Thoughts on the GAO Report and Implications for Legal Ethics

Interesting read.  Again the full GAO Report is here.  The report is more balanced than I would have expected, pointing the finger largely at software patents, patent quality, and litigation costs, not NPEs.  

I know that Chief Judge Rader is doing his level best to try to reduce costs, as are many members of the judiciary, through model orders and the like.  When it comes to these costs, lawyers on both sides of the v have responsibilities.  

The plaintiff's side's responsibilities have been written about a lot:  primarily the need for adequate pre-suit investigation including careful infringement analysis.

The defense side's responsibilities are less often talked about (I think).  Defense lawyers paid by the hour can have conflicting interests:  there may be a clear path to dismissal of a suit or early settlement, but the billable hour is in tension with that result, at least where the client is not sophisticated enough in patent litigation to guard against that problem.  A while back, I was asked to write about the problem of trolls, and, not by design but through analysis, concluded that defense counsel faced some serious issues.  The article is here.

Now to work on the article about Section 285, which I think is the flexible solution to a lot of problems — despite the Federal Circuit's decision in Brooks Furniture!

About David

Professor of Law, Mercer University School of Law. Formerly Of Counsel, Taylor English Duma, LLP and in 2012-13, judicial clerk to Chief Judge Rader.

23 thoughts on “Thoughts on the GAO Report and Implications for Legal Ethics

  1. 22

    anon, you know the answer. Defendants and their counsel want to delay and impose costs on the patent owner, and they want to maximize his risk my multiplying the number of times validity is decided. Dockets suited to get to the result quickly throw a monkey wrench into their stall tactics.

    Thus rocket dockets are demonized by the defense bar.

    The same can be said when they seek to scatter suits far and wide so the patent owner must litigate at the same time against defendants in multiple jurisdictions, maximizing his costs, but litigating the same issues regarding claim construction and validity again and again and again and again.

    The defense bar is doing everything in its power to drive up costs to the patent owner in the name of reducing litigation costs. The game being played needs to be noted for all its cynicism.

    The patent bar has been hoodwinked. They have been herded like sheep to support this assault on patents, and they need soon to wake up and smell the coffee.

  2. 21

    I find it interesting Ned that the dockets that most actually conform to your advice of shortening litigation are the same dockets routinely accused of being too much pro-patent.

    Causation? Correlation? Mere happenstance?

  3. 20

    More to this point, as I was skimming a legal journal and ran across an ad from a law firm actually touting the suppression of all communication except ‘perfect’ final form work product, precisely to create the impression that the firm only performs perfect work.

    What are the chances that all efforts prior to the final form are written off?

    Is the active proselytization, let alone the actual practice of such strictly ‘ethical?’ Isn’t such actually an active misrepresentation of what it takes to practice law? Is this not an actual disservice to the industry by building a false image?

  4. 19

    We may be headed that direction with IPR, Ned, and the ITC (though with it, the money seems to be the same, just earned in a shorter period of time).

    Years ago, a defense lawyer actually said to me that he needed “to work the file” more, before settling. So, we went a few more months and settled for what we’d offered…

    I agree with you that cost is key — streamlining things, reducing costs, making law more predictable (especially claim construction — Lighting Ballast anyone?), and so on. Sigh.

  5. 18

    David, years ago I shared a plane ride with a district court judge who used to be a small firm litigator who explained to me the tactics of large firm litigators. They would always recommend to their clients that they should not accept a settlement offer, whereupon they would litigate law and motion for years and just before trial recommended to their clients that they settle, normally for the same amount they could have settled to begin with. In this manner, they never lose a case, but still made money from law and motion fees.

    But is not all that simple, as inside lawyers, particularly General Counsel, also are risk-adverse. They may have large litigation budgets, but they cannot accept a litigation loss because that will cost them their jobs. Furthermore, as you suggest, they are not confident enough in their own legal position to disagree with outside counsel on issues of settlement. And finally, they do not rely on inside patent counsel if there is a dispute between inside counsel and outside counsel about litigation strategy. They almost always will follow the advice of outside counsel, which as we have noted, is risk-adverse, and very expensive in terms of law and motion and delaying tactics.

    Corporate politics inside a company cannot be addressed through litigation reform. However the best way to contain costs is to shorten litigation. Put patent litigation on a rocket docket, have it over and done with in a matter of months, preferably.

    If this takes patent court with Article III judges, perhaps that is the way to go.

  6. 17

    good comment – and one that has been advanced by the likes of Mossof and Katznelson.

    And a further reason not to blindly follow the bleating of ‘litigation is out of control’ cries from those that coined the pejorative ‘Troll’ in the first place (and that action was not for the benefit of the consumer).

  7. 16

    Just read the GAO report. Indeed it does state that software patents are sticking out from the pack. This raised a normalization question to me. For example, during the inventive years of the electrical generation and distribution system – I am sure that the ‘electrical patents’ were sticking out from the pack as well – and the language could have been decried as vague and overly broad as well (valves anyone?). See, “Empires of light” on Amazon. Could it just be that the category or technology group that is sticking out at any particular time – is where the inventive action is? I mean after all, its pretty easy to predict that in 5 to 7 years we are going to have litigation of the graphene inventions being created right now. That is the hot area.

  8. 15

    We will agree to agree then.

    And you are correct in that the tougher part comes in developing solutions.

  9. 14

    Fair enough, and I appreciate that. My point is more that I don’t know what to do. This is one of those areas where fixes sometimes are worse than the problem resolved, and so perhaps a better way for me to put it is: I don’t know what the solution is, but I doubt it consists of one thing.

    Believe me, I have grave concerns about a lot of legal fees. Hourly rates that I see are insane, especially for baby lawyers. Salaries are a large part of the problem, and that led to higher tuition and more students and…. onward and onward….

  10. 13

    Thanks Prof. Hricik – blogging is an imperfect medium, and my comments may be coming across more strident then I intend, but I too, am meaning what I wrote, and I intended to address the notion of “OR IF there IS ‘a thing’ to do!” to me strongly implies that doing nothing may be an option.

    To me, doing nothing is simply not an option. The market dictates that doing nothing is not an option. Law firms that do nothing will show evidence of that.

  11. 12

    Thanks David, but we are not necessarily talking about rabbit trail time being not reported (and that rather obscures the point I am making).

    My point is that the time that is being reported is being skewed low as often real time may not be reported. I have too often seen partners make this decision based solely on the size of the bill to be presented, and not on the content of the actions undertaken.

    Yes, this does fall to a communication issue.

    No, this is not limited to being a communication issue, precisely because this directly affects fees.

    As I mentioned, it is one thing to report diligently the efforts, and write off the non-productive ones (inform the client that the rabbit hole was investigated, came out as a false trail, and the client is not being billed for that false trail). It is quite another to under-report efforts and build the (misleading) perception that every trail set down upon is always the right trail the first time chosen.

    The plain fact is, legal work encompasses chasing down and eliminating the false trails. Part of the problem is that this reality is an inconvenient reality. But to draw a medical analogy, exploratory surgery is not something the doctors and hospitals throw in gratis and the ‘client’ is not made aware of.

  12. 10

    I don’t know that not billing a client for work you did is unethical. I guess I can sort of see a failure to communicate, but is it unreasonable to not write time down? I know I did as a young lawyer, and still do today, when I run down a rabbit trail, for example.

  13. 9

    Is such not billing time ethical?

    It may depend on if this not billing is also not reporting. Reporting and writing off is arguably different than not reporting. The latter skews the record as to what the effort for the client actually took, and denies the client information that arguably belongs to the client. I tend to doubt that any such non-reporting has been thoroughly discussed with, and blessed by, the client in most situations.

  14. 8

    In response to “or if there is “a thing” to do!”, I know that NOT doing anything is NOT an answer.

    When a driver is found (and arguably the largest driver), ignoring the driver seems quite ill-advised. Not withstanding any prior antitrust difficulties, if the bar truly desires to maintain its ability to self govern the profession (including ethics and fees), then it needs to not only govern itself, but also convince any governmental oversight bodies that such governance (as mandatory fixed fees) serve the consumers’ interests. I suspect though that resistance to such an idea may come from internal to the bar as well (especially in the loss leader low ball practice).

  15. 7

    I don’t think the antitrust laws let the bar set fees any more — I think that got the bar in trouble back in the day.

    I see a lot of problems from the billable hour, too, in all aspects of litigation and life. And I have had many youngsters tell me that they don’t bill time because of the squeeze you talk about.

    But I don’t know what to do, or if there is “a thing” to do!

  16. 6

    I wish I could, too. Lou Reed paraphrased someone else when he sang: “don’t believe half of what you see and none of what you hear.”

  17. 5

    Thanks Prof. Hricik – I wish you could say more about the ‘misinformation’ concerning the advisory committee postings – nature abhors a vacuum and this vacuum has been filled with innuendo.

  18. 4

    A larger conflict of interest is pervasive in law: the billable hour.

    A concept seemingly foreign to law is the notion of ‘you get what you measure,’ and law firms largely (still) measure their cogs, er um, associates, by billable hour.

    I have seen some not-so-deft handling of this tension by partners tightening the bolts on associates and driving towards unrealistic work expectations while maintaining the yardstick of the billable hour. Throw in the (ethically questionable?) practice of low-balling prosecution billing in order to attract litigation, and what I have seen is more shoddy prosecution bread that feeds the litigation mouth.

    Given the inordinate delays from filing an application to seeing any action on the application (let alone having a patent grant and then enforcing the patent through litigation), ‘ownership’ of patent writing is practically non-existent. Clients tend to not help the situation either in their short term shop around habits. But that is their choice.

    Would it be in the bar’s interest to mandate set flat fees for all patent work, regardless of firm size or prestige (remove some of the grey from the existing rule of reason)? Would competition then be strictly on ‘quality,’ or would human nature intervene and drive law firms to squeeze their cost factors in order to drive profits? Should the rule of reason when it comes to fees limit the low end of fees? Should loss-leader, artificially low prosecution fees be abolished?

  19. 3

    That’s an interesting point about the data. I don’t know enough about the underlying data to have a thought, but that could matter.

    I wish I could comment on the orders. But, I feel comfortable saying only that there’s a lot of misinformation that began right about when the order was posted by the advisory committee, and continues to this day.

  20. 1

    The baseline of the data is put together by Lex Machina (Lemley) and RPX.

    Is anyone surprised that software is implicated?

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