by: Kenneth Solomon

 

Many businesses tend to relax their oversight of costs when times are good and money is rolling in. Of course, costs then tend to rise. When times turn bad, however, those escalating costs that went unnoticed in the good times suddenly become a burden. This tendency is particularly pronounced when it comes to legal expenses. The good news is that legal expenses can be reduced dramatically while actually improving the efficiency, quality and amount of the legal services received and facilitating business operations. My comments here are directed specifically to the area with which I have most familiarity: patent law. Nevertheless, they are merely illustrative and may be applicable to other areas of the law as well.

 

I began my career in centers of significant patent activity – Chicago and then Philadelphia. When I moved to St. Louis in 1984, the patent law community was very small and had changed little in years. Most of the reason for this stagnancy was the antipatent reputation of the U.S. Court of Appeals for the Eighth Circuit, the appellate court within whose jurisdiction St. Louis is located and which had not found a patent valid in ages. Because patent owners believed that filing a patent infringement suit in St. Louis meant not only losing the suit, but losing their patent to a finding of invalidity, they avoided filing their patent infringement lawsuits in St. Louis. Therefore, St. Louis saw little patent litigation for many years.

 

All that changed in the early 1980’s. In an effort to spur technological development by beefing up and creating uniformity in the United States patent system, the U.S. Court of Appeals for the Federal Circuit was created to hear all patent appeals no matter where in the U.S. the suit arose. Suddenly the same court heard the appeal whether a patent suit was tried in St. Louis or Chicago or New York. St. Louis no longer was a death sentence

for a patent.

 

As a result, the patent community in St. Louis has grown rapidly over the past twentyfive years. Fortunately for clients, however, is that the rates charged by St. Louis patent law firms, stunted by the years of shunning by patent owners, continue to lag far behind those in the rest of the country, especially the Coasts, the North (Chicago, Milwaukee, Detroit, Minneapolis, and so forth) and Texas. As a result, St. Louis still offers comparatively bargain patent law rates.

 

The substantial relative price advantage of St. Louis can be seen from the Report of the Economic Survey on patent law costs published every two years by the American Intellectual Property Law Association. The most recent report, from 2007, shows that the attorney fees charged for preparing and filing trademark applications and patent applications, whether simple mechanical inventions or complex biotech, chemical or electrical inventions, typically run 20% to 50% higher in New York, Boston, Philadelphia, Chicago, Texas, Los Angeles and San Francisco than in what they identify

as “Other Central” (the central region other than Chicago and Minneapolis). The differences were even greater when it came to litigation, and the bigger the litigation, the greater the difference was. According to the Report, the median attorney fees for patent infringement litigation involving less than a million dollars at risk, through discovery exclusive of costs, and through trial including costs were as follows:

 

 

According to the Report, the median attorney fees for patent infringement litigation involving one to twenty-five million dollars at risk, through discovery exclusive of costs, and through trial including costs were as follows:

 

 

According to the Report, the median attorney fees for patent infringement litigation involving more than twenty-five million dollars at risk, through discovery exclusive of costs, and through trial including costs were as follows:

 

 

Yet, despite the relatively low costs, the quality of lawyering is just as high in St. Louis as in larger cities. While the quality of patent attorneys varies from firm to firm – and, especially in large law firm patent departments, even from lawyer to lawyer - the quality of patent lawyers I have seen in St. Louis is every bit as high as the quality of patent lawyers I saw when I practiced in Chicago and Philadelphia or see today in my dealings with patent lawyers across the country. In St. Louis, we have represented companies just as large and with reputations just as high as companies represented by firms elsewhere. And in my nearly twenty-five years of practice here in St. Louis, I have never seen my St. Louis firms out-lawyered, whether it is in litigation or in preparing or prosecuting patent applications.

 

As a matter of fact, our lower costs allow for superior lawyering because it permits us to spend more time on the case. Just think about the tactical advantage the litigant whose legal bills are half or less than yours has over you. Your opponent can get more service for less cost and can litigate longer with less detrimental impact on its business. I have won many cases in which a company much larger than my client waged a war of attrition,

trying to bowl over or wear down my client with expensive, protracted litigation only to see that strategy backfire. Time and again I have seen my Goliath opponent give up because his legal bills were so much greater than those of my David client. While the area covered by the Eighth Circuit offers particularly favorable patent law rates, several other factors render St. Louis and other mid-sized Midwest cities relative bargains in patent as well as other areas of law. For instance, the relatively low cost of living in such areas is accompanied by relatively low incomes as well as more costsensitive clients, all of which force law firms in cities like St. Louis to be far more costconscious than are their pricey rivals. Thus, while one large major national law firm with major offices in Chicago and New York recently boasted of increasing their profits per equity partner to $1,400,000 a year, profits of even half that amount are unheard of in St. Louis; indeed, one-third that amount is rare. The drive to build up such hefty profits demands not only shockingly high hourly rates, but also hyper-staffing of legal projects. Most companies located in mid-sized cities in the Midwest cannot afford either approach and so neither can their law firms.

 

As a result, while the largest St. Louis law firms have been closing the price-gap with the rest of the country, many firms in St. Louis and other mid-sized Midwestern cities provide legal services far more cost-effectively than do law firms elsewhere. In fact, many large, big city law firms have recognized that they can get high quality work for lower prices and so have leveraged the “St. Louis” advantage to their benefit by acquiring St. Louis firms or opening St. Louis satellite offices as sorts of “maquiladoras” – places to ship work to be done at lower prices, but to be charged out at the high prices of their main offices. Often, the work you receive from such big city law firms is not just the same quality as the work from St. Louis. It IS the work from St. Louis!

 

Why should the big city law firms enjoy all the benefits from a lower priced market? Consumers of legal services can cut out the middleman and enjoy the price break themselves by dealing with the more cost-conscious firms directly. Not only that, but a sizable client can get better service from St. Louis law firms where it might be a larger, more important client to the firm. As a result, moving legal work to a city like St. Louis is a win-win decision. Legal costs can be cut substantially without sacrificing quality, but improving service and providing tactical advantages in litigation.