Kramer Levin's New Technology Transactions And Outsourcing Practice: At The Cutting Edge

Wednesday, September 1, 2004 - 01:00

Editor: Would each of you gentlemen give our readers something of your background and experience? How did you come to Kramer Levin?

Spilko: I joined Kramer Levin in 1996 as a lateral associate. I was attracted to the firm for its diversified corporate practice and the opportunity for professional growth. Today I am a partner in the Corporate Department, and I have a diverse practice with an emphasis on mergers and acquisitions, joint ventures, finance and technology transactions such as business process outsourcing and software licensing.

Lipsitz: I am a registered patent attorney with more than 25 years experience in the field. I am involved in all phases of matters concerning intellectual property law, including patent and trademark counseling and litigation, protection of business methods and software, and transactional work. It is this experience, combined with a good knowledge of IP issues and technology, that I bring to bear as Co-Chair of the firm's new Technology Transactions and Outsourcing Practice Group. I came to Kramer Levin in January 1998 as a lateral partner and was the first IP attorney in the firm. We now have over 50 attorneys in the firm that work with us in the IP Department.

Editor: Attorneys of a certain age - myself among them - remember when the law relating to IP was an arcane and highly specialized area. How has this evolved over the years you have been engaged in practice?

Lipsitz: My personal experience with intellectual property law mirrors the evolution to which you refer. When I started in 1978, intellectual property legal matters were handled by boutique law firms. General practice firms at that time believed that this specialized work should be handled by those boutiques equipped to handle it and, as a general matter, referred the work over to them. Then in the 1980s a few general practice firms saw an opportunity to establish their own IP departments. They did so with varying degrees of success. Over the next few years, with the U.S. coming to protect business methods and software patents, and the development of specialized training needed to handle such matters, negotiation and transactional skills came to the fore. The ability to draft documents and close deals involving intellectual property also began to be important. As a result, general practice firms took on more and more of this work. Today the field is dominated by such firms, and Kramer Levin has one of the largest IP practice groups in a general practice law firm.

Editor: What is Kramer Levin's Technology Transactions and Outsourcing Practice Group?

Spilko: Our Technology Transactions and Outsourcing Practice Group brings together a disparate group of attorneys whose common denominator is substantial experience in technology transactions. Both the IP Department and the Corporate Department make substantial contributions to the group. The specific expertise includes all aspects of business process outsourcing, IT outsourcing, application development and maintenance agreements, software licensing and support agreements, complicated application implementation agreements, ASP agreements, and technology matters as a part of broader corporate transactions such as M&A and joint ventures.

Editor: Please tell us about the evolution of this practice group. I understand it utilizes a multidisciplinary approach to the issues it handles. What are the disciplines? What kinds of background do your lawyers have?

Spilko: We are focussed, of course, on technology transactions. When we evaluated the trends in that area, we came to realize that we had a valuable resource in terms of the attorneys here who are familiar with a variety of technology-based and -oriented matters. We decided to create a collaborative team to more effectively serve our existing clients' needs and to better market our services to prospective clients. The attorneys involved bring a variety of perspectives to bear on the issues the team handles, in addition to their basic familiarity with the technological arena. As a full service law firm, of course, we are also able to call on our colleagues from other disciplines and practice areas as needed.

Lipsitz: In the IP Department I would say the majority of attorneys are registered patent attorneys with specialized training. Many of them have engineering or science degrees. My undergraduate training was in physics, and I have dealt with many matters - particularly with respect to computer hardware and software Ñ where that training was extremely valuable.

Editor: How is the work of the practice group generated? Does it have its own clients? Or is it providing a service for, say, the firm's corporate clients?

Spilko: The group works with Kramer Levin's existing clients, and in that sense it is providing a service for clients which are connected to other practice groups within the firm. The group also serves as a platform to showcase the firm's expertise in this area to prospective clients. The practice group is new, and at an early stage in developing its own client base, but it is beginning to happen. People are hearing about the group and beginning to come to the firm as a consequence. That, of course, is one of the purposes for which it was set up.

Editor: Is it the case that any firm with the kind of client base and practice that Kramer Levin enjoys would have to have a practice group similar to yours today?

Lipsitz: Of course, it doesn't just happen that a firm creates a practice group such as our Technology Transactions and Outsourcing Practice Group. The basic resources - in terms of attorneys with the experience and skills necessary to provide counseling and guidance to the clients - must be present. For many years Kramer Levin has had such resources. What is now happening is that those resources have been brought together in a particular way and with a particular focus in response to what we see as a need in the marketplace. We are providing this service with a new configuration of attorneys, and every indication is that it is going to be very successful.

Editor: Please tell us about the kinds of things that the practice group handles on an ongoing basis?

Spilko: A principal focus of the group is on outsourcing transactions, and these run the gamut from complex information technology outsourcings - where the provider takes over the IT function from the client in its entirety, including employees of the client performing IT services - to business process outsourcing. For example, today we are working with a client in the pharmaceutical industry to outsource their logistics function in terms of shipping, delivery, warehousing, payment, collections, and so on. We also focus on application development and maintenance agreements, which are becoming very prevalent, particularly in an offshore setting, where much of this work is now being sent for reasons of cost. India is a very current example of this. We also focus on technology transactions within the context of a larger transactional arena, such as an M&A undertaking or a joint venture. Just about any transaction that occurs today is going to have a technology feature. These are just a few examples of our work in this field; we have the expertise and ability to add real value in any technology transaction.

Editor: These days, technology does not acknowledge national borders. It is, in fact, the driving engine of globalization. Do you find yourselves operating in the international arena?

Lipsitz: For many years Kramer Levin attorneys have worked in the international arena. We have an office in Paris. We have an affiliation with the Studio Santa Maria law firm in Rome and Milan, and we have a formal alliance with the Berwin Leighton Paisner firm, which has offices in London and Brussels. In addition, our attorneys work with correspondent firms in countries throughout the world on IP and other matters. Our U.S. and foreign clients also have the benefit of our international experience and contacts.

Editor: What are the principal issues under discussion today in your area of the law?

Spilko: Offshoring is a major issue. This involves sending functions or services overseas to English-speaking countries which provide a high quality of service at a much lower cost. This includes, typically, software development, back office support, data entry and call centers. On the corporate side there are many issues, including choosing the right provider and choosing the right jurisdiction in which the provider is located. With Sarbanes-Oxley and the regulatory framework that derives from it, there is a real imperative to insure that the offshore provider is in compliance with a whole host of requirements, with particular reference to the customer's financial reporting. Offshoring has also generated a great deal of debate in the political arena.

Lipsitz: On the IP side there are many issues that confront attorneys on a regular basis. These include protection of a company's business secrets and software. Big issues arise over ownership, and joint ownership, of IP that is developed. When customer data is involved, there are issues of privacy data protection and identity theft protection.

Editor: Yours is a practice area that has emerged as a full-blown legal specialty fairly recently. General counsel and corporate legal departments may not have seen many of the things that you deal with on a daily basis. What are the issues that you would call to the attention of our publication's readership?

Spilko: Compliance with law and with changes in law in the outsourcing context is clearly at the top of the list. The contract should clearly spell out which party is responsible for compliance over its term, as well as which party pays for compliance, and which party is required to monitor compliance over time. Another issue concerns technological interfaces in the outsourcing arena. Many outsourcings fail because the parties do not adequately identify the scope of services in relation to technological interfaces between the customer and the vendor. When an issue arises (as they inevitably do) the parties are left to attempt to negotiate a resolution or rely on a cumbersome dispute resolution procedure to address an issue that is often very technical. Outsourcing is driven by cost savings, so a misstep in this area can eliminate the entire purpose of entering into the outsourcing arrangement. Another very important consideration concerns securing meaningful service level commitments from the provider. If the contract fails to specify actual measurable service levels in order to monitor the provider's performance over time, the outsourcing arrangement may be seriously undermined.

Editor: What about the future? Where do you see the Technology Transactions and Outsourcing Practice in, say, five years?

Spilko: In the outsourcing context we expect to see more variety in the transactions we handle and greater frequency of all kinds of transactions as offshoring and business process outsourcing take hold of both the U.S. and the non-U.S. mindset. We anticipate increased call center activity in places such as Canada, Mexico and the Philippines. Data warehousing and hosting and ASP arrangements are also going to be on the increase in the outsourcing arena. In addition, we see our contractual work focusing on relationship management between vendor and customer, with deals being structured in such a way as to address the inevitable disconnects between technology integration and people integration. Another development has to do with the outsourcing cycle. The contracts that were executed a few years ago are coming up for renewal soon. Renegotiating those contracts on the basis of what we have learned during the initial phase of outsourcing is going to receive a great deal of attention from everyone involved in this industry. Finally, we expect to see a great deal of industry consolidation, especially in the BPO space. There are a great many small players in this field that will be swallowed up by the heavyweights. We expect our group to be very busy over the next five years.

Lipsitz: If the way in which Kramer Levin has handled the explosive growth of IP is any indication of how the firm will nurture our new group, we expect great achievement and growth as we continue to service our clients.

Please email the interviewees at rlipsitz@kramerlevin.com or hspilko@kramerlevin.com with questions about this interview.