Motorola’s global general counsel and company secretary Peter Lawson strides into The Lawyer’s interview room and puts his mobile phone on charge. Motorola’s flagship mobile phone product – and one Lawson has a customised version of – is the V3 Razor. One cannot help but wonder if the impetus for the design and name came from the way the company has slashed and sliced, cut and carved itself back into shape.
The company had a difficult period around 2000, but in the past two years it has bounced back.
The legal department did not go unscathed when the scalpel came out during the less profitable years. The Chicago-based company underwent a corporate restructure which resulted in a more streamlined approach to the business, and the current 200-lawyer global team is now half of what it was in 2000.
But although Motorola posted its best-ever third-quarter results this year, the legal department’s expenditure has remained the same as it was during those belt-tightening days.
A 25-year veteran of Motorola, Lawson is ruthless yet likeable. He speaks fondly of the Chicago White Sox baseball team, but is blunt and to the point when discussing business.
As first reported by The Lawyer (31 October), over a period of five years Motorola slashed its legal budget in half to $200m (£114.6m) and culled around half of its traditional external counsel, in addition to the staff cuts. “Like any commercial business, we’re under a lot of pressure to reduce costs,” Lawson states matter-of-factly.
Of the $200m budget, around $110m (£63m) is spent on external counsel. The figure can vary depending on the amount of corporate work, but Lawson roughly divides it up as follows: litigation, of which 99 per cent is spent on external counsel, is between $40m (£22.9m) and $50m (£28.6m) a year; IP, including related litigation work, is just over the $50m-a-year mark; corporate transactions are not budgeted, but historically it is believed to be as high as $30m (£17.2m) and is now averaging approximately $10m (£5.7m).
US firms have felt the biggest pinch from Motorola’s cost-cutting. The company is coy about revealing which firms fell out of favour, but Lawson did reveal who is still in: Ashurst, CMS Cameron McKenna and Osborne Clarke are favoured in the UK; in Europe, Baker & McKenzie, Freshfields Bruckhaus Deringer, Lovells and White & Case share the bulk of the work; in the US, Arnold & Porter, Kirkland & Ellis and Steptoe & Johnson are favoured for litigation work; while for corporate transactions Wachtell Lipton Rosen & Katz and Winston & Strawn are the main players.
The company incorporates around 1,000 patents a year, so consequently IP accounts for around half, or $45m (£25.8m), of the total in-house legal budget.
“We took a very sharp pencil to our patent generating costs and we’ve developed a number of low-cost sources for our legal work,” explains Lawson. “We generate them and litigate when they’re infringed; and we have substantial litigation around the world, which is why most of our budget goes here.”
The company has also outsourced the first stage of patent writing to small Indian firms and uses a number of small firms in the US to do the registry work. “We’ve achieved a 25 per cent reduction in costs on producing a patent up to the point it’s to be submitted,” boasts Lawson.
But that is not the only area where costs have been saved. Litigation has also come in for some cost-cutting, and it is here where Lawson is not afraid to throw around Motorola’s weight.
“We negotiated very heavily to get fee discounts. We asked for flat-rate proposals for the firms to get our work and we’ve condensed our litigation into a smaller number of firms to get a bigger discount,” says Lawson. It must have been a bitter pill to swallow for some of Motorola’s advisers. “We’re very fee reduction-driven,” he adds. “If you want my work, you’ve got to offer a good deal.”
The company is involved in at least 100 legal disputes annually. It also has legacy litigation, cases that have been running for a number of years, and this eats around half of the litigation budget.
“In the US, the big companies tend to be defendants,” Lawson says. “Leading-edge technology doesn’t always work, and when it shuts down the lawsuits start.”
When The Lawyer first spoke to Motorola, the company ran a complex matrix of business structures. Now, it is much more simple, with just four business groups: mobile devices, networks, government and enterprise mobility solutions and connected home (new technology).
No wonder Lawson has to recharge his phone now and then.
Global general counsel
|Global general counsel||Peter Lawson|
|Reporting to||Chief executive officer Ed Zander|
|Main law firms||Europe, Middle East and Africa – Ashurst, Baker & McKenzie, CMS Cameron McKenna, Freshfields Bruckhaus Deringer, Lovells, Osborne Clarke and White & Case; US – Arnold & Porter, Kirkland & Ellis, Steptoe & Johnson, Wachtell Lipton Rosen & Katz and Winston & Strawn|