Open Source, Open Season?
May 14, 2007 | Filed Under Litigation, Technology
Fortune reports that Microsoft is taking a hard look at various free and open-source software (FOSS) and is planning a strategy to assert patent claims. Many large companies use such software in various applications across the enterprise.
Microsoft General Counsel Brad Smith and licensing chief Horacio Gutierrez sat down with Fortune recently to map out their strategy for getting FOSS users to pay royalties. Revealing the precise figure for the first time, they state that FOSS infringes on no fewer than 235 Microsoft patents.
Mr. Smith has been aggressive in building up Microsoft’s patent portfolio. When he became general counsel in 2002, the company filed 1,411 patent claims; in 2004 it submitted 3,780.
There were three options for the Microsoft GC regarding potential infringement:
First, it could do nothing, effectively donating them to the development community. Obviously that “wasn’t very attractive in terms of our shareholders,” Smith says.
Alternatively, it could start suing other companies to stop them from using its patents. That was a nonstarter too, Smith says: “It was going to get in the way of everything we were trying to accomplish in terms of [improving] our connections with other companies, the promotion of interoperability, the desires of customers.”
So Microsoft took the third choice, which was to begin licensing its patents to other companies in exchange for either royalties or access to their patents (a “cross-licensing” deal). In December 2003, Microsoft’s new licensing unit opened for business, and soon the company had signed cross-licensing pacts with such tech firms as Sun, Toshiba, SAP and Siemens.
Microsoft has not said whether it will pursue litigation over alleged FOSS patent infringement. If it does, expect the IP practice areas of major firms to get very busy.
Build your Firm; Hold the Pickle
May 8, 2007 | Filed Under Service Insights, Selling the GC
Sometimes service firms have to look a bit beyond their business and try to learn from others.
About five blocks from my offices in Ann Arbor is a special place called Zingerman’s Deli.
The New York Times apparently likes Zingerman’s as well. In a recent profile noting Zingerman’s 25th anniversary, the unique approach to service and strategic planning is examined. Not the three year plan. Not the five year plan. How about the 15 Year Plan:
But neither the festivities nor the variety would have been possible if Zingerman’s co-founder, Paul Saginaw, had not dragged his business partner, Ari Weinzweig, to a bench in front of the deli about 15 years ago and demanded that they start thinking about where they wanted their business to wind up.
Mr. Weinzweig was reluctant to break away from his routine of running the deli, then generating about $6 million a year in sales, to brainstorm. But Mr. Saginaw insisted.
What resulted was a plan to retain the unique attributes of Zingerman’s (including high levels of service and premium pricing) but grow the business. The plan for 2009 (which was begun in 1994) targeted growing revenues to $20 million without franchising. With two years to go, Zingerman’s is ahead of plan, and on track for $30 million in revenues this year. There are eight separate operations (that include a bakery, restaurant, coffee-roasting company, catering, and a training business). It was also profiled last year in this book by Inc. magazine editor Bo Burlingham.
What does this all mean for the legal market beyond a good caterer for your next closing? Zingerman’s rebuffed repeated approaches to sell, merge or franchise. Phone cards. Profitable in the short run, probably destroy the brand in the long run. It also really engaged in real long-term strategic planning, not the dressed-up fancy tactical stuff that masquerades for it in many environments.
Note also that Zingerman’s retains premium pricing (up to $13.99 for a sandwich), but invest a lot in the product and share a great deal with staff on things (margins sometimes as thin as the sliced pastrami). Not great for the owners in the short run, but certainly allows them to attract and retain the best people.
From my personal experience the most notable aspect of Zingerman’s is what you see when you walk into the deli and how you feel after placing your order with the smart and helpful people they have behind the counter. Definitely not a commodity-type operation.
I think people (which include in-house counsel) will pay top prices for premium service. The feeling that some GCs have is that they are always on the fixed-price menu, paying the same for the deluxe reuben as they do for white bread, toasted.
On the left of the article text is a delectable (and short) multimedia show about Zingerman’s. Turn your speakers up and you can almost smell the corned beef.
I think I’m going out today for lunch.
Profits For You; Fees for Me
May 2, 2007 | Filed Under Law Firm Trends, Legal Resources
Earlier this week the American Lawyer trumpeted the mother lode that certain Am Law 100 firms struck in 2006:
In 2006, for the first time since The American Lawyer started measuring the financial performance of law firms 22 years ago, a majority of America’s 100 top-grossing firms had profits per equity partner of $1 million or more.
Going even higher up the food chain, 15 firms had PPP of over $2 million and 3 firms topped $3 million. Good for them, I hope they are taking some time to enjoy it.
When a GC sees this (or CFOs, for that matter) there’s a bit of shock and awe that gives way to a realization as to who is picking up the tab.
So while some firms celebrate, what are the clients doing? Today’s Wall Street Journal today (temp link) tells part of the tale:
General counsels, in charge of their companies’ legal matters and budgets, are perpetually under pressure to trim and better manage expenses. But it hasn’t been easy to move away from the familiar billable-hour system, in part because neither companies nor law firms typically have a good sense of what a piece of legal work will end up costing. Now, new tools are helping both sides estimate costs up front, giving general counsels more confidence to move ahead with arrangements like fixed fees and “value-based billing,” in which the payment a firm gets depends in part on the results it achieves.
The WSJ goes on to describe what companies like Cisco, FMC, Chevron Phillips Chemical, and Pitney Bowes are doing to slow the clock down a bit.
Profits per equity partner are an important metric for law firms to track. When it starts to appear like the metric, clients take notice. Who is tracking VPHB: value per hour billed?
Any engaged GC is rightly focused on making law firm expenditures more prudent as they are incurred and defensible when they are reviewed.
The Am Law 100 should go ahead and party like it’s 2006; just remember it’s already 2Q07 and your favorite GC may be going into a budget forecast meeting as we speak.
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