Federal Circuit Clarifies the “Commercial Offer for Sale” Prong of the On-Sale Bar

On July 11, 2016, a unanimous Federal Circuit en banc affirmed that The Medicines Company’s (“TMC”) use of third-party contract manufacturing services did not invalidate U.S. Patent Nos. 7,582,727 and 7,598,343 (the “patents-in-suit”) under the on-sale bar, reverting back to the district court’s original ruling but on modified grounds. The Medicines Company v. Hospira, Inc., No. 2014-1469 (“Hospira”). The Court provided useful guidance for companies and patentees that have third-party agreements to ensure they do not run afoul of the bar.

The on-sale bar under pre-AIA 35 U.S.C. § 102(b) prohibits patentability if “the invention” was “on sale” more than one year before the effective filing date of the invention. Here, TMC contracted with a batch manufacturer, Ben Venue Laboratories (“BV”), to produce Angiomax®, a blockbuster blood thinning drug covered by the patents-in-suit. More than a year before the effective filing dates of the patents-in-suit, TMC contracted with BV to manufacture a new formula of Angiomax® that met FDA requirements. In a decision penned by Judge O’Malley, the Federal Circuit reached the opposite conclusion from last year’s 3-judge panel decision holding that the patents-in-suit were not invalid under the on-sale bar.

The Federal Circuit addressed the first prong of the U.S. Supreme Court’s two-prong Pfaff test, which holds that a “claimed invention” is “on sale” when it is: 1) the subject of a commercial offer for sale; and 2) ready for patenting. Because the Federal Circuit dispensed with the issue on the first prong, it did not reach either the second prong or experimental use. The Court held that a “commercial sale or offer for sale” must bear the “general hallmarks of a sale pursuant to Section 2-106 of the Uniform Commercial Code,” i.e., when parties, intending to be legally bound, agree to give and pass property rights for consideration. An offer for sale can also trigger the bar when the offer rises to a “commercial” level—that is, an offer that another party could make into a binding contract by simple acceptance (assuming consideration).

Here, the Federal Circuit held that the transactions between TMC and BV did not rise to a commercial level. The Court reasoned that § 102 requires the claimed invention to be “on sale,” in the sense that it is “commercially marketed.” The product and product-by-process claims of the patents-in-suit covered a product. But, the contract between TMC and BV was a manufacturing service contract for the claimed product, not a contract for the sale of the product. The Court identified four factors in reaching its decision:

  • Manufacturing Service-Style Terms and Conditions: The Federal Circuit indicated that the invoice between TMC and BV was “to manufacture” the product, and the amount paid to BV was only about 1% of the ultimate market value of the manufactured product— indicating a service, not a sales, contract.

  • No Title Transfer: After clarifying that title transfer is a “helpful indicator” and not dispositive, the Court found that BV lacked title in the claimed products as it was not free to use or sell the products or to deliver the products to anyone other than TMC—reflecting a lack of commercial nature to the transaction (“[T]he inventor maintained control of the invention, as shown by the retention of title to the embodiments and the absence of any authorization to [the manufacturing service provider] to sell the product to others.”)

  • After noting that the confidential nature of the transaction is an important factor but not one of “talismanic significance,” the Court held that the “scope and nature of the confidentiality” imposed on BV supported the view that the sale was not a commercial sale of the patented invention.

  • “‘[S]tockpiling,’ standing alone, does not trigger the on-sale bar.” The Court clarified that mere “commercial benefit” does not trigger the on-sale bar. E.g., mere stockpiling of a patented invention by a purchaser of manufacturing services—irrespective of how the stockpiled material is packaged—does not constitute a “commercial sale” as it is “a pre-commercial activity in preparation for future sale.” Instead, the Federal Circuit focused on “those characteristics that make a sale ‘commercial’ in the most well-understood sense of that term and on what constitutes commercial marketing of a product, as distinct from merely obtaining some commercial benefit from a transaction….”

The Court also refused to create a blanket “supplier exception,” upholding its prior precedent and noting that the focus must be on the commercial character of the transaction and not solely on the identity of the parties.

Takeaways after Hospira

  • Now that contract manufacturing does not per se trigger the on-sale bar, drugmakers and others that cannot make products in-house can rest assured that their patents are free from challenge (“We see no reason to treat [TMC] differently than we would a company with in-house manufacturing capabilities” as “there is no room in the statute and no principled reason . . . to apply a different set of on-sale bar rules to inventors depending on whether their business model is to outsource manufacturing or to manufacture inhouse.”). Yet, careful attention should be paid to the type of contractual terms between patent owners (and/or their exclusive licensees) and third parties.

  • Structure supplier agreements as service manufacturing agreements, not product purchase/requirement contracts, and retain rights with title-retention clauses. The role of confidentiality and non-disclosure agreements over sales or offers for sale, as well as trade secrets, may expand to potentially avoid triggering the on-sale bar.

  • Pre-commercial activities, such as stockpiling and publicizing upcoming availability of a product for sale, should not trigger the on-sale bar. Nonetheless, active steps should be taken to not create an “offer” in the commercial sense, which another party could merely accept to create a contract.

For practice-based tips for practitioners which still apply despite Hospira’s holding, please click here and scroll down to Section IV.  To view the Court’s opinion, please click here.

ARTICLE BY Pratibha Khanduri, Ph.D., Krishan Thakker & Gaby L. Longsworth, Ph.D. of Sterne, Kessler, Goldstein & Fox P.L.L.C.
© 2016 Sterne Kessler

EEOC Revises Its Proposal To Collect Pay Data Through EEO-1 Report

EEOC EEO-1 reportOn July 13, 2016, the U.S. Equal Employment Opportunity Commission (EEOC) announced that it has revised its proposal to collect pay data from employers through the Employer Information Report (EEO-1). In response to over 300 comments received during an initial public comment period earlier this year, the EEOC is now proposing to push back the due date for the first EEO-1 report with pay data from September 30, 2017 to March 31, 2018. That new deadline would allow employers to use existing W-2 pay information calculated for the previous calendar year. The public now has a new 30-day comment period in which to submit comments on the revised proposal.

Purpose of EEOC’s Pay Data Rule 

The EEOC’s proposed rule would require larger employers to report the number of employees by race, gender, and ethnicity that are paid within each of 12 designated pay bands. This is the latest in numerous attempts by the EEOC and the Office of Federal Contract Compliance Programs (OFCCP) to collect pay information to identify pay disparities across industries and occupational categories. These federal agencies plan to use the pay data “to assess complaints of discrimination, focus agency investigations, and identify existing pay disparities that may warrant further examination.”

Employers Covered By The Proposed Pay Data Rule 

The reporting of pay data on the revised EEO-1 would apply to employers with 100 or more employees, including federal contractors. Federal contractors with 50-99 employees would still be required to file an EEO-1 report providing employee sex, race, and ethnicity by job category, as is currently required, but would not be required to report pay data. Employers not meeting either of those thresholds would not be covered by the new pay data rule.

Pay Bands For Proposed EEO-1 Reporting 

Under the EEOC’s pay data proposal, employers would collect W-2 income and hours-worked data within twelve distinct pay bands for each job category. Under its revised proposed rule, employers then would report the number of employees whose W-2 earnings for the prior twelve-month period fell within each pay band.

The proposed pay bands are based on those used by the Bureau of Labor Statistics in the Occupation Employment Statistics survey:

(1) $19,239 and under;

(2) $19,240 – $24,439;

(3) $24,440 – $30,679;

(4) $30,680 – $38,999;

(5) $39,000 – $49,919;

(6) $49,920 – $62,919;

(7) $62,920 – $80,079;

(8) $80,080 – $101,919;

(9) $101,920 – $128,959;

(10) $128,960 – $163,799;

(11) $163,800 – $207,999; and

(12) $208,000 and over.

Stay Tuned For Final Developments 

The EEOC’s announcement of the revised pay data reporting rule opens a new 30-day comment period, providing a second chance for the public to submit comments on the proposal through August 15, 2016. The EEOC is also formally submitting the proposed EEO-1 revisions to the Office of Management and Budget for consideration and decision. We will keep you posted on any further developments.

Please note that employers required to file an EEO-1 report for 2016 must do so by the normal September 30, 2016 filing date using the currently approved EEO-1 and must continue to use the July 1st through September 30th workforce snapshot period for that report.

ARTICLE BY Cecilia M. Romero of Holland & Hart LLP
Copyright Holland & Hart LLP 1995-2016.

Intellectual Property and You: University Edition

Intellectual Property at UniversityIt may be July, but school is still in session. Today, I’ll discuss another common but mysterious topic: intellectual property ownership, specifically in the university setting. Universities sponsor research, encourage experimentation, and foster collaboration. The hallowed halls of universities are treasure troves of intellectual property. However, the process can hit a snag when it comes time to start a company and (hopefully) make money. Intellectual property is the cornerstone of many companies and at the center of many disputes. Here, I will address a few items: 1) joint inventorship; 2) university policies and grant terms; and 3) employment agreements.

Joint Inventorship

As it is synonymous with intellectual property, let’s first tackle patents and the concept of “joint inventorship.” 35 USC §116(a) provides that when an invention is made by two or more persons jointly, they shall apply for a patent “jointly.” Further, inventors may apply for a patent jointly even though (1) they did not physically work together or at the same time, 2) each did not make the same type or amount of contribution, or 3) each did not make a contribution to the subject matter of every claim of the patent.

Case law maintains no minimum threshold for contribution. In Burroughs Wellcome Co. v. Barr Labs, Inc. (1994), the court posited that “conception is the touchstone of inventorship.” There, the patent application was prepared before the defendant’s scientists (Barr Labs) contributed to the research on the use of a pharmaceutical to treat HIV. The court held that inventors are those who thought of the idea, not those who only realized the idea. As such, discovery that an idea actually works and reduction of that idea to practice are irrelevant for inventorship. The idea must be “definite” and “permanent” in a sense that it involves a “specific approach to the particular problem at hand.” The typical contributions of a supervisor do not necessarily qualify.

Burroughs Wellcome teaches an important lesson for startup teams: everyone should have a clear understanding of their roles and duties. Over an idea’s lifecycle, many hands may touch the idea. Confusion among these matters can create disputes and unnecessary hurdles. Teams must secure the intellectual property rights of all inventors, otherwise, the intellectual property will have multiple owners. For example, three students are working on a project for a new light tracking technology. Each student contributed, but only two students were listed on the patent, which was assigned to the company IP, Inc. The third student has inventorship rights, and as such, she can have herself added to the application and more importantly, she has rights to the patent which she may assign and license at her pleasure. Put simply, your company may have a joint owner.

University Policies and Grant Terms

Second, always–and I do mean always–look at your university’s intellectual property and technology transfer policies and any funding terms that you receive. These terms will ultimately govern your relationship with the university and dictate your responsibilities and rights. Many of your questions may be answered right in the policy.

For my fellow Wolverines, let’s focus on the University of Michigan’s Tech Transfer Policy.

1. Ownership. Generally, the University claims ownership over intellectual property made by “any person, regardless of employment status, with the direct or indirect support of funds administered by the University (regardless of the source of such funds).” These funds include University resources, and funds for employee compensation, materials, or facilities.

2. Student Intellectual Property. The University generally does not claim ownership of intellectual property created by students. The policy defines “student” as a person enrolled in University courses for credit, except when that person is an employee. However, UM will claim ownership of intellectual property created by students in their capacity as employees (i.e., persons who receive a salary or other consideration from the University for performance of services, part-time, or full time). Interestingly, a student will be considered an employee, for the purposes of this policy, if they are compensated. UM gives the following examples as compensation: stipends and tuition.

The University of Michigan is relatively generous towards its students. However, employees (professors, graduate student instructors, research assistants, post-docs) are another matter.

Employment Relationships

Lastly, as hinted above, founders should pay close attention to the terms of their engagement with the university, which will include employment agreements or other related agreements. Typically, professors, graduate student instructors, research assistants, and the like will have these agreements in place and they are bound by their provisions. Each of these agreements is likely to have an intellectual property assignment clause, which will give ownership of created intellectual property to their respective university employer.

Conclusion

Although the university setting is a boon to intellectual property creation, it does come with strings attached. IP ownership can also become very messy due to concepts like joint inventorship and a lack of proper assignment documents. An unwary student group can end up with the university, or another party, as a co-owner in his/her intellectual property.

Here are a few suggestions:

  • Communicate. As stated above, it is important that everyone understand their role in your project/venture. Informed persons are less likely to assert unwarranted ownership claims.

  • Read your university, classroom, and grant policy. While some places can be student friendly (GO BLUE!), others may not.

  • Maintain clear documentation. Properly document your inventive processes. Also ensure that when you have a startup involved, have proper intellectual property assignments between participants and the startup.

  • Always read your employment agreements. These agreements can contain various obligations in regards to intellectual property. They may also contain intellectual property assignment clauses.

Keep in mind, there is a value to working with university intellectual property. The university may already have ownership, or in some cases, a venture (or students) may assign their intellectual property to tech transfer offices for help in commercialization efforts. The university is a valuable environment.

ARTICLE BY Fermin M. Mendez of Varnum LLP

© 2016 Varnum LLP

Update Company Policies for Transgendered Employees

Although no federal statute explicitly prohibits employment discrimination based on gender identity, the Equal Employment Opportunity Commission has actively sought out opportunities to ensure coverage for transgender individuals under Title VII’s sex discrimination provisions under its Strategic Plan for Fiscal Years 2012-2016. After the EEOC issued its groundbreaking administrative ruling in Macy v. Bureau of Alcohol, Tobacco, Firearms and Explosives, EEOC Appeal No. 012012081 (April 23, 2012), where it held that transgendered employees may state a claim for sex discrimination under Title VII, some courts have trended to support Title VII coverage for transgendered employees.

To address potential challenges and lawsuits that may arise, employers should consider updating codes of conduct as well as non-discrimination and harassment policies. While policies may differ based on an employer’s business, there are some key features to consider:

  • Include “gender identity” or “gender expression” in non-discrimination and anti-harassment policies. Gender identity refers to the gender a person identifies with internally whereas gender expression refers to how an employee expresses their gender—i.e. how an employee dresses. The way an employee expresses their gender may not line up with how they identify their gender.

  • Establish gender transition guidelines and plans. A document should be established and available to all members of human resources and/or managers to eliminate mismanaging an employee who is transitioning. The guidelines may identify a specific contact for employees, the general procedure for updating personnel records, as well as restroom and/or locker room use.

  • Announcements. After management is informed, and with the employee’s permission, management should disseminate the employee’s new name to coworkers and everyone should begin using the correct name and pronoun of the employee. Misuse of a name or pronouns may create an unwelcome environment which could lead to a lawsuit.

  • Training and compliance. Employers should review harassment and diversity training programs and modules to ensure coverage of LGBTQ issues. All employees should be trained regarding appropriate workplace behavior and consequences for failing to comply with an organization’s rules.

In addition to the potential liability under federal law, some state laws provide a right of action for transgendered employees who are discriminated against at work; therefore, employers should review the laws of the jurisdictions in which they operate to ensure compliance.

ARTICLE BY Latrice Nicole Lee of Polsinelli PC

© Polsinelli PC, Polsinelli LLP in California

Retaining Millennials at Law Firms Requires Change

Millennials law firmManaging attorney departures at a law firm can be a daunting task, especially if a departing attorney has a book of business and takes clients along when leaving the firm. Although it can be difficult for the firm, a practice area and, often, the attorneys who remain, it has been a fairly rare occurrence in the past, particularly for equity partners.

That rarity is changing at an increasing rate as baby boomers have phased out of the workforce, leaving millennials to become the largest percentage of the U.S. employee pool. In fact, millenials are expected to make up 75 percent of our nation’s workers by 2030. They bring a different attitude regarding their careers and longevity with a particular company than we have become accustomed to, especially in a law firm culture.

As most business professionals are aware, it takes much more money to hire and train a new employee than to simply retain astute professionals. And, with millennials’ perceptions of how office life should be, law firms will need to pay much more attention to those ideals in order to keep excellent talent, which is imperative for a successful firm.

Millennial Expectations

So, what do millennials expect in the way of work life? This is a frequently discussed topic in the media, at companies and within law firms throughout the world. I’ve read several good articles on the subject lately and will share from one in particular written by Jeff Fromm for Forbes magazine.

Fromm, who consults on the “Millennial Generation” or “Gen Y,” often speaks about the attributes these employees want from their companies, and it’s not all about salary and benefits.

Although there is no precisely defined birth date range for this segment of the population, it is often described as people reaching young adulthood around the year 2000. These individuals were raised with technology and gadgets at a time when developing a child’s self esteem and individuality was a predominant theme in educational and behavioral methodologies.

Other attributes discussed include:

    1. Millenials want to be a part of  “the process.” They have strong entrepreneurial tendencies and desire growth. If they do not feel they are growing at a company or firm, they are much more likely to move to another than their older peers.
    2. Millenials prefer to be coached and mentored instead of “bossed” or just told what to do. Interestingly, this does not mean that they want to work independently with little supervision; it’s quite the opposite. They actually prefer more interaction and feedback than the typical baby boomer.

Conforming to the Millennial Way of Life

So, what does this mean for law firms and particularly law firm management, practice area leaders and the like? It means an almost 180-degree change in the way associates have been managed in the past.

Millennial attorneys will want to be part of the process from the beginning. They are not content to receive a directive such as, “Research a particular point of law and prepare an annotated brief on the subject.” Instead, they want to know about the case, why the research is important for the case and how it will be used to benefit the case.

Likewise, instead of just receiving a red-lined document back with few instructions regarding how to improve the work, millennials will prefer to discuss how the work product was perceived, why changes were made and how the changes make the information better in relation to the case. They want to learn and grow from the process; i.e., from performing their work.

These types of processes will, indeed, make for a better learning experience for associates, enhance their skills and grow more capable team members. However, this approach will also take more time and patience on the leader’s behalf. Just a “do as I say” directive, without an explanation of why to do it, doesn’t sit well with a millennial. Over time, such treatment will erode the associate’s desire to stay at the firm.

Millennial Mentoring

Remember, these younger attorneys need to feel included and that they are growing and making a difference to be motivated and engaged. Just receiving a good paycheck and the chance at equity ownership isn’t a long-term motivator for them. That really is a cultural change in how many, if not most, young associates used to be trained to be the future leaders of a law firm.

Also, consider that dramatic change in a firm’s processes can’t happen all at once, or else the culture will implode. Instead of instituting entirely new training and evaluation programs, try adding in or updating your firm’s processes. As a start, adding a strong associate mentoring program with real checks and balances will go a long way toward including associates in the process. And know that opening up the lines of communications top-down and bottom-up at any organization also will result in better operations and more-satisfied employees. If good communication isn’t standard at your firm, offer training across the board.

The impact the changing workforce has had on law firms isn’t just beginning … it is happening and must be addressed now to avoid major business operational issues for law firms. Take note of this growing trend and make the necessary changes to ensure your firm has the best talent today and in the future.

ARTICLE BY Sue Remley of Jaffe
© Copyright 2008-2016, Jaffe Associates

EEOC Alleges Hospital’s Mandatory Flu Vaccine Policy Violates Title VII

Mandatory Flu VaccineAs summer temperatures soar, one might think the last thing to worry about is the upcoming flu season. And while that may be true in most respects, the flu is on the minds of the Equal Employment Opportunity Commission (EEOC). A lawsuit filed by the EEOC sheds light on the issue for healthcare employers who impose mandatory flu vaccine requirements on employees as a condition of continued employment.

The EEOC alleges in EEOC v. Mission Hospital, Inc. – a lawsuit that includes class allegations – that Mission Hospital violated Title VII by failing to accommodate employees’ religious beliefs and by terminating employees in connection with the hospital’s mandatory flu vaccination program. In particular, the EEOC took issue with the hospital’s alleged strict enforcement of its deadlines, which required employees to request an exemption by Sept. 1 and, if the exemption request was denied, to obtain the vaccination by Dec. 1.

According to Lynette Barnes, regional attorney for the EEOC’s Charlotte District Office, “An arbitrary deadline does not protect an employer from its obligation to provide a religious accommodation. An employer must consider, at the time it receives a request for a religious accommodation, whether the request can be granted without undue burden.”

The key takeaway here is that, similar to what is required under the Americans with Disabilities Act (when, for example, an employer is analyzing the application of a policy to a particular employee with a disability), employers should consider analyzing their duty to accommodate under Title VII based on the facts and circumstances of the particular case, as opposed to applying an (allegedly) inflexible rule without regard to the circumstances of the particular case. The other take-away here is that employers should consider basing this kind of employment decision on more than one reason – for example, a missed deadline plus a determination that granting the exemption would (or would not) be an undue burden (and why).

A copy of the EEOC’s lawsuit is found here and a copy of Mission Hospital’s answer is found here.

ARTICLE BY Norma W. Zeitler of Barnes & Thornburg LLP
© 2016 BARNES & THORNBURG LLP

Failure to Comply with Hart-Scott-Rodino Act Just Got More Expensive

FTC Hart-Scott-Rodino AntitrustLast November, President Obama signed into law an amendment to the Federal Civil Penalties Inflation Adjustment Act (Sec. 701 of Public Law 114-74). The amendment requires federal agencies to adjust the maximum civil penalties for violations of the laws they enforce no later than July 1, 2016.

On June 29, 2016, the Federal Trade Commission revised its Rule 1.98 to reflect the new higher levels for maximum civil penalties. The new maximums will apply to civil penalties assessed by the FTC after August 1, 2016. They include civil penalties for violations that occurred prior to the effective date. (Going forward, the maximums will be adjusted for inflation each January.)

Of particular significance to corporations that acquire, sell, or merge with other businesses, the penalties for violating the premerger reporting and waiting requirements under the Hart-Scott-Rodino Act have been increased from $16,000 per day to $40,000 per day, an increase of 150%.

As most businesspersons know, under the HSR Act, the parties to mergers and acquisitions that meet the dollar thresholds of the Act and are not otherwise exempt must file a premerger notification form, pay the appropriate fees, and wait 30 days (or possibly more) prior to closing the transaction. Failure to file the required notification or to observe the mandatory waiting period will subject the parties to civil penalties, which are now significantly higher.

Note that for continuing violations of the HSR Act, each day is a separate violation. As a result, the maximum civil penalty may be multiplied by the number of days for each violation of the applicable statute or order. (For example, a company or individual that is required to report but fails to do so for one year would be facing a fine of up to $14.6 million under the new levels.)

But statutory maximums are not automatically imposed. Before levying a civil fine, the Commission considers various factors in determining whether the maximum should be mitigated. Those factors include:

  1. Harm to the public

  2. Benefit to the violator

  3. Good or bad faith of the violator

  4. The violator’s ability to pay

  5. Deterrence of future violations by this violator and others

  6. Vindication of the FTC’s authority

Why does it happen that a company or individual fails to make the required HSR filing? The FTC reports that it frequently sees two specific scenarios:

  1. Company executives who acquire company voting shares through exercising options or warrants may fail to aggregate the value of such shares with the value of the company shares they already hold and therefore do not realize that they have satisfied the HSR size of transaction threshold test.

  2. Sometimes companies or individuals who have qualified for the “investment-only” exemption in the past may erroneously continue to rely on that exemption even though they have become active investors in the company or their holdings in the company have increased above 10%.

Other recurring scenarios can also trip up acquirers. For example, companies may not realize that patent and other IP licenses are in certain circumstances treated as the acquisition of an asset for HSR Act purposes.

ARTICLE BY William M. Hannay of Schiff Hardin LLP

© 2016 Schiff Hardin LLP

Congress to Vote on Short-Term FAA Reauthorization This Week

Congress FAA reauthorizationThis week, Congress will vote on a short-term Federal Aviation Administration (FAA) authorization that will reauthorize FAA programs through September 30, 2017. The short-term authorization includes some policy changes, but avoids many significant changes the House and Senate had been pursuing. While the Senate passed a long-term FAA reauthorization bill this year, the FAA Reauthorization Act of 2016 (S. 2658), the House did not take up the bill reported out of the Transportation and Infrastructure Committee, the Aviation Innovation, Reform, and Reauthorization (AIRR) Act of 2016 (H.R. 4441). Both the House and Senate are expected to pass the highly-negotiated short-term extension, before FAA authorization expires on July 15.

The short-term extension does include provisions related to safety and security, as well as some unmanned aircraft systems (UAS) provisions. Among the policy changes, the bill will increase funding for bomb-sniffing dog teams, direct FAA to detect and mitigate UAS operation near airports, and require airlines to refund baggage fees if luggage is delayed or lost, among other provisions.

It appears that House Transportation and Infrastructure Committee Chairman Bill Shuster (R-PA) successfully kept many policy changes out of the short-term extension, in order to keep pressure up on Congress to pass a long-term extension next year that includes Chairman Shuster’s controversial air traffic control reform proposal.

This Week’s Hearings:

  • On Tuesday, July 12, the Senate Commerce, Science, and Transportation Subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety, and Security will hold a hearing titled “Intermodal and Interdependent: The FAST Act, the Economy, and Our Nation’s Transportation System.” The witnesses will be:

    • Patrick J. Ottensmeyer, Chief Executive Officer, Kansas City Southern Railway Company;

    • Major Jay Thompson, Arkansas Highway Police; President, Commercial Vehicle Safety Alliance;

    • David Eggermann, Supply Chain Manager, BASF; and

    • Stephen J. Gardner, Executive Vice President and Chief of NEC Business Development, Amtrak.

  • On Wednesday, July 13, the Senate Commerce, Science, and Transportation Subcommittee on Space, Science, and Competitiveness will hold a hearing titled “NASA at a Crossroads: Reasserting American Leadership in Space Exploration.” The witnesses will be:

    • William H. Gerstenmaier, Associate Administrator of Human Exploration and Operations, NASA;

    • Mary Lynne Dittmar, Executive Director, Coalition for Deep Space Exploration;

    • Mike Gold, Vice President of Washington Operations, SSL;

    • Mark Sirangelo, Vice President of Space Systems Group, Sierra Nevada Corporation; and

    • Professor Dan Dumbacher, Professor of Engineering Practice, Purdue University.

  • On Tuesday, July 12, the Senate Foreign Relations Subcommittee on Department and USAID Management, International Operations, and Bilateral International Development will hold a hearing titled “Public-Private Partnerships in Foreign Aid: Leveraging U.S. Assistance for Greater Impact and Sustainability.” The witnesses will be:

    • Eric G. Postel, Associate Administrator, U.S. Agency for International Development; and

    • Daniel F. Runde, William A. Schreyer Chair and Director, Project on Prosperity and Development, Center for Strategic and International Studies.

ARTICLE BY Timothy W. Drake & Patricia Doersch of Squire Patton Boggs (US) LLP

© Copyright 2016 Squire Patton Boggs (US) LLP

Law Firm Business Strategies: 4 Keys to Breaking the 7-Figure Barrier

It’s no surprise when laid-off lawyers or law school grads who can’t find a job hang out their own shingles, but there are even more attorneys heeding the siren call to start up their own firm in order to achieve a better work-life balance (if that even exists).law firm marketing business strategy

You may feel at times that starting a law firm is counterintuitive when it comes to finding balance in your life. However, if you build it right, running your own firm can be a highly satisfying way to employ yourself and serve clients the way you’ve always wanted.

I have personally trained over 18,000 lawyers on how to manage and market their firms more efficiently and effectively. I have probably helped more attorneys break the seven-figure barrier in revenues than anyone else. I’m not telling you this to brag, but to share with you the keys to breaking the seven-figure barrier based on my experiences.

Key #1:  Run your law firm like a business.

You studied the law as a noble profession, but to break the seven-figure barrier, you must run your law firm like a business. As a solo practitioner or the owner of a small law firm, your primary focus – after gaining competency as an attorney – is to understand and apply the key principles of business development, operations, management and law firm marketing every single day. There are 10 major parts every successful law firm owner must focus on – in this order:

Marketing: The purpose of marketing is to generate leads. There are a wide variety of ways to do this. All of them work, but they are not always suited for all situations, practice areas or attorneys. Find three-five different ways that work for you and use them frequently. Not every attorney will be a top Rainmaker, but everyone can do something to grow and market his or her practice.

Sales: The purpose of sales is to close the deal or sign up the client. Once you start generating leads, you must become better at getting prospects to become paying clients.

Services: Once you have become proficient at generating leads and closing the deal, you must perform the services for the client. When you fix your marketing, then you have a sales problem. When you fix your sales problem, then you have a services problem. See how this works?

Staff: When you become successful at marketing and sales, eventually you will also need more staff to do the work. You cannot hire just any staff; they must be the right staff for you. What kind of culture do you want your firm to have? Who will best fit that culture? Develop a list of qualities and characteristics you need your team members to have.

Systems: Policies, procedures and systems allow you to scale to the next level. Without written systems you cannot scale your business. You will hit a breaking point. It may be at half a million or more, but eventually you will experience a lot of unnecessary pain and suffering because you didn’t invest in creating written policies, procedures and systems for your law firm. You need written systems for every major part of your business. From marketing and intake to money and metrics, it all must be logically written down so even a brand new team member who knows nothing about your business can follow it.

Space: After you start hiring the right staff because you have more clients to serve, eventually you will need more office space to house them. Far too many attorneys get caught up in renting a much bigger or nicer space than they can afford in an attempt to “keep up with the Joneses” or give off the appearance of being more successful than they are. The pleasure you may gain from a fancy office is nothing compared with the worry of making those big payments every month. Don’t strap yourself with too many financial obligations and be careful about signing longterm agreements, especially when you’re just starting off.

Money: Very few attorneys went to school to become a bookkeeper or an accountant, but to manage a growing business you must know how to manage your money. You need to know the basics of finances for small business, from reading a profit and loss statement to analyzing your cash flow. Being an owner means other people are depending on you to manage the money wisely.

Metrics: To consistently break a million dollars per year in revenues, there are over a dozen numbers you must be monitoring and measuring consistently. Here are a few of them – unique website visitors each month, leads per month, average cost per lead by marketing channel (PPC, SEO, TV, radio, print, etc), appointments your team sets per month, show up rate to your appointments, conversion rate for initial consultation by attorney, average cost per client acquisition by marketing channel, cost of goods sold (COGS) per practice area and profit margin per practice area. This is not a comprehensive list, but if you know, measure and track each of those metrics every month, you’re on your way to comprehensively monitoring your business.

Strategy: While having a great strategy is necessary, most attorneys spend too much time developing a strategy and too little time implementing the strategy! Get some leads in the door. Make the sale. Collect the money. Do great work. Obtain some referrals. Wash, rinse and repeat! Then work on your next level strategy.

Self: Upgrading yourself is the last, but most important step. You need to read business growth books or take classes or seminars if that fits your style of learning better. Hang around other successful business owners. Join a mastermind group of successful attorneys. Push yourself outside of your comfort zone. You will never build a multimillion-dollar law firm by staying inside your comfort zone.

Key #2: Focus on a Niche

When you’re in the startup phase (from $0 to about $250,000), you face a never-ending challenge of taking whatever business comes in through the door in order to pay the bills or concentrating on one area to build a niche practice. It becomes a question of short-term focus versus longterm survival – and I realize that most solos need to balance both in order to make it.

However, the faster you can start focusing on one to two practice area niches, the faster you will go from having a job ($0 to $500,000) to creating a practice ($500,000 to $1M). When people see you as a jack of all trades (the generalist approach), they also perceive you as the master of none. People will pay more for a specialist because they see you as an expert. People will refer more to a specialist because they aren’t afraid of you stealing their clients or competing with them. Contrary to popular belief, this approach does not limit you. It helps to focus your marketing and business development efforts.

There are many ways to select a niche, but it must be small enough to be realistic, yet big enough to have enough potential clients in it. For example, being No. 1 divorce attorney in all of the Phoenix metro area is not realistic. There are far too many entrenched and successful competitors to ever achieve this. However, you could be the No. 1 divorce attorney for entrepreneurs and small business owners in the East Valley. Here are a few other ways to select a niche:

  • ServiceNiche: DUI attorney for licensed health care professionals; estate planning and asset protection for doctors and dentists; tax attorney for the self-employed; business transactional lawyer for real estate investors; business immigration law for the hi-tech industry; business law for health care providers; and IP and trademark lawyer for small business owners.

  • Industry Niche: Technology, agriculture, doctors, transportation, restaurant owners, manufacturing, construction, energy, or real estate development.

  • Geographic Niche: Phoenix, Gilbert, Tempe, Chandler, Scottsdale, or the East Valley.

  • Specialty Market Niche: Privately held companies, Fortune 500, physicians, white collar executives, blue collar construction workers, franchise owners, bicycle accidents, fitness centers, Spanish-speaking clients, developers, or commercial lenders.

Review your top 10 client list (either by amount of revenue/fees generated or in terms of how much you enjoy working with them). Then, look for any similarities. It may not be apparent at first, but keep asking questions and you will find it. Building a niche around a solid client base is one of the fastest ways to differentiate yourself.

Read Part 3-Law Firm Business Strategies: 4 Keys to Breaking the 7-Figure Barrier (Part 3 of 4)

ARTICLE BY Stephen Fairley of The Rainmaker Institute
© The Rainmaker Institute, All Rights Reserved

Professional Liability: Punishing Effect of Rule 11 in Keister v. PPL Corp.

professional liabilityFederal courts correct bad litigation behavior, eventually.

People take being sued personally, and lawsuits can take an emotional toll on defendants, whether as an individual or as a representative of an employer. Anger and frustration always lead to the same questions: Can we sanction them for lying? Can I get my fees (or my insurance deductible) back? Won’t the court do something?

Federal courts can and do sanction attorneys for lying, failing to investigate claims and “posturing” a case to get a settlement. But sanctions are reserved for the worst offenders, and it often takes multiple violations before attorneys’ fees, costs or other monetary fines are imposed.

A Case in Point

In Keister v. PPL Corp., U.S. District Court Judge Matthew W. Brann of the Middle District of Pennsylvania directed Attorney X to pay opposing counsel’s fees and costs in excess of $103,000.

What did Attorney X, a solo practitioner in a rural Pennsylvania county, do to potentially warrant more than $100,000 in sanctions? In a 55-page Opinion (which supplemented a 48-page summary judgment opinion), the court explained that  Attorney X:

  • Engaged in “litigious necromancy” by “conjuring” facts to support the age discrimination claim of his client, Ernest Keister, a 34-year employee of PPL and a union member, who worked in a unique position (i.e., his job could not be compared with others) and who was neither fired nor replaced by a younger worker.

  • Proceeded with the claim, in the absence of any evidence that Keister’s age was a factor in (1) his employer’s 2011 denial of a request to reevaluate his job title, duties, salary and management role or (2) the union’s decision not to support moving Keister’s position from the collective bargaining unit.

  • Alleged that Keister faced “ongoing” discrimination in order to avoid dismissal of his client’s lawsuit, despite the complete absence of evidence that anyone insulted or otherwise mistreated Keister.

  • Intentionally asserted claims that were directly contradicted by Keister’s testimony, failed to comply with local motion practice by failing to admit undisputed facts, and submitted documents that were “calculated” to confuse the court and opposing counsel.

  • Failed to investigate the facts and observe procedural requirements, including following the union’s grievance process and filing the federal action within the applicable limitations period (as established by the EEOC’s denial of a claim filed by Attorney X).

  • Amended the complaint for the sole purpose of forcing a mediation to settle a valueless case.

  • Engaged in this conduct after receiving two (non-monetary) Rule 11 sanctions in other cases as well as a public reprimand by the Pennsylvania Disciplinary Board.

Judge Brann repeatedly stated that Rule 11 sanctions are not a “general fee-shifting device” and are not available merely because one side was successful. Sanctions were imposed because Attorney X “is simply not getting the message,” despite prior federal court and state bar disciplinary reprimands. The court held that the “least severe sanctions adequate to serve the purpose” of punishing Attorney X’s conduct and deterring it in the future was to award all costs and fees to the defendants.

Summary

The Keister ruling suggests that a Rule 11 motion should only be filed when it can be proven that opposing counsel did not have the facts to back up a client’s claims and made an effort to hide the absence of a factual dispute. However, even when such proof can be found, federal courts will first award non-monetary sanctions for an attorney’s first and even second offense, as happened here with Attorney X.

When facing a litigation opponent who lies to the court, it is best to prove the lie, document it, and then decide the most appropriate way to bring it to the attention of opposing counsel and, if appropriate, the court or disciplinary authorities. The work might not yield monetary sanctions in the first instance, but the federal courts may not act to stop abusive litigators until presented with multiple examples of bad conduct.

In the short run, it may seem more cost-effective to ignore an opponent’s abusive actions because a judicial reprimand does not return money to the client. But in the long run, the federal courts will not protect a client from future bad acts or additional lawsuits until an attorney’s repeated pattern of deception is established.

ARTICLE BY William F. McDevitt of Wilson Elser Moskowitz Edelman & Dicker LLP

© 2016 Wilson Elser