The saying “you get what you pay for” is not always true when seeking good legal advice for your business decisions. However, the legal profession sometimes receives a bad rap for its costs, including high billing rates and excessive hours billed. And that’s too bad, because not seeking legal counsel just to save a few bucks can be a grave mistake.
When I started out in business at a large public company, we never thought about having a legal concern, as we had many lawyers on staff to help us. The good ones were always learning the business and could walk the walk when they had to. Later in my career, with smaller companies and startups, the most effective lawyers we engaged were still the ones who got involved in knowing the business.
At smaller companies like Carnegie Group, NOMOS and Pittsburgh Life Sciences Greenhouse, we used name-brand law firms, even though they carried higher rates. But I have also found excellent lawyers at smaller firms, and I actually prefer to use them, mostly because they tend to become involved in the business and try to understand the products and process.
No matter what the choice, or which firm, leaders need to treat hiring legal counsel with the same level of scrutiny they use when hiring a full-time employee.
Where legal plays a role
The most common legal issues in business generally don’t have courtroom drama, but they are important to the company’s success. Managers typically see issues surrounding proposals, employment agreements and partnering agreements. These are managed most effectively by good policies and procedures, vetted by legal counsel. Following sound policies and procedures keeps businesses out of trouble, out of courtrooms and in favor with employees and customers.
Less common for most employees, but all important to managers, are confidentiality issues, which protect the company from attack by competitors. Protecting intellectual property is of the utmost importance and can be easily overlooked in a simple negotiation of a contract with a new business partner or customer.
It is also very important to protect the company’s secret sauce, which does not always require the expensive and long process of obtaining a patent. One of our premier portfolio companies at the Pittsburgh Life Sciences Greenhouse has more than 100 patents filed, which will help protect it from competition. But having patent protection isn’t foolproof. I recall a “rock solid” patent in a radiation oncology product losing a patent infringement lawsuit on a clever legal detail, opening the doors for more competition than we ever thought possible.
Patents, in addition to not being foolproof, expire after 20 years, and during that time, the process is fully exposed. Look at Coca-Cola, which has done pretty well for a very long time, since 1880, with keeping its formula secret.
John W. Manzetti is the managing director of Manzetti Group LLC. John is an award-winning, visionary financial and business leader, technology entrepreneur, startup adviser, investor and expert on the topics of economic development, venture capital formation and the commercialization of innovation. He wrote a book in 2018, “Small Bites of the Elephant,” where he uses straight talk and anecdotes to help small business owners and entrepreneurs address complex business issues.