Why do Law Firms charge Tech Companies high fees?

Why do Law Firms charge Tech Companies high fees?

On the 22nd day of April, 2017, I received a thoughful message on the Whatsapp Group of “MY LEGAL DIARY”. Mr. Oladimeji Fatona, an excellent Electrical & Electronics Engineering Graduate from the University of Ibadan asked an intelligent question after his observation from some Tech Movies that lawyers seem to charge a lot.

He made specific reference to a case where a Law Firm demanded Legal Fees amounting to 2.5million dollars to represent a Tech Company that was sued for intellectual property theft after receiving 5 million dollars in funding for a project. He also asked whether there is a way such cost can be reduced.
MY OPINION
Dear Dimeji Fatona,
I’m glad you brought up this question. The first time I came across an issue like this was on the Internet where someone queried “Why do lawyers charge heavily? They are not like tech companies so, why should they be making much money like that?” Permit me to say, legal advice/services are at the foundation of every successful business irrespective of the area of interest. Put differently, a person, human or corporate, can lose all he has laboured for all his life within a twinkle of an eye if he slacks in the legal arena.
There are several factors that can result in heavy billings but I will explore some while my bosses will fill in the gaps.

Firstly, the method or structure of charging the fees can result in the high cost. For example, some firms bill such tech companies you mentioned hourly. There is no doubt that the briefs of most of those tech companies require constant research/finding and it’s as if the lawyer is an employee of the company; the work keeps going on day-by-day. More so, they are aware most of the companies can afford the cost.
Secondly, the prestige, or at least the size, of the firm may also make the client to incur heavy legal cost. You will agree with me that this is expected. The popular saying “two heads are better than one” applies in this instance. I know some firms that have over 50 lawyers and everyone is expected to sit down in meetings regularly to provide the optimum solution to your legal issues. Where will the firm get the money to pay all the lawyers if not the fees the clients pay? So, their idea is this: if you want the best, you pay the best!
Thirdly, the area of Law involved or the type of legal service required may attract heavy costs because specialists might sometimes be needed, as is the case with intellectual property, capital market, oil and gas, maritime etc. In fact, even for the lawyers, it requires a high cost to acquire knowledge and expertise in most of these specialization. For example, in respect of the firm that charged 2.5million dollars as legal fees to service a business that was sued for intellectual property theft after receiving 5 million dollars in funding, it requires many technicalities which will cost the firm money, expert witness(es) will most likely be required, it will consume a lot of time and energy, and the firm knows the implication of being found liable may be payment of billions of Dollars as damages aside from the likelihood of forfeiture of the intellectual property involved.
Fourthly, the location may also push up legal fees. This includes both the location of the firm and the location in which the legal service is required to be carried out. For example, the rent and transportation costs in Abuja is not the same as that in Sagamu, right? Therefore, it is reasonably expected that the legal fees in the former will be higher than that charged in the latter. Don’t be surprised if a Sagamu-based lawyer bills heavily for a legal service that is to be carried out in Abuja or even Lagos.
On a fifth note, the experience of the lawyer usually also determines the legal fees. A lawyer with over 30years of experience and a high level of expertise in some areas of law will most likely bill more than a lawyer that graduated from the Law School two years ago. This should not be strange to you. You can’t expect Prof. Yemi Osinbajo SAN to charge the same fee a “new wig” will charge! I could remember my Principal told me how excellent he is while they were in the University of Lagos and I heard from another source that he lectures the Law of Evidence(a course the prevents so many budding lawyers from obtaining the minimum 40% they need to graduate) offhand. All these and his experience as a former Attorney General of Lagos State will affect the legal fees he charges.
In conclusion, the amount charged by lawyers is a question that has been lingering in the mind of many with great curiosity especially when they’re thinking of hiring one. Note, however, there is no hard and fast rule to this. For example, the legal opinions on “MY LEGAL DIARY” are given free of charge because I have the conviction to do so. If I’m to provide such legal services to some of your foreign tech companies, for instance, I may have to charge over $10,000 for some.
On the question of how it can be reduced, the Rules of Professional Conduct for Legal Practitioners has been the friends of our clients by prescribing the maximum sum of 10% on the value of the case. I also noticed that personal relationship helps to reduce the financial burden of such legal services though it is not in your interest to obtain such services free of charge. Lastly, depending of the type or business of the company, retainership may also help to reduce the cost.
NB: This is strictly my view!

Warm regards,
Joseph Jagunmolu Ogunmodede

Joseph Ogunmodede
Founder, THE LEGAL DIARY
Joseph Jagunmolu Ogunmodede is a budding lawyer and founder of Nigerian-based innovative network known as THE LEGAL DIARY, an online platform for educating people on their legal rights and duties which is a unique idea that meets the pressing need for public enlightenment in Nigeria.
Since the evolution of THE LEGAL DIARY in January, 2017, he has consistently updated his audience with various legal stories and legal opinions posted on a weekly basis. He has also offered several pieces of advice and legal opinions to a number of clients both online and physically.
He was born in Ogun State, Nigeria, and holds Bachelor of Laws (LL.B) Degree from the prestigious University of Ibadan, Ibadan, Oyo State where he was awarded a First Class (Honours). He is currently an Intern at B. O. Ogunmodede & Co, Abeokuta, Ogun State.

One thought on “Why do Law Firms charge Tech Companies high fees?

Leave a Reply