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Am Law 200 Firms Expected to Increase Revenues Through Alternative Fee Arrangements Over the Next Few Years

Zach Lowe, writer for Am Law Daily reports in his article "Greenberg Continues Unique Billing Arrangement with Alcoa" that experts expect revenues from alternative billing arrangements to increase for Am Law 200 firms over the next few years.  Here is the full report:

Three years ago, when Alcoa was looking for a law firm to handle its IP work exclusively and at a fixed fee, Scott Bornstein, co-chair of Greenberg Traurig's patent litigation group, knew some partners at his firm would hesitate to embrace an alternative fee model.

But Bornstein, who had been working with Alcoa for several years, found lots more support than opposition, and Greenberg eventually beat out nearly three dozen firms who competed for the Alcoa contract awarded in January 2006. Then came the real test: Would the contract pay off for Greenberg?

Apparently it has, because the firm and Alcoa have renewed their deal for a confidential length of time Bornstein will only describe as "more than two years and less than 10." And as the National Law Journal reported this week, more companies are at least paying lip service to the idea of forcing firms to abandon the reviled billable hour.

Greenberg's deal with Alcoa might have been unique in 2006, but it's not now, says Lisa Smith, a consultant at Hildebrandt. Smith says Am Law 200 firms earn about 10 percent of their revenue through alternative fee arrangements; she expects that percentage to rise to about 20 percent or 25 percent over the next few years. The change has been slow because both firms and clients are hesitant to move from a model they're comfortable with. It's easier for clients to ask for discounted hourly billing rates, something some general counsel say they will be looking for this year, as sibling publication The Recorder reports.

"It's a lot harder to come up with something more creative," says Smith, than it is to offer discounts. "It requires a lot of investment on the front end."

Greenberg Traurig's contract pays the firm an annual fixed rate to handle the bulk of Alcoa's IP work. But the billable hour still found its way into the deal, Bornstein says. Any particularly difficult patent litigation or "exceptional projects" fall outside of the fixed fee deal and are billed hourly, he says.

That's also a fairly typical clause in alternative fee arrangements, Smith says.

Bornstein says he's crunched the numbers to see how much money the firm would have made from Alcoa under the traditional hourly billing system. He won't disclose the results, but he says if his comparison showed a big loss for the firm, "I'd have some very difficult questions to answer."

In a statement, Thomas Tempus, Alcoa's senior counsel, described the deal as "cost-effective" and hopes the two sides continue to work together for "many years to come."

Tempus was traveling Wednesday and not immediately available for further comment.

Greenberg worked hard to win the original contract in 2006, Bornstein says. They went through several interviews, submitted a lengthy written proposal with biographies of key IP attorneys, and agreed to bring in several in-house Alcoa attorneys the company was preparing to let go. That move placated Alcoa's scientists, who had grown comfortable with their own attorneys, Bornstein says.

The experience has made Bornstein and the firm open to alternative fee structures with other clients, including Burger King, according to the NLJ

"In this economic environment," he says, "the lawyers that are unwilling to be creative are going to have a lot of time on their hands."

Is your firm exploring the use of alternative billing arrnagements?


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