fair profit).
How have we done this? We use small teams of more senior and highly skilled lawyers, allowing us to work more effectively and efficiently over a shorter period of time. Where necessary, we scale on a case-by-case basis by assembling a customized team from our trusted network of senior, skilled attorneys who embrace as we do the use of non-hourly based fee structures. This significantly reduces our overhead as compared to that borne by traditional firms that employ on a full-time basis unduly large numbers of overpaid and inexperienced junior attorneys and underutilized senior attorney resources. In addition, we aggressively outsource both legal and non-legal services to more efficient, lower cost legal specialists and other vendors, and we further lower our overhead for real estate and office services through a creative office sharing agreement with 50-attorney Silicon Valley business litigation firm Hoge, Fenton. >>back to top
Q: How does the success reward work if there is a settlement?
A: As a party involved in litigation, a successful outcome for you is prevailing at trial or having a judgment entered in your favor by the court before, during or after trial as a result of motions practice or other activity in the case. A successful outcome also includes a negotiated resolution between the parties. Since settlements are consensual, your decision to agree to a settlement will reflect your view that it is a successful outcome. >>back to top
Q: What happens if you exceed your budget?
A: We respond the same way you do in your business- we stand by our price. If our budget turns out to be inaccurate, or even if we are not as efficient as we hoped to be in handling your matter, you do not pay more. Only where there is a substantial change in the assumptions or circumstances both of us relied on to come to an agreement on fees, might a modification of the fee agreement (up or down) be necessary. For example, if new claims involving other patents are added to the case, we would agree to negotiate a modification to the fee agreement within the spirit of its terms. >>back to top
Q: Isn’t litigation too unpredictable to set a single flat fee?
A: Not at all. It is widely accepted within the legal community that litigations of all sizes can and should be conducted on a fixed price basis. For a senior trial attorney, pricing litigation is far easier than many of your business decisions (we are not building a next generation wafer fab or an oil platform in the North Sea). The clear trend, even for litigated matters, is non-hourly based billing. WSJ, Companies Reset Legal Costs: Hourly Billing Loses Ground. A traditional firm that tells you that litigation must be billed by the hour is "[w]rong on the count that we don't know what things cost, and wrong on stilts that lawyers aren't good enough businessmen to set a fair price." Bruce MacEwan, Creator and Host, Adam Smith, Esq. >>back to top
Q: Why should I be confident that together we can come up with fair price for my case?
A: Our clients trust us to help them get beyond the billable hour and thereby reap the major benefits of using an alternative, flat fee, structure. Our team has decades experience as equity partners in premier national intellectual property practices developing accurate budgets for complex intellectual property litigations worth hundreds of millions of dollars. We apply that experience in extensive pre-engagement due diligence making a detailed early assessment of your case and the likely associated fees and costs. We also use our experience to identify benchmark litigations in our history, your history, or both, that most closely replicate the case at hand; from there we adjust for case specific circumstances, e.g., opposing counsel, the judge, the expected case schedule, specific legal principles or evidentiary rules that may apply under the circumstances, etc. We are highly incented to get the case assessment right because we bear the risk of getting it wrong. Unlike billable hour firms, we do not have the luxury of getting paid for a poorly developed case strategy. >>back to top
Q: What if, at the outset of a case, we don’t know enough to set a price for the entire case?
A: For reasons discussed above, we are confident that we can arrive at a mutually agreeable price at the outset of the case. Nonetheless, on the rare occasion where either you or CLP requires more information, we will provide you with our proposed fees and costs for an initial, strategically significant, phase of the matter, typically in the range of 3 to 6 months. We will charge a flat fee during this initial phase, with the expectation of proposing, upon completing the initial phase, a mutually agreeable flat fee arrangement for handling the rest of the case. This arrangement allows both you and CLP to move forward in a timely fashion, and at the same time provides the additional information necessary to arrive at a mutually agreeable price for the remainder of the matter. >>back to top
Q: How do you handle "larger" cases?
A: The truth is, all cases, even "large" intellectual property litigations, are best handled by a small team of senior, experienced, trial attorneys.
"[B]ased on our experience (which includes over $20 B in legal fees), you will be pleased to know that there is strong support for [the] proposition that cases are most cost effectively handled by small teams, often teams of one, and that the optimal staffing profile includes what can best characterized as junior partner level attorneys." John Weber, CT TyMetrix, Legal OnRamp.
"3 highly experienced partners will always do a much higher quality job than 20 associates, 4 junior partners, chief trial lawyer, etc WHY? Because it makes no sense to have people preparing a case for trial who have never seen a trial. Such novices will always waste huge $$$ doing "projects" that will never see light of day at trial or change anything." Fred Barlit, Legal OnRamp.
CLP assembles a team customized for your case. We take advantage of strategic partnerships to select experienced trial attorneys with expertise and specialization in the technologies and issues related to your case. When opposing counsel tries to drown us, and their own clients, in voluminous data, we have the bandwidth of 50-lawyer Hoge, Fenton, a respected Silicon Valley business law firm. For discovery issues, we leverage years of managing complex e-discoveries for large firms, to optimize relationships with expert consultants who deliver secure, efficient and cost-effective solutions to your collection, storage, processing, review and production needs. We can easily handle large cases. >>back to top
Q: How do I know you are good?
A: The best predictor of future success is past success. CLP attorneys are experienced trial attorneys with lengthy track records of success in high value complex IP cases. We are graduated from the best law schools and IP practices in the nation. And, of course, if you do not already know our reputation for excellence, read what our clients have to say about CLP. >>back to top
Q: Why not use an AmLaw 200 firm that has cut its hourly rates or capped its fees?
A: Because your case would be the lowest of all life forms in BigLaw - the case which is not making any money. Under the circumstances, you have no realistic expectation of receiving the talent and attention your case deserves.
A lot of large law firms are trying to win back or hold on to disgruntled clients by dropping hourly rates or capping hourly fees. However, the cost to these firms of delivering legal services remains extraordinarily high, several hundreds of thousands of dollars per lawyer, and the firms have failed or are unable to develop more efficient and effective delivery systems.
“[P]eople are going to have to turn their attention to the operating model and begin addressing real issues associated with delivering valuable service and legal product at acceptable prices to clients, for a COST OF DELIVERY that is much lower than today so that a reasonable level of compensation may be earned, for a quality of life that is worth living. NOTHING in what is being done now appears to address any aspect of that.” Edwin Reeser, Legal OnRamp.
The firms therefore cannot generate any profit on these cases. They assign their most talented and productive lawyers to profitable “full freight” hourly cases, while their discount cases are handled by less motivated, less experienced and less capable attorneys making reduced compensation. >>back to top
Q: Why not use the small firm with very low hourly rates?
A: So you’ve found a small group of lawyers who will give you more attention and bill low hourly rates? Everything’s great, right? Wrong. Hourly billing sells hours, not results. Whether done by large or small firms, and whether the rate is high or low, hourly billing rewards inefficient conduct, drives work to the least qualified lawyers, and subjects you to repeated surprise cost overruns.
On the other hand, “by basing their prices on the client's value on solving a problem and by setting those prices up front, [alternative fee] firms work more effectively without all the waste caused by hourly billing and its related systemic problems”. Jay Sheperd, The Client Revolution.
And don’t assume your small firm “trial“ attorney has ever tried a case before, let alone handled a multi-million dollar patent or IP litigation against a litigation savvy adversary with a war chest. Your company cannot afford the drop-off in quality from senior, experienced and successful intellectual property litigation attorneys. >>back to top
Q: What about the associated costs of litigation?
A: Your total price includes both the fees for legal services plus the costs (aka “disbursements” or “expenses”) incurred in providing these services. CLP includes as much of the costs as possible into our flat fee. When this is not practical, CLP provides an upfront estimate of the amount of the costs broken out according to the predicted case schedule. Learn more about how CLP handles costs. >>back to top