14:40, August 11 573 0 law.com

2017-08-11 14:40:04
Big Law Firms Are 'Poorly Run Businesses,' Says Ex-Heavy Hitter

As chief operating officer of intellectual property boutique Fish & Neave in 2004, William Glasgow saw his 160-lawyer firm face two simultaneous problems.

The firm’s talented patent litigators were being poached by high-powered corporate firms that were beginning to find an interest in patent litigation and could pay partners double or even triple what they made at a boutique. At the same time, those corporate firms were no longer referring patent work to boutiques like Fish & Neave, dwindling a large source of work.

Fish & Neave found what may have been a silver-bullet solution through its 2005 merger with Ropes & Gray. Glasgow, a former Stoel Rives and Perkins Coie partner who founded the latter’s office in Portland, Oregon, before becoming CFO of Northwest electric utility PacifiCorp, calls the union between Ropes & Gray and Fish & Neave one of the most successful combinations ever in the legal industry.

The deal brought Boston-based Ropes & Gray’s presence in New York from 80 lawyers to more than 200, as well as laying the groundwork for the acquiring firm to transition from its private equity focus to more of a general practice shop with a leading patent litigation practice.

Even so, Glasgow saw an inherent difficulty with the merger from the very beginning. Fish & Neave’s patent prosecution practice wasn’t nearly as profitable as the work it did on big patent litigation cases.

“There was always this tension between IP litigation and patent prosecution work,” said the 70-year-old Glasgow in a Thursday interview with The American Lawyer.

That tension has finally been eased, as this month Ropes & Gray finalized the spin-off of its patent prosecution practice into a standalone firm called Haley Guiliano, which on Aug. 1 moved into new office space in downtown Manhattan. Ropes & Gray chairman R. Bradford Malt told The American Lawyer in March that the move was designed to separate the economics of the two practices.

“There has been a lot of talk recently about the need for law firms to innovate and do work cheaper and faster,” Malt said at the time. “If you step back and look at this from 20,000 feet, [Joseph Guiliano, co-head of Ropes & Gray’s IP rights management practice, and a leader of the new firm] and I had to find a way to serve clients with the proper overhead, cost structure and leverage ratios. And we had to look at whether [patent prosecution] belonged in the environment of a large firm.”

Glasgow (pictured right) was unaware of the spin-off until contacted by The American Lawyer, but he said he was not surprised by it. Perhaps that’s because he had a similar idea for Fish & Neave’s patent prosecution practice as far back as the mid-2000s. It would have been the type of transformative move that the former leading Big Law practitioner believes today’s big firms could benefit from.

The idea, Glasgow said, was to outsource a bulk of the patent prosecution work to a low-cost country like India. A $5 million investment and a partner or two who was willing to oversee the project could have allowed Fish & Neave to sell such work at considerably cheaper than the going rates at the time.

Couple that with a promise by general counsels to give Fish & Neave a set portion of their patent litigation work, and Glasgow figured that his former firm would have a unique business proposition. The idea, of course, wasn’t acted on.

“That is just not how law firms think,” Glasgow said. “And of course they were making enough money that they looked at me like that was crazy. But that’s the sort of innovation in the practice of law that the business needs.”

Glasgow earned his Big Law stripes during the 1980s. In 1983, he left the partnership and executive committee at Stoel Rives to be Perkins Coie’s first lawyer in Portland. Five years later, Perkins Coie’s office had 27 lawyers and grossed about $5.5 million in revenue; enough for Glasgow to bring home more than $250,000 in 1988, his last year at the firm, according to a “Heavy Hitter” profile of Glasgow in The American Lawyer about his decision to become general counsel of PacifiCorp Financial Services.

Over the next 30 years, Glasgow started his own venture capital firm in Oregon, served as president and CEO of a joint venture involving construction giant Bechtel Group Inc., president and COO of a real estate private equity firm and as chief restructuring officer for AIG Global Real Estate.

He even tried to acquire a Portland franchise in an ill-fated baseball league planned by Donald Trump. But a meeting with the man who would go on to become president went poorly.

“Trump showed up late and was kind of a big blowhard,” Glasgow recalled. “The bottom line is nothing became of the league; sort of a harbinger of things to come.”

Through it all, he never stopped thinking about how Big Law firms should be innovating.

“They’re very poorly run businesses when you compare [them] to anything else,” Glasgow said. “And the reason is, until someone forces them to change, they’re making a lot of money.”

In his view, Big Law continues to be plagued by thinking it sells billable hours rather than quality legal results. And that thinking is reinforced by the pressure of law firms to keep their profits high so rainmakers don’t depart for better-paying firms.

“Firms constantly feel like they need to continue to be more profitable,” Glasgow said. “Yet if you think about what [metrics such as profits per partner] imply, the questions are: Have you been able to work your lawyers harder? Have you been able to charge your clients [higher rates]? Firms never made more money by charging our clients less. But that’s what companies try to do: Create a cheaper product to make more money. The incentives for law firms are completely backwards.”

Like many of his former Big Law brethren, Glasgow blames this dynamic on The American Lawyer’s publication in 1978 of law firm financials.

“If you want to pick a watershed event, I would pick the birth of The American Lawyer as the event that started all this,” Glasgow said, while admitting that partners at high-end firms have the ability to select where they practice and how much money will sway that decision.

For Glasgow today, the argument is academic. After spending three years helping AIG restructure its real estate division following the federal government’s bailout of the huge insurer, Glasgow has been living “quasi-retired” in San Francisco and “playing grandparent.”

He could perhaps still play law firm consultant, too.