The legal teams working with the world’s leading tech companies
The Transatlantic Elite
Much of this week’s issue of The Lawyer is taken up with the 2012 Transatlantic Elite. This year that sector is technology. Appropriate then, that this year you’ll need to go online to read the entire publication.
There you’ll find a detailed analysis of the strategies of the in-house legal teams at 20 of the most cutting-edge businesses in the market.
The Lawyer has examined the in-house legal teams at household names such as Apple, Facebook, Google, IBM, Microsoft and Cisco, along with lesser known, but no less interesting, beasts such as cloud computing pioneer Salesforce, security software outfit Symantec and mobile payments business Square. For music fans, or those with a penchant for alliteration, Spotify is in there as well.
In this year’s Transatlantic Elite we are highlighting:
The size and history of the in-house legal teams
Key deals and litigations
The closest relationships these companies have with their outside counsel and the history of these links
The firms they turn to when they go public, or face game-changing patent litigation, or go on an acquisition spree
The firms they use outside of their home jurisdictions
Access to this report costs just £149 and can be paid for and accessed through TheLawyer.com from Tuesday 19 June onwards.
Through in-depth interviews with the in-house lawyers at these 20 companies and the top partners at the firms that work with them, along with countless interviews with other key figures in one of the fastest-moving sectors in the world, we have revealed this year’s Transatlantic Elite.
It’s required reading for any lawyer – either in-house or in private practice – who is active in the technology sector.
This year in the Transatlantic Elite we have done things a little differently. Until now the primary focus has been on the activities and strategies of the world’s leading law firms.
Previously we have focused on a narrow group of highly profitable and strategically ambitious firms, most notably the group we call the Sweet Sixteen, which includes the UK magic circle and 11 elite US players.
The rationale was that by focusing on this group, we would be able to offer clues more generally as to the future direction of the global legal market. In the past we have noted trends such as expansion in the Middle East and emerging economies, the increasing importance of international arbitration and the growth of the Swiss Verein as an effective method of growing a firm’s platform.
Kudos, dare we say it, to The Lawyer for never having given in to the temptation to add the now-defunct Dewey & LeBoeuf to our core group of 16, although, of course, hindsight is 20:20 and indeed the firm featured prominently last year in the wider editorial. This was partly because last year we made the first change of direction with the Transatlantic Elite. We began taking a sector-led approach to the analyses, kicking off with energy and natural resources.
That opened the door to a raft of new players – notably, in last year’s publication, increased coverage of Dewey, where energy and natural resources was such a key factor in the firm’s growth strategy and, ultimately, its downfall.
This year we have added another twist. The Transatlantic Elite is once again focusing on a single sector: technology. But this year we are examining the legal market through the lens of 20 of the most innovative and interesting clients in the world. For each company we have explored the key relationships, the firms that are winning the quality work, the partners who are being instructed and what happens when those partners move between firms or go in-house.
To arrive at our 20 companies we handed over the reins to a third party: you. The list has been compiled entirely from the suggestions of private practice technology lawyers, with the top 20 chosen by dint of the number of votes they received in a wide-ranging survey. Which means our response to any queries about the companies included is simple: there is no editorial involvement in the ranking – the companies have been picked by you.
Effectively we have taken a leaf out of the playbook of the company that topped our poll, one of the world’s most iconic businesses, Apple: we have kept it simple.
Innovation’s what you need
This spring we canvassed more than 100 handpicked law firms, known for the strength of their technology teams, from around the globe. They included all of the Sweet Sixteen and the top-tier technology practices in the UK and US. They also included firms in India, Scandinavia, Continental Europe and Asia.
We asked firms to nominate the five companies they believed have been the most innovative in the technology space in recent years and/or have had the most impact on the law. In the interests of objectivity we also asked firms to identify whether or not they were current clients of the firm.
The feedback was phenomenal. The top 20 included many household names such as Google, Facebook, Twitter, IBM and Microsoft. In some cases the companies that firms suggested were also highly unexpected, with Nokia and Yahoo! in particular raising eyebrows, being companies that are perceived as in decline.
On the flipside, payments company Square raised eyebrows primarily because most people still have not heard of the three-year-old outfit. That, however, could be about to change. As our in-depth profile reveals (see downloadable pdf available through TheLawyer.com), Square is set to embark on an overseas expansion drive and, according to general counsel Dana Wagner, it is already looking at the best route to go down in terms of appointing overseas legal advisers.
“Outside the US we don’t have any deep relationships yet, no go-to international firm, but we’re starting to develop that,” she says. “One of the questions is whether we go for the one-firm approach or best-of-breed in each jurisdiction. Both models can work: it just depends on the firms having the right people.”
The IT crowd
The insights into global strategy straight from the horse’s mouth is one of the factors that makes this year’s Transatlantic Elite so compelling. It hardly needs to be said that the 20 companies listed here are some of the most innovative in the world. They regularly generate some of the most challenging and complex legal work and when they do, they throw it out to the world’s top legal brains. By shining a spotlight on their activities and the legal work they send to their external lawyers we have arrived at a group of firms that can credibly claim to be the world’s leaders for technology work.
Of course there are gaps. For starters, we could have looked at 100 companies, a move that would have inevitably have included more external firms. But the clue to this feature is in the title: these are the elite.
In this eight-page feature you will find the ranking of the top 20 and three of the in-depth features profiling Google, IBM and Cisco. For the profiles of the remaining 17 world-beating technology companies, and to see who else is in this year’s Transatlantic Elite, it is only appropriate that you will have to go online to TheLawyer.com.
From Silicon Valley to Tech City: market trends
The focus in this year’s Transatlantic Elite on a small group of leading companies has highlighted several key technology market trends.
Notably they include the current craze for patent acquisition and litigation. One global law firm partner, when asked what was keeping his general counsel clients up at night, simply responded: “patent litigation, patent litigation, patent litigation”.
The boom over the past couple of years in technology-related IPOs, particularly in the social networking space, also features (particularly thanks to Facebook’s now-tarnished IPO).
Outside of the core areas of patents and high-flying corporate deals, the busiest lawyers in this sector are advising on major M&A, broader commercial matters and increasingly antitrust, a huge boom area in recent years.
Technology, particularly the kind of emerging and new technology so prevalent in this year’s Transatlantic Elite, is an area rich in opportunities for West Coast US firms, in particular the likes of Cooley, Fenwick & West and Wilson Sonsini Goodrich & Rosati, all three of which can be found popping up repeatedly in the profiles of the 20 companies.
There is also the more usual cadre of global behemoths from both sides of the Atlantic, plus technology-focused firms from the US, the UK and further afield.
Talking of global firms, Dewey & LeBoeuf did submit information for this year’s report. The research period straddled the firm’s demise, which created a novel twist, one that perfectly highlights one of the themes of this year’s report: the importance of relationships.
A substantial part of Dewey’s former lawyers active in this sector, notably West Coast M&A titans Rick Climan and Keith Flaum, along with their clients, notably eBay, now reside at Weil Gotshal & Manges. Weil would probably have made the list anyway off the back of its patent litigation and other work for Apple and others, but the arrival of the Dewey team cemented its place in this year’s elite (see the eBay profile for more detail on this at www.thelawyer.com).
Strategically, with a sector as hot as technology is currently, it is no surprise that lawyers such as Climan and Flaum are in such demand and that firms are under serious pressure to hang on to their top talent. Wilson Sonsini in particular is seen as something of a West Coast training factory for the wider US legal market.
“Every out-of-town law firm wants the local guys,” says one law firm partner in the West Coast tech market. “The out-of-town firms have a different style from the likes of Wilson Sonsini, Cooley or Fenwick. They’ll act for a small number of big clients, while those three will act for thousands and do everything in the expectation that one or two will go huge. They’ll also take stakes, so the partners occasionally will make millions.”
A decade ago Google ‘went huge’ for Wilson Sonsini, while last year Zynga came up trumps for Cooley.
And last month came the biggest of them all, when Fenwick client Facebook marked what could prove to be the high point of the social media bubble with its IPO, which valued the company at $104bn (£66.89bn), although it has slipped considerably since then.
All three firms are steeped in a way of working that can best be described as the ‘Silicon Valley mentality’, a mentality that permeates the pages of this year’s Transatlantic Elite. It is, as one local lawyer puts it, “networking turbocharged”.
As Stephan Eberle, assistant general counsel of Silicon Valley Bank, describes it: “It’s in the practical approach to getting deals done, a strong understanding of the lifecycle and needs of a company, and a knowledge of who’s in the community and the sources of funding.”
That approach is characterised by a willingness to open as many doors as possible, epitomised by the serial entrepreneur and reflected by the regularity with which the same names crop up again and again (within the Transatlantic Elite’s list of just 20 companies, for example, both Twitter and payments company Square were founded by Jack Dorsey).
As Eberle says, relationships in this sector can last a long time. “You see the same people over and over again,” he says.
This ‘Valley mentality’ also leads to a style of working that does not always suit the approach of many larger international firms but is perfectly suited to West Coast rivals that have grown up with the culture and are attuned to its risks – and potential upside.
“To be any good for early-stage companies in the Valley, you need the infrastructure in place, which means lots of associates doing deal after deal, and the companies need experienced capital markets lawyers for the various rounds of fundraising,” says a partner at one global firm. “They don’t need a firm with dozens of offices around the globe.”
The question is, if a firm does not handle the early-stage work, can it ever build a practice and break into the market? The answer is probably not. But there is another way in.
“These companies grow and mature and as they do, they don’t always stay with the firm that brought them to the dance,” adds the global firm partner. “There are internal personnel changes and different needs and that results in changes of law firms.”
Moving on up
Those personnel changes and their impact is reflected in this year’s Transatlantic Elite. As well as highlighting the current relationships, we have tracked many personnel movements at the top 20 companies’ in-house teams that have had the greatest impact.
They include the move three years ago of Intel’s general counsel Bruce Sewell to an “exciting and lucrative gig” (as one lawyer described it) at Apple, that of Salesforce general counsel from Expedia and former Google in-houser Jared Grusd to the top legal job at Spotify.
Certainly the position of general counsel at a top technology company is now a much sought-after role, and one that wields great influence. Consequently they are becoming harder to secure.
“The path now is that you have to have worked in-house and then you work your way up,” says one partner. “The people in the top roles tend to have been promoted from deputy general counsel or are the general counsel of a smaller company.”
There are some exceptions, for example Intel’s Doug Melamed, an ex-WilmerHale partner who was hired in the midst of a government antitrust investigation.
“So there are still battlefield promotions at companies with potentially acute problems,” says one law firm partner.
They are, however, rare.
Meanwhile, the Silicon Valley mindset has been slowly spreading to the UK. Last week Silicon Valley Bank officially opened the doors on its first UK office, a move seen as a nod to initiatives such as Tech City in London.
And in the legal market firms such as Osborne Clarke (which has had its own office in Palo Alto for more than a decade), Taylor Wessing (the only major law firm to operate an office in Tech City), and global technology stalwart Baker & McKenzie (the London office of which has headed the UK directory rankings for intellectual property and technology for as long as there have been directory rankings) are all champions of the networking as business tool ethos.
Indeed, Osborne Clarke’s Simon Rendell sums up the increasing importance of technology lawyers, thanks to industry trends such as the smartphone wars, which have been moving them up the legal market food chain. “IP lawyers are driving value to the business and this will be a key part to business strategy, with companies being aggressive to protect their turf,” he says.
Rendell and his ilk prove that many of the lawyers active in this sector have the ‘Valley mentality’, regardless of whether they are based in Menlo Park or Milton Keynes. And in this sector, that is what makes you elite.
Google’s $12.5bn (£8.04bn) pending acquisition of Motorola Mobility – on which Cleary Gottlieb Steen & Hamilton advised the internet giant, led by M&A partner Ethan Klingsberg – has proved that the company is not one to get shoved aside lightly, particularly by its arch rivals.
The colossal search engine has been slapped with an investigation by the European Commission following complaints against Motorola Mobility, complaints that add to the hundreds of lawsuits aimed at the tech giant and its 800-strong legal team.
“Microsoft and Apple have always been at each other’s throats,” blogged Google chief legal officer David Drummond when the takeover was announced. “So when they get into bed together you have to start wondering what’s going on.”
“They want to make it harder for manufacturers to sell Android devices,” former Wilson Sonsini Goodrich & Rosati partner Drummond wrote of two of the claimants, Apple and Microsoft. “Instead of competing by building new features, they’re fighting through litigation.”
A tonne of litigation
The patent fight has kept Google’s in-house lawyers (or ‘Googlers’, as employees call themselves) busy, with recently hired deputy general counsel Allen Lo (formerly deputy general counsel at Juniper Networks) telling Stanford Law School he had around 100 active patent litigation matters in January this year.
“Google’s in-house legal team have a very high-quality and creative group of antitrust lawyers,” says Slaughter and May Brussels-based partner Claire Jeffs, who is acting for Google on the European investigation alongside Cleary London and Brussels partner Maurits Dolmans. “They devote enormous energy and intelligence to dealing with these issues.”
It is an energy that has saved the company billions. The current barnstorming Oracle v Google, for example, was once estimated by Oracle to be worth more than $6bn, but the software developer – represented by Morrison & Foerster partner Michael Jacobs – is yet to secure any wins against the search engine, which was represented by Keker & Van Nest and King & Spalding.
“I think you’ve seen a lot of patent cases filed lately, and most of them haven’t resulted in successful outcomes for plaintiffs,” Google general counsel Kent Walker told The Wall Street Journal. “That may send a message to those who might want to do these things in the future.”
Pain from Spain
But it is not just competitors taking Google to court. One of the tech giant’s most recent court cases is an investigation by the European Court of Justice (ECJ) following requests from Spanish citizens to have their information removed from Google’s search results.
“It’s one of the most significant cases we’ve worked on because it’s about how you and I will be able to find information in the future,” says Harjinder Obhi, director of Google’s litigation arm in Europe, the Middle East and Africa. “Everybody would be able to tailor what you can read about them on a Google search, which isn’t how the internet should be structured. It’s about the rights for people to obscure history
versus the right for people to know history.”
It is these cases, Obhi adds, that make being an in-house Googler so significant.
“Why my job’s interesting is very simple,” the former Bristows lawyer enthuses. “I have a caseload to die for. Many of the cases we work on are determining what the law’s going to be, cases that are right on the cutting edge of technology and internet law. The consequences of each case are enormous – not just for us as a company, but for people all over the world.”
Amplifying that this is the most fascinating legal job he has ever had, the next question is how a lawyer gets to become part of the Googler gang, which is rumoured to put applicants through up to 15 interviews.
“The interview process is very tough,” confirms Obhi, pointing to the vast range of areas applicants are quizzed on by separate pools of interviewers. “The internal structure’s complex. It’s a huge army of lawyers organised on both a regional and functional level, so if we have to put a regional lawyer in a country, then that person has to be the jack of all trades.”
But even the trade Jack or Jill can need some external advice, and the tech giant is not shy of saying it has a ‘huge’ roster of external counsel.
“Firm selection’s based on ability, not just of the firm, but of the individual lawyers. We want to work with people that give us the right advice and we like to stick with them,” Obhi says, pointing out that different firms are used for different areas and regions, mentioning, among many, Herbert Smith in France, Cleary for competition, Bristows for trademark and data protection and Reynolds Porter Chamberlain for defamation. “Nothing’s ever set in stone, however,” he adds.
While Obhi says there is no overall go-to firm, it is nevertheless interesting to see who the team lays its trust in for cases with the biggest consequences. Google Street View, for example, has faced legal action on every continent except the Antarctic, with legal tussles continuing today.
“Google produces some of the most exciting and innovative technology products in the world and inevitably this sometimes means new legal questions arise about how old laws apply to new technologies,” says Bristows co-managing partner Mark Watts, who has been advising Google Street View on data privacy issues since early 2010 (since this interview the UK’s data protection watchdog has reopened its original investigation into Street View, see box below). “Being a Google lawyer must be one of the most interesting technology law jobs around – they’re right at the cutting edge.”
When asked to describe Google’s in-house legal team, the phrases ‘cutting edge’ and ‘innovation’ continually pop up.
“They’ve been called ‘innovation facilitators’,” says Maurits Dolmans, the Cleary partner advising Google on Motorola. “They’re part of the spirit of innovation that permeates Google.”
Such spirit makes it hard to pinpoint just one landmark, cutting-edge case, although Google’s win against luxury brand LVMH in 2010, which saw the EU rule that Google, represented by Herbert Smith, did not infringe trademark by selling company names through AdWords, is certainly a highlight.
But what are the most exciting, significant cases for Google’s 800 or so lawyers?
“You haven’t got enough time for that,” Obhi says wryly.
Approx size of legal team: 800
CEO: Larry Page
Executive chairman: Eric Schmidt
General counsel:Kent Walker
Deputy general counsel:Christopher Chin
Senior vice president and chief legal officer: David Drummond
Global privacy counsel: Peter Fleischer
Director of litigation for Europe, Africa and the Middle East: Harjinder Obhi
Director of litigation: Catherine Lacavera Senior competition counsel for EMEA, India, China: Julia Holtz Legal director for UK, Benelux & Ireland: Luisa Edwards
Senior patent counsel: Suzanne Michel
2012: The jury returned its verdict in favour of Google in the Oracle v Google patent battle earlier this year, a huge blow to Oracle after it sued Google Android for infringing its IP rights in 2010. Keker & Van Nest and King & Spalding represented Google.
2011: Cleary Gottlieb Steen & Hamilton (Ethan Klingsberg) advised Google on its largest ever acquisition, the $12.5bn takeover of Motorola Mobility. Cleary also advised Google on its acquisition of AdMob in 2009 for $750m and ITA Software for $700m in 2011.
2010-12: Google’s (represented by Quinn Emanuel) You Tube win against Viacom International was overturned this year when Viacom (represented by Jenner & Block) won its appeal in April. The spat was over 64,497 copyrighted videos on You Tube, which Google bought in 2006 for $1.65bn.
2012: January saw the latest win for Google on its AdWords keyword advertising program. Represented by Cooley (Michael Rhodes), complaints were filed in 2008 over claims advertisers were improperly charged for spots on low-quality domain.
2010-12: Google’s Street View (represented by Bristows) has found itself in the spotlight again after the UK’s data protection watchdog reopened its investigation into Street View’s unlawful collection of personal information. The allegations stem from an admission in 2010 that Street View Cars had collected data from unsecured Wi-Fi networks.
2004: Google’s $20bn public offering (advised by Wilson Sonsini Goodrich & Rosati) was dubbed the “most sought-after high-tech float since Netscape”.
Key external law firms
Baker & McKenzie, Bird & Bird, Bristows, Cleary Gottlieb Steen & Hamilton, Taylor Wessing, Reynolds Porter Chamberlain, Herbert Smith
Cooley, Wilson Sonsini Goodrich & Rosati, Quinn Emanuel Urquhart & Sullivan, Cleary Gottlieb Steen & Hamilton, Mayer Brown, Keker & Van Nest, King & Spalding, Perkins Coie, Potter Anderson & Corroon, Ropes & Gray, Durie Tangri, Keker & Van Nest
Not many technology companies can say they have had more than a century of success, but IBM can. The household-name technology giant celebrated its 100th anniversary in 2011.
Since its inception IBM has traditionally focused on storage systems, chip-making, software and services. The emergence of other groundbreaking developments, such as the Watson Project, has also made it a pioneer in data analytics.
Big Blue, as it is often called, has made a staggering number of acquisitions in recent years, with longstanding adviser Cravath Swaine & Moore representing it in a whopping 95 M&A deals since 2000, aggregating more than $40bn (£25.5bn) in value. This includes the most recent acquisition of Green Hat to complement IBM’s existing cloud offerings.
Evan Chesler, a litigation partner and presiding partner at Cravath, who has been representing IBM since he was a summer associate in 1974, says the firm has a historic relationship with the company.
“Our firm’s worked with IBM since the early 1950s and has been involved in many of their major litigation cases. In the early part of our relationship the company didn’t use much outside corporate legal services. This has changed over the years as IBM became engaged in more M&A activity. As a result of our longstanding relationship and institutional knowledge, IBM’s turned to us for much of this work as well,” he says. “This kind of enduring relationship is increasingly rare.”
As noted by IBM vice-president and assistant general counsel David Walsh, who heads the M&A and antitrust areas of the team, a lot of input is needed from the legal team to make sure so many deals go through. “We have an incredible M&A engine in-house at IBM and do a lot of small acquisitions. I’ve got a phone book of names that we’ve acquired over the years, so you need an extremely efficient legal engine to get this done,” he stresses.
For Cravath corporate partner George Schoen, who has advised IBM on a large number of transactions, experience is what sets this in-house team apart from the rest of the technology market.
“IBM looks at many opportunities every year and looks into many more deals than it actually executes on. It’s very disciplined about finding opportunities for meaningful growth,” he says. “As a result the in-house legal team has a wealth of experience across multiple deal structures and geographies. The team really knows what matters on a deal and gives valuable advice to the business.”
IBM cuts a strikingly different figure to many of its rivals and tends to shy away from shouting its achievements from the rooftops.
This was shown by the way the legal team handled a long-running investigation by the European Commission, the US Department of Justice (DoJ) and the Korean Fair Trade Commission (KFTC) into alleged abuse of mainframe pricing.
The case was all too familiar for Big Blue, which endured a 13-year legal battle in the 1970s and ’80s with the DoJ, which was eventually dismissed in 1982.
In the most recent case, Walsh led alongside then head of litigation Michelle Browdy and the firm’s head of government programmes, coordinating a team of lawyers from the US, Europe and Korea. As for external law firms, IBM turned to regular US counsel Cravath, which represented it in the DoJ case in the 1970s and ’80s. Cleary Gottlieb Steen & Hamilton also acted as European counsel, with Hogan Lovells providing a supporting role on both sides of the Pond.
“The in-house team was very hands-on,” relates Walsh. “We pulled together both the internal and the external teams from very early on and there was a strategy for the litigation in the US and how this would relate to litigation in Europe and in Korea. We had a very specific strategy and quickly figured out what lines we couldn’t cross.”
Walsh himself was heavily involved in the case, flying back and forth between Brussels and IBM’s New York HQ each month. The driver behind this, he notes, was to make the whole process as collaborative as possible.
“We spent so much of our time just brainstorming with Cleary, and it really helped integrate our team and made sure we were all our marching to the same beat,” he says.
Cleary partner Maurits Dolmans, who has been advising IBM for 25 years, led. He believes that the legal team’s way of working is indicative of the company’s overall strategy.
“In the case, they set themselves a goal early on, devised a strategy to distinguish the case from the Microsoft case from a legal and policy point of view, highlighting the significant technical innovation by IBM that would be at risk and the intense competition faced by IBM in the market for server computers,” he explains. “The team then consistently implemented the strategy exactly as planned, with quiet strength of mind. This is quite unusual and is what sets them apart from many of their competitors.”
Unlike many of its other rivals in the market, there was little fuss made of the IBM case, despite the stream of successful results, with both the DoJ and the Commission deciding not to pursue with the case and the KFTC opting to drop the investigation altogether.
Even after the case went to appeal in the US, it was eventually dismissed and resulted in no payout from IBM. But then, publicity is not its bag, explains Walsh.
“We don’t like attracting attention so there wasn’t a lot of publicity about the case, but it was very well-received here at IBM and the result was significant for the company,” he notes. “Mainframes just don’t resound with most people in the world, so it’s not something that grabs the headlines, but they are of course extremely important to comput