The 6 alternative fee arrangements in-house counsel need to know
Having been on both sides of the fence - as General Counsel for large companies like Disney, Yahoo and Ledger, as well as Outside Counsel - I have learned a lot of things and among them, how to (re)negotiate your legal fees! The different fee models no longer hold any mystery for me. And good news - I’d love to share them with you!
Below, I’ll share six different pricing models as well as some tools to help you better manage your resources.
Playing it safe: the fee cap
As the name suggests, it is a matter of agreeing on a fixed and final price with your external lawyer to carry out a given project, case, or matter.
At AndCo Law, for example, when we are asked to do a compliance review covering several countries, we are sure to share a price for one, two and, X number of countries. The advantage of this model? As a client, you know exactly what you’re getting yourself into!
Ensuring visibility and flexibility: tiered billing
This is a fixed fee system. We negotiate an all-encompassing and detailed package with “add on” options that we can decide to use or not.
The idea is, of course, to have the greatest possible visibility on the fees to be paid at the end of the project.
For example, for the realization of a standard contract invoiced at 5,000 euros, several add ons were foreseen at the time of negotiation. If a second version of the contract is required then an additional 2,000 euros will be needed, for a third, 1,000 euros, etc. The fees become predictable.
Betting on the future: results-based fees
In France, where I do the majority of my work, “classic” fees must imperatively be paid but it is possible to foresee, for example in the case of litigation, that a percentage of the sums recovered will be paid at the end of the case. From experience, be careful to tell your colleagues in the finance department that they will have to pay 10, 15, 20% of the amount recovered to your law firm.
Motivating your firm: fees for partial success
This is a good way to encourage your firm! It’s very simple. The Law firm will receive a sum of money, classic fees and some kind of bonus at the end of the project only if it reaches certain objectives. The key to success? Be extremely clear on the conditions that will trigger this bonus.
Valuing loyalty: subscriptions
For example, all intellectual property files in a firm will be covered by a monthly fee. Again, be very clear from the start. Personally, I recommend doing some “clear contracting” to define what is in the monthly subscription and what is not.
Using your lawyer hours à la carte: the retainer
This is very similar to a subscription in that it is a monthly payment that allows you to ensure continuous collaboration with a firm for a certain type of work. You can negotiate a package of hours each month. This is very interesting and it can really help you out when, for example, you are short on resources (e.g. when you have a maternity leave to cover or at the end of a quarter when you have many contracts to negotiate and sign).
With a retainer, you get a package of hours with your law firm. For instance, 20 hours over a period of 6 months at a fixed cost to be paid every month.
The trick? To negotiate floating hours! In January, if you only use 5 hours out of the 20 hours monthly allowance, the remaining 15 hours can be carried over to the next month. On the other hand, from the firm’s point of view, it will be necessary to count on the fact that beyond a given period (6 months, for example), the hours are definitely lost. Otherwise, there is no way out and no end in sign to the original agreement (i.e. the house would continue to pile up month after month).
Managing your fees and legal work: legal tech
There are two super interesting legal tech products that I’d like to mention. I must confess, I’m promoting my friends here but they really are great!
The first is Simple Legal. I know them well and have worked with them both while at Ledger and as Outside Counsel. The solution is used by some big tech players including Snapchat, Pinterest, and Airbnb.
Simple Legal allows you to get a complete view of your budget with a single click. For in-house counsel, this solution offers super simple budget control. You can easily see an overview of your spend so you will know which firms cost how much. When the finance department tells you “this patent stuff is expensive!”, you can access with one click the exact details of how much these patents are actually costing you. And it’s all presented in super cool-looking tables.
The second solution is Leeway! Simply put, if you’re going to have only one contract tech, this is it. In terms of contracts, I don’t think you can do any better. Leeway is a contract lifecycle management platform and helps companies reduce the time spent on contract management as well as giving them more control and visibility over legal and financial risks. It can help streamline contract drafting and negotiation, so you’ll be able to collaborate with your law firm better too.
One thing to remember when it comes to negotiating external fees: be hyper clear from the start!