Five years ago, and perhaps as little as three years ago, old-line clients of the historically patrician McCarthys stepping out onto the 49th floor could have been excused for thinking they were in the wrong building. Stripped of the sartorial habits of stereotypical lawyers, the dress code of the firm's New Economy Practice Group more closely resembles that of executives from a high-tech multi-media company. With not a necktie or suit jacket in sight, these lawyers bring their Palm Pilots, RIMs, Pocket PCs and other digital marvels to important client meetings as the badges of their trade, not to mention as also providing clear evidence of their cyber-savvy. This is the "here and now" of "where it's at". These are the digirati, the digital or e-commerce world's equivalent of what would otherwise be termed the cognoscenti.
"The New Economy floor is certainly the most underdressed floor in the firm," admits Barry B. Sookman, Chair of McCarthys' Internet and Electronic Commerce Group. Sookman along with George S. Takach, Toronto-based national head of the Technology Law Group, and Montreal-based Michel Racicot, Takach's counterpart in Quebec, spearhead the firm's e-business initiatives. McCarthys' aggressive gambit is emblematic of a fundamental business and attitudinal transformation sweeping the New Economy marketplace. So pervasive is the culture of e-commerce, says Clay Horner, head of the business law group at Osler, Hoskin & Harcourt LLP, that the US$34 billion Vivendi-Seagram merger, seen in large part as a technology and media/entertainment combination comparable to the AOL-Time Warner merger, was negotiated without a necktie or business suit worn by any of the participants, including senior executives from the merging companies, their lawyers and investment dealers. "Cool" is in, even for the "white shoe" law firms who acted on the transaction, which included Blake, Cassels & Graydon LLP as Canadian counsel to Vivendi, Cravath, Swaine & Moore as US counsel to Vivendi, Oslers as Canadian counsel to Seagram, Simpson Thacher & Bartlett as US counsel to Seagram, and Goodman Phillips & Vineberg as counsel to the Bronfman family. Preppy khakis, polo shirts and docksiders are the new uniform of the digirati.
But e-commerce has changed more than the look of isolated floors in law firms. It has fundamentally changed the practice of law. So much so, says Wendy Gross of the Technology Group at Torys, that "the shape of the Cadillac legal work product is no longer the same." On Bay Street, and its counterparts from Vancouver to Halifax, geek is in. Attesting to the geographically seamless nature of the New Economy, e-commerce lawyers across the country consistently emphasize that their approach is a new, more entrepreneurial, more risk-oriented, and more innovative way of practising law. The hallmarks consist of a loosening of internal firm hierarchies, the straight-talking, no fuss, no frills nature of e-commerce clients, the speed at which e-commerce deals move and the attendant professional risks inherent in such transactions, the importance of understanding the industry, and the changes to the professional and business mentality of law firms brought on by the importance of Internet-related businesses as clients, particularly issues relating to equity participation, billing practices and cash flow structure (on these three latter issues, see Equity In Clients: Jackpot Or Long Shot by John Alexander Black and Alan Gahtan in the April, 2000 issue of Lexpert).
The central importance of e-commerce as a major new practice area is a vindication for lawyers like Barry Reiter, who heads up the Technology Group at Torys, made up of twenty five lawyers in Toronto and a half dozen in New York practising technology and e-commerce law full time, with another twenty five lawyers spending one-third to one-half of their time in the field. "When I came to Torys eighteeen years ago, I did not want to do Series F preferred share deals," Reiter recalls. "Partly by accident and partly because of my entrepreneurial bent, I became involved with technology start-ups, learned about them, and got them financing when there was no venture capital community in this country. Those of us who did it are now regarded as prescient, but back then there was a certain amount of scepticism in the firm. We were prepared to take personal risks, because there were certainly less risky paths to success on Bay Street. But to Torys' credit, no one said I could not do it. One of the reasons the dot-com clients and people like me get along is that everyone will tell them and us why we'll fail, and we both had to believe in ourselves to be successful." In stark contrast to those wilderness years, Torys has had headhunters looking for qualified e-commerce lawyers for at least the past two years. "We'll hire as many good e-commerce people as we can find," Reiter explains. "It's as simple as that."
The market is in overdrive. According to Clay Horner, Oslers has targeted e-business as its "single biggest and most important strategic priority." Horner goes on to add that his firm has embarked on a recruiting program aimed at "building the same presence in e-commerce and technology that we have achieved in the tax and M&A practices, which are our biggest practices." To do that, Oslers has broadened its criteria. David McIntyre, a recent lateral recruit, is also the co-founder of BayStreetDirect.com, which sells IPOs and other new issues over the Internet and ranks eleventh on The Globe And Mail's list of Canada's hottest dot-coms. "One of the reasons Oslers was interested in me is because I am entrepreneurial, something which the firm has not focused on in the past," McIntyre observes.
Without exception, each of the law firms interviewed for this Cover Story has targeted e-commerce or e-business as a priority growth area. A fierce jockeying for position is taking place. As George Takach at McCarthys points out, high on the list of drivers for McCarthy's recent cross-border strategic alliance with Fried Frank Harris Shriver & Jacobson was the US firm's strong e-commerce practice, particularly in its Washington offices. "After all," Takach explains, "for Canadian companies to make it as e-commerce entities, 80 to 90 per cent of their business has to come from the US".
It was this gravitational pull of the US market which led information technology lawyers J. Fraser Mann and Alan M. Gahtan, formerly with Bennett Jones, to set up Mann & Gahtan LLP "in association" with Brown Raysman Millstein Felder & Steiner LLP, a 150-lawyer New York-based firm with acknowledged strengths in technology law. Mann enjoys an international reputation in the field. Last October, he was named Co-Chair of the Technology and E-Commerce Law Committee of the International Bar Association Section on Business Law. Further attesting to e-commerce's current influence on the strategic decisions of lawyers and law firms, Gregory G. Turnbull of the Calgary office of Gowling Lafleur Henderson LLP notes that Gowlings' strength in e-commerce and intellectual property was a prime factor in the predecessor Code Hunter firm's decision to merge with the larger firm. "Gowlings' nameplate opens a lot of high-tech and e-commerce doors around here," says Turnbull, a corporate finance lawyer who developed an e-commerce practice as many of his junior oil and gas clients migrated to the high-tech area.
Most of the top practitioners in the high-tech or e-commerce field are, as one would expect, with a number of well-known Toronto firms, with a select number of Ottawa and Montreal practitioners included in this exclusive group. This concentration of legal talent reflects the economic strength of the Toronto-Ottawa-Montreal triangle, anchored by Toronto, and the singular importance of the technology corridor which runs from Southwestern Ontario to the Ottawa Valley and into Montreal.
Yet the rise of the e-commerce lawyer is a nationwide phenomenon which draws in firms of all sizes across the country-provided, of course, they have the requisite talent. Indeed, by its very nature, e-commerce is the great leveller. The geographic location of law firms for e-commerce work is not as important as it is for other areas of practice. E-commerce breaks business free from geographic moorings. The Internet's low entry barriers give small, regionally-based companies a chance to reach as many clients as established global giants headquartered in Toronto, New York, Chicago, and elsewhere.
And the money markets have shown a new, opportunistic appetite in the New Economy. They go to the entrepreneurial, tech-savvy business talent whether it be in Toronto or Vancouver or Halifax. No better example exists than Vancouver-based 360networks Inc., the high-flying fibre-optic cable company which in April of this year completed one of the largest high-tech/telecom IPOs in Canadian history. The cross-border offering resulted in gross proceeds to 360 of over US$700 million with concurrent completed debt placements of US$600 million and euro 200 million. Counsel to 360networks was Vancouver-based Farris, Vaughan, Wills & Murphy with the corporate team led by Cameron Belsher. The underwriting syndicate was advised by Oslers in Toronto and Latham & Watkins in New York.
Within the e-commerce world the ubiquity of the Internet facilitates regionally-based clusters of entrepreneurial, tech-savvy business talent. Across Canada, ambitious lawyers have established successful technology and e-commerce practices which revolve around these clusters. The names are well-known. Martin Kratz in the Calgary office of Bennett Jones LLP (who practises in Toronto as well), John Ramsay, Q.C., at Macleod Dixon in Calgary, Cameron Belsher and Hector MacKay-Dunn at Farris, Vaughan in Vancouver, Robert Fashler at Davis & Company in Vancouver, David Carrick at Aikins, MacAulay & Thorvaldson in Winnipeg, and Rodney Burgar at Patterson Palmer Hunt Murphy in Halifax. Burgar's experience is illustrative. He has built an eleven lawyer technology and business law group over the past decade. "Until 1996," Burgar recalls, "at least 75 per cent of the information technology (IT) work, and almost all of the intellectual property (IP) work that is closely related to IT work, went to Toronto." That is no longer the case, certainly not for Patterson Palmer's IT clients, most of whom are private sector start-ups such as software developers and software houses who do outsourced IT work for institutions and companies as well as venture capital groups focusing on the new economy.
Also within the e-commerce world, the big firm vs. boutique battle, yet once again, is being fought out. Will a client get more "horsepower" from a major full-service firm than a specialist boutique? Recently, Blake, Cassels & Graydon LLP advised the Canadian Imperial Bank of Commerce (CIBC) in becoming Canada's preferred financial services affiliate for VeriSign, Inc., the leading provider of Internet-based trust services and digital certificates. "Horsepower" clearly played an important role. "Going to Blakes was important because we had very tight deadlines," says CIBC in-house legal counsel Linda Smith. "Blakes can devote a lot of resources on very short notice and it had the expertise we needed."
Yet it is hard to argue with the success of at least two boutique practices that are commonly regarded as major players. Amy-Lynne Williams and her partners at Toronto's 15-lawyer IP/IT boutique Deeth Williams Wall LLP and Paul LaBarge and his partners at 14-lawyer high-tech boutique LaBarge, Weinstein in Ottawa are clearly seen by competitors as important players in the e-commerce market. LaBarge, Weinstein's client list, which includes such heavy hitters as Jetform, Mosaid Technologies, GSI Lumonics, and JDS Fitel, reads like a high-tech who's who. Williams believes that small firms such as hers have significant advantages in acting for dot-com clients. "The major difference is that the turnaround time for dot-coms is 24 hours," she says. "There is no time for learning curves or for teaching juniors so that you can put four of them on a file-something most start-ups cannot afford."
No time for learning curves is a sine qua non of a successful e-commerce practice. Again and again the point is driven home, by clients and lawyers alike. Key to the VeriSign-CIBC affiliate transaction were digital certificates-a secure electronic verification method for both buyers and sellers in the e-commerce marketplace. As Blakes' lawyer Robert Wilkes recounts, "Our challenge was to create a structure for an effective contractual relationship between everyone involved-the bank, a business or individual giving out the certificate, and the so-called 'relying party' receiving it. Our technical understanding of the process was what enabled us to offer quick and practical advice. We knew what digital certificates were and how they worked. Rather than spending months trying to figure out what goes on behind the scenes or ignoring important technical elements, we quickly zeroed in on key areas." In other words, no learning curve.
The profound impact that the New Economy is having on the profession should come as no surprise. One only has to look to the US and, in particular, California. Silicon Valley is "ground zero". In an article entitled Radical Redesign in the July, 2000 issue of The American Lawyer, Susan Beck wrote that, "For the past few years, every significant change in the legal profession has come from a handful of firms in Silicon Valley." At the head of the New Economy pack are Palo Alto's Wilson Sonsini Goodrich & Rosati and San Francisco's Brobeck, Phleger & Harrison LLP. Brobeck hired 208 lawyers in the first four months of this year, growing at a breathtaking 40 per cent from 540 to 754 lawyers since the previous August. Nor did the growth hurt profits, not even temporarily. At Brobeck, profits per partner increased 44 per cent in 1999 to US$855,000. Wilson Sonsini was hard on Brobeck's heels with a 35 per cent increase, raising partners' income to US$835,000. By way of comparison, the largest rise among the top ten New York firms was Skadden, Arps, Slate, Meagher & Flom, where partners' incomes rose 16 per cent. And the numbers from the Silicon Valley firms do not include capital gains from client equity investments, a form of remuneration these firms have successfully institutionalized. Wilson Sonsini and Brobeck partners confirm they have made as much from equity investments in clients as from fee income, which pole vaults their overall profitability into the same ballpark as that of New York heavyweights such as Skadden, Arps and Davis Polk & Wardwell. What is driving this spectacular growth?
Worldwide statistics regarding e-business make it crystal clear why "no time for learning curves" is of the essence to e-commerce clients. The Computer Industry Almanac maintains that 490 million people have Internet access globally, with the number expected to grow to 750 million by 2005. Stuart Woodring at Forrester Research, Inc. estimates the size of the world's Internet economy at US$6.8 trillion by 2004, compared to $657 billion this year, $310 billion in 1999 and $80 billion in 1998. Woodring also maintains that the United States is moving into a seven-year period of e-commerce hypergrowth, 90 per cent of which will be business-to-business (B2B) activity, which embraces electronic transactions between companies and their vendors. And according to a recent PricewaterhouseCoopers survey, technology companies and Internet enterprises combined to receive 93 per cent of the record US$17.22 billion invested in American entrepreneurial ventures in the first quarter of this year. Fifty-eight per cent went to Internet enterprises, with forty-five per cent going to technology companies.
Canada ranks fourth in per capita Internet usage internationally, behind the United States, Japan and Britain, a statistic that improves considerably on the country's overall position in the global economy. And a British Trade and Industry Department report published in June ranks Canada and the US tied for first in "connectedness." In the business to consumer domain (B2C), Canadian online sales in 1999 exceeded $1.5 billion, increasing 422 per cent in two years. Indeed, the Internet is so pervasive that it is even forcing Statistics Canada to reconsider the way it operates the help wanted index, a key database surveying the want ad sections in 22 Canadian newspapers. The Bank of Canada has been using this index to measure economic performance and set interest rates. But, according to the National Post's Alan Toulin, outgoing Bank of Canada Governor Gordon Thiessen believes the newspaper index may be losing its relevancy as Internet job seeking grows exponentially.
From an industry perspective, Corporate Canada has gone digital, belying the mistaken notion that e-commerce is essentially about idea-rich, cash-poor start-ups, as well as a new class of clients like service providers, system operators, Internet portals, and domain name keepers. "We think of e-commerce first in relation to clients who have been part of our core business, doing transactions relating to the Internet," says Clay Horner at Oslers. "Second, we think of clients and potential clients providing services to users of Internet technology; the third group is people providing services to providers of Internet technology." New Economy business has "exploded" for Baker & McKenzie's seven-lawyer Toronto e-commerce group, says partner Theo Ling, even though the firm has made a decision to deal with dot-com start-ups on only "a limited basis" and concentrate its efforts on established clients.
"Established clients" are major drivers in the race for market dominance in the New Economy. In the vernacular of the digirati, these are the "bricks and mortar" companies migrating to "clicks and mortar". Canada's banks, for instance, were among the first online players in the country and TD Waterhouse is among the most successful online brokerages in the world. In July, the CIBC announced it was teaming with Yahoo! Inc. to offer person-to-person payment services over the Internet to Yahoo!'s customers in the United States. The Yahoo! Paydirect accounts will come under the auspices of the CIBC National Bank, one of the Amicus group of companies created by the CIBC to bring its Internet banking business together. CIBC already has arrangements with Loblaw Companies Ltd. to deliver President's Choice Financial in Canada, and similar contracts with Winn-Dixie and Safeway in the US. The bank has also teamed up with Business Depot and Staples to launch Bizsmart, an online, no-fee banking service for small business.
The auto industry is another example of how "established clients" are transforming the marketplace with e-commerce initiatives. Ford Canada unveiled its BuyerConnection program last May. BuyerConnection, and similar programs by the other car companies, allow consumers to access automakers' web sites to custom order vehicles, with enormous implications for suppliers, dealers, and in turn, the lawyers who act for these enterprises. At the technical heart of buy direct e-commerce are B2B exchanges, called aggregators, which electronically link multiple suppliers with multiple manufacturers along industry lines, allowing them to work with partners linked in real time over the Internet.
Forestindustry.com, a BC public company established in 1995, provides a vertical business community on the Internet featuring software and services linking the solid wood industry from "stump-to-end-user." Customers use Forestindustry.com's services to access advertising, communication, sales, procurement and information needs through the lumber mill supply chain. Now boasting a client list of 600 industry buyers and sellers in more than 20 countries, Forestindustry.com has grown 240 per cent annually while revenues have increased 200 per cent each year since the company's creation. On another side of the resource sector, Alcan Aluminum Ltd., Inco Ltd., Noranda Inc. and Barrick Gold Corp. have joined with ten of the world's largest mining and metals companies to create an Internet marketplace for buying and selling supplies. These fourteen giant corporations are expected to invest US$100 million in the web site venture, called MetalSpectrum.com.
Even the epitome of bricks and mortar, North America's real estate industry, has joined the e-commerce world. In June of this year, thirteen of the continent's largest commercial real estate firms, including Canadian companies such as TrizecHahn Corp., Brookfield Properties Corp., and Oxford Properties Group Inc., launched Office Technology Consortium LLP, an online procurement and leasing exchange designed to facilitate leasing and lower operating costs for landlords and tenants. And O&Y Properties Corp., which has an ownership interest in 8 million square feet of Canadian office property, has concluded an agreement with AT&T Canada and US-based Allied Ruiser Communications Corp. to provide high-speed broadband network services to its buildings. O&Y has also announced the launch of two real estate management software systems: Building Connect, a virtual property manager, and Client Connect, a real-time client reporting tool.
Governments are rushing to keep up. John Gregory, General Counsel with the Policy Branch at Ontario's Ministry of the Attorney General, has spent seven years "bringing the law along in a paperless world." The efforts of Gregory and his colleagues at the Uniform Law Conference have produced the Uniform Electronic Commerce Act, 1999 (UECA) and the Uniform Electronic Evidence Act. UECA is the model for e-commerce legislation introduced as Ontario's Electronic Commerce Act, known as Bill 88, and for similar legislation tabled in British Columbia and Manitoba. Saskatchewan's e-legislation, which also mirrors the UECA, is already in place. Meanwhile, Bill C-6, the federal government's privacy legislation pertaining to public sector institutions, will take effect on January 1, 2001. All of this new legislation, and especially the private sector privacy legislation expected by 2004, will almost certainly provide major legal work as e-commerce players test the parameters of their new marketplace.
Academic institutions are also rushing to keep up. The phenomenal growth of the e-commerce market has led Osgoode Hall Law School to introduce a two-year, part-time LL.M. program in e-business, commencing in 2001. The program's principal target constituency is practising lawyers. Barbara Tong, Assistant Director of the Professional Development Programme at Osgoode, notes that the program will be offered in Toronto, Ottawa, Montreal, Vancouver and Calgary. Courses introduce lawyers to e-commerce's underlying technology, e-property, e-regulation, and e-transactions. The program culminates with instruction in setting up dot-coms, including a study of corporate structures, financing, insurance, employee contracts, and IPOs as they relate to e-business. And the prospective faculty, which reads like a who's who of the e-commerce bar, includes George Takach of the Toronto office of McCarthy TÃ©trault, Robert Fashler of the Vancouver office of Davis & Company, Martin Kratz of the Calgary office of Bennett Jones, Richard Corley of Davies, Ward & Beck in Toronto, Edward Belobaba of Gowling Lafleur Henderson LLP in Toronto, and Alan Gahtan of Mann & Gahtan LLP also in Toronto.
The sheer breadth of Osgoode's program speaks to the professional challenges facing those who call themselves, or would like to call themselves, e-commerce or e-business lawyers. Quite apart from routinely bringing multinational jurisdictional headaches to proposed transactions, e-commerce also raises novel questions in IP, contract, and tort law. Further issues abound in privacy, copyright, meta-tagging, trademark infringement, data protection, general liability questions, online terms and conditions, customer contracts, consumer credit, as well as in outsourcing, service, web site content and software development agreements. And a recent study by Towers Perrin suggests that over the next few years e-commerce will bring huge changes to the business world, changing organizational structures and job descriptions and intensifying the need for legal advice in the employment law area. Finally, with Industry Minister John Manley stating publicly that Internet commerce should be taxed, the unexplored legal issues will undoubtedly keep tax lawyers and litigators busy for years.
All of this growth, and the promise of spectacular future growth, has generated record M&A and financing activity in the high-tech and e-commerce sector. Holland & Knight LLP, the fifth largest law firm in the US, and UK giants such as Clifford Chance and Allen & Overy, have set up "virtual deal rooms" enabling teams of lawyers, clients, accountants, investment bankers and other stakeholders to collaborate on deals using secure Internet-based web sites. Holland & Knight, in fact, plans to franchise its concept to other law firms and professionals. Not to be outdone, the Big Five accounting firms in Europe are also entering the market. In early August, following on the heels of Ernst & Young's "DealSpace" service, Andersen Legal announced the launch of its "Dealsight" virtual deal rooms. KLegal, KPMG's new law network is developing a similar capability, and Landwell, PricewaterhouseCooper's law network, offers deal sites through an outside service provider. Berwin Leighton, a major UK-based law firm, and Deloitte & Touche are investing almost Cdn$15 million in Be-Professional, a solicitor-accountant online joint venture that will provide online business solutions to small and medium-sized businesses.
Given the furious level of activity on the part of US and UK law firms, what is happening in Canada? How are firms positioning themselves to ride along with, as opposed to being ridden over by, the New Economy? And just what is an e-commerce lawyer? What are client expectations of e-commerce lawyers? What are the skill sets that these professionals must have? And finally, are they generalists or are they specialists-or both?
It is a new skill set, which combines general corporate practice talent with specialist IT or e-commerce knowledge. This contributes the general business savvy or value-added component that is so greatly appreciated by clients. There is a strong yet mobile industry focus. There is no room for learning curves. It is immediate. This is how the digirati describe themselves.
"These days, virtually every client is an e-commerce client," says Barry Sookman at McCarthys. In an economy moving at Internet speed, he adds, clients insist on lawyers "who have been there and done that, because they certainly do not have the time and many do not have the money to educate their lawyers." And this explains why many law firms are organizing their e-commerce departments along business lines, abandoning the traditional "practice area" departmental structure.
Hence, the new 31-lawyer Internet and Electronic Commerce Group at McCarthys chaired by Sookman. "Previously, there were lawyers in different groups dealing with clients who had e-commerce issues and frequently, there were ad hoc associations between these lawyers and lawyers who had been practising technology law for years," says Sookman. "But e-commerce clients have common problems and it has become very important to share the information that the different groups are acquiring. The e-commerce phenomena, it turns out, transcends all business lines." It is the same story everywhere. "When I started out doing e-commerce in the early nineties, I had a self-contained technology practice confined to one industry," says Thomas Smedinghoff, the Chicago-based coordinator of Baker & McKenzie's North American e-commerce practice. "Now e-commerce affects every area of the law and every industry out there, so it's a matter of adding an e-commerce overlay to lawyers in traditional legal areas."
In an economy where both old and new clients live and die by partnerships, strategic alliances and joint venture relationships, knowledge of the e-commerce industry and marketplace is a critical way in which lawyers can add value to their services. "When I joined Bennett Jones in 1991 with a mandate to build a technology practice, I discovered that the firm already had an industry focused practice mentality based on its energy practice," says Martin Kratz, whose background in electrical and mechanical engineering includes a strong suit in computer programming. "And I think of an e-commerce practice in a similar vein to the oil and gas practice because they are both risk embracing, capital intensive and transaction-oriented." Kratz's 32- member group focuses on intellectual property; biotechnology in the health industry; information communications and e-commerce technology law; and securities, financing, and M&A work for technology companies.
This twinning of legal expertise and industry savvy underlies the current debate as to whether the e-commerce lawyer is a generalist or a specialist. "The general commercial lawyer is back in demand," writes James Rossiter in The Rise Of The E-Lawyer in the March, 2000 issue of Commercial Lawyer, a major UK publication. Rossiter goes on to add: "Who would have thought so even two years ago? Specialization had killed him off in all but the smaller firms." Yet most e-commerce lawyers argue that they are specialists in an industry rather than, or in addition to, an area of law. "E-commerce lawyers need a different skill set than general commercial lawyers, because they must understand technology issues and have good industry knowledge," says Fraser Mann of Mann & Gahtan. A better way, then, of framing the issue may be to recognize that lawyers with a strong general business sense and experience are back in demand, regardless of their legal area of specialization. "I am a corporate commercial lawyer, specializing within a technology and e-commerce industry vertical," is how Duncan Card of Toronto's Davies, Ward & Beck describes himself. Card's experience includes work with Rogers and a host of telecommunication companies such as the Yahoo! Canadian franchise, the portal's first international franchising effort and Skulogix, a "Web agent for fashion" recently ranked seventh among Canada's hottest dot-coms.
Given the largely transactional nature of e-commerce business, it is not surprising that many of the leading e-commerce lawyers, like Sookman, Takach, Reiter, Card, Ian Kyer at Fasken Martineau DuMoulin LLP in Toronto, Richard Coleman at Oslers, and Richard Owens at Smith Lyons, have a commercial background, particularly in the information technology field. But e-commerce lawyers are as likely to come from corporate finance, M&A, and IP backgrounds. "Many of us are well-rounded corporate commercial lawyers with a transactional bent who have added this new medium to our range of expertise," says Rodney Burgar of Halifax's Patterson Palmer. But this may be an understatement of the impact of e-commerce on the practice of law. It is not a "bolt-on" to corporate practice. It is more pervasive than that.
According to Clay Horner at Oslers, "Mergers and acquisition work has totally changed over the last five years, so most of what we're doing in the area is Internet and telecom-related." Included on Oslers' e-commerce M&A representation list are such trophy mergers as Alcatel-Newbridge, JDS-Uniphase, BayNetworks-Nortel, and even Seagrams-Vivendi, which qualifies as e-commerce because it was driven by the same convergence of Internet communication and content service considerations as the AOL-Time Warner merger. Inevitably, the M&A lawyers doing the work are becoming e-commerce lawyers, as are the corporate finance lawyers at Oslers who worked on the 360networks and 724 Solutions Inc. transactions. "If, as an e-commerce lawyer, you see yourself only as a securities lawyer or an M&A lawyer, you'd have a big problem responding in a timely and cost-effective way to the range of issues on which you're asked for advice," explains Barry Reiter at Torys. Reiter regards himself as a generalist in the law, but specialized in the industry. "I know a lot about recurrent e-commerce issues," he explains, "I know something about a bunch of other issues, and I know the people in the firm who know a lot about those other issues."
George Takach at McCarthys has been on the front lines of technology law since the early 1980s, when he began practising what was then called "computer law" and is now commonly referred to as "technology law" or "information technology law." Takach has a commercially oriented practice that finds its origins in hardware and software licensing and development transactions. But Takach has "always had his feet in the corporate finance side of things." As a result, 30 per cent of his practice is what he calls "e-commerce commercial"; 40 per cent involves corporate finance work for e-commerce enterprises, either on the venture capital side or the entrepreneurial side; and 30 per cent is "traditional technology work."
Takach's background and experience fits well within the e-commerce environment. "E-business clients are working in a different environment than traditional business, because of the enormous pressure to complete projects and get on to the next one," says Sookman. "The days of deals going back and forth for three months is over, and lawyers have to adapt. They must know the right answer from experience with e-commerce deals, and rather than negotiating all day, must get straight to issues of fairness. It's a whole new skill set." Adds Takach: "An e-commerce deal is not the time or place for the full 25 point checklist. If you have four days to do the deal, a good e-commerce lawyer will know the three or four points on the checklist that matter to the client." Sookman has been practising computer law since 1986, and is the author of Sookman Computer Law: Acquiring and Protecting Information Technology, as well as the four-volume Electronic Commerce Law, works regarded by many as the "bibles" of IT law.
One finds the same "convergence" at Torys where Barry Reiter, Chair of the firm's technology group, blends his technology law background and practice with corporate development and finance skills. "I'm proactively involved with my clients across a range of technology sectors in implementing and developing strategies for growth," he explains. Reiter spends half his time with dot-com start-ups and the rest with established clients, like Rogers Communications, Thomson, Moore, and Sears, who are involved in, or are moving into, the e-commerce arena. Partner Wendy Gross, formerly with Rogers Communications in-house, provides corporate commercial and IP advice to Internet, e-commerce and new media companies. She provides advice on agreements that define "the e-commerce relationship", including technology contracting, strategic alliances, licensing, and development agreements.
The "e-commerce relationship" that Wendy Gross speaks of is no place for neophytes or traditionally risk-adverse lawyers. As she explains, the deals that characterize e-commerce transactions "are incredibly complex, but there's rarely enough time to think through all the ramifications and it's impossible to cover all the bases. Giving advice in an e-commerce deal almost always involves a real risk assessment, and you can't do that without knowing your client's business and industry very well." Clay Horner at Oslers agrees, pointing out that the Alcatel-Newbridge merger, in which Oslers acted for Newbridge, was effected in four days, and the Seagrams-Vivendi deal, in which the firm acted for Seagrams, in five days. "Nowadays, many clients are not looking for documentary perfection," Horner observes. "What they want is faithful reflection and the risks reflected in the documentation."
Richard Coleman, who founded the Technology Group at Oslers in 1982, is adamant that "the people who are effective at e-commerce are the ones who are commercially astute, understand the client's business and apply their specialty across a very broad spectrum of that business." In other words, the pressure is on the specialist to be more "commercial" in the sense of having a close understanding of e-clients' businesses-but the pressure is equally on the commercial "generalist" to understand the technology. "So the specialists are becoming more generalized in the sense that they're applying their knowledge to a wide range of business issues, and the generalists are becoming more specialized in the sense that they must learn the technology," Coleman explains. He goes on to add that "technology is so pervasive that it can no longer be a pure specialist area." Echoing Clay Horner's earlier comments, Coleman maintains that the key to e-commerce success for Oslers is raising the knowledge bar on technology across the firm's business law group. To that end, Oslers has embarked on a program of training associates in the early recognition and management of technology issues.
Again and again during the interviews conducted for this article, the theme of "convergence" emerged. "First and foremost, I am a business lawyer, and my clients are technology clients," says 34-year old Michael Fekete, a technology and e-commerce lawyer called to the Bar just seven years ago, but nevertheless the partner responsible for no less an Oslers' client than Microsoft. Ian Kyer at Fasken Martineau DuMoulin is of much the same mind: "I feel like I've gone from a technology specialty practice to a generalist." Kyer, who spent many years as a "pure technology" lawyer, now finds himself dealing with labour law, securities law, corporate law and IP law for his dot-com clients. "I end up dealing with a whole host of matters in addition to my specialized knowledge of the products in which my clients are dealing." The nine core members of Kyer's Information Technology Group focus on and serve the legal needs of information technology companies. "We see ourselves not as legal specialists in the way labour lawyers are, but as industry specialists or legal generalists serving the needs of that sector." In Montreal, Sunny Handa, a member of Kyer's group, makes the same point: "We hold the client's hand, know their business, understand what they're looking for and what they should be asking for."
While the rise of the e-commerce lawyer, as noted earlier, is a nationwide phenomenon, it is, as always, fascinating to watch the opening moves by the major firms for dominance in the bearpit that is the Toronto market. And, notwithstanding the turbo-charged atmosphere of the New Economy, it is important to remember that we are still in the top half of the first inning. The excitement which surrounds e-commerce is electrifying. The resources which major firms are prepared to devote to building their practices are breathtaking. And why not? It is the portal to the future.
At Blake Cassels & Graydon LLP, the E-Commerce Group embraces the firm's commercial, corporate, intellectual property, financial services, tax, litigation, and labour departments in what financial products specialist Martin Fingerhut calls "a multidisciplinary practice where the various specialties feed on each other's knowledge." Lawyers like Fingerhut, commercial lawyer Elizabeth Gearing, technology lawyer Rob Wilkes, and IP specialist Sheldon Burshtein have led the firm's charge into e-commerce. Blakes represented US-based 24/7 Media, Inc. in its acquisition of Click-Through Interactive; two investing partners in 724 Solutions Inc.; the lead underwriter on a $220 million dollar RIM offering; CIBC in its negotiation with VeriSign, Inc.; Open Text Corporation in respect of a $100 million corporate financing; Bell Canada in its joint venture with Lycos, Inc.; Interbrew in setting up beer.com; and recently won the beauty contest for the prestigious position as counsel to the Canadian Internet Registration Authority.
At Cassels Brock & Blackwell LLP, the Honourable David Peterson, Q.C., Chairman of the firm, has been emphasizing the importance of technology since his time as Premier of Ontario. Peterson was the moving force behind a provincial report on the future of technology in Ontario entitled Competing in the Global Economy. "We've put a tremendous amount of focus and energy into the e-commerce practice over the last few years," Peterson says with obvious pride. The E-Business Group includes senior securities lawyer Cameron Mingay and works closely with small to mid-cap entrepreneurial companies, who partner Lawrence Wilder calls "the RIMS and Ciscos of tomorrow." Representative clients are companies like e-commerce solutions provider Microform, Upstartcanada.com, which hosts "boot camps" for Internet entrepreneurs, OnX.com, and Groome Capital.com, Canada's first online investment bank. Cassels Brock was also involved in the initial financings of RIM and Promis Systems, a world leader in management software ultimately acquired by PRI Automation. "These companies are different from other clients because they need hands-on care," Wilder observes, "and we make it a point to be not only their legal advisers, but their partners and their eyes and ears in the industry."
Wilder describes his firm's approach to servicing e-commerce clients as a "SWAT team approach," where each client has a group of lawyers familiar with the industry who service all the client's needs. The approach certainly impressed Microform CEO Howard Pearl who speaks admiringly of the "street smarts" the firm brings to the table. According to Pearl, "Cassels Brock demonstrated beyond question that they understand the nuances of e-commerce above and beyond the norm. All the lawyers we interviewed understood the facts. Cassels Brock understood the flavour. They have helped our business grow and helped us avoid imprudent decisions."
Gowling Lafleur Henderson LLP, says David Pamenter, who calls himself a business lawyer with a technology background, has embarked on its e-commerce strategy "from a position of IP preeminence." In a Toronto pilot project, the firm moved a group of business lawyers from all corporate commercial disciplines "into the midst of IP practitioners and litigators" to create a 15-member e-commerce group. The experiment "produced a sense of common purpose while creating a technology client-friendly group of experts." Gowlings plans to roll out the model in other offices across Canada in the near future, and follow up with another pilot project aimed at "providing business advice that is broader than traditional legal advice."
At Lang Michener, where Alexandra Hoy has established a strong practice in telecommunications and e-commerce M&A work, David Young's 10-lawyer e-commerce group draws its lawyers from the firm's competition, marketing and distribution, technology, IP, corporate finance and M&A practices. Aird & Berlis models its 12-lawyer A+B/TECH group after an emergency room. Donald M. Cameron, who holds a Master's degree in aerospace engineering and focuses his IP practice on e-commerce clients, explains the approach as follows: "We have two or three people from the group do a work up on the client. Then we call in specialists from the group to answer the client's particular needs." Goodman Phillips & Vineberg has recently reached an exclusive arrangement with University of Ottawa law professor Michael Geist, an acknowledged authority in the field, to provide added e-commerce depth. "Right now, the e-commerce expertise is distributed among our communications, new media and corporate commercial practices, and our goal is to integrate the e-commerce lawyers more closely," Geist notes. "E-commerce is an area that encompasses so much."
From a client's perspective Howard Pearl, Chief Executive Officer of Microform, an e-commerce solution provider recently singled out by Canadian Business magazine as the fastest growing technology business in Canada, puts it this way: "Good e-commerce lawyers get it. What is "it"? It's the challenge of transforming a conservative business practice into the New Economy and dealing with the characters behind the business. E-commerce specialists understand the nuances of e-space and the e-environment, because any deal ultimately comes down to the nuances of the give and take process." "It" is something that appears to come naturally to the digirati. As Duncan Card at Davies, Ward & Beck explains, the e-commerce environment tends to be less adversarial than traditional business dealings: "E-commerce lawyers need to be focused in the knowledge that their clients will, in many cases, have to live with their strategic partners for ten years, a negotiating situation that's very different from buying and selling a business where the purchaser and vendor won't ever see each other again."
Being a business law firm in the New Economy demands a different style and organization. There is a cultural shift. "That's why Cassels Brock looks for young lawyers who are tech-savvy and comfortable dealing face- to-face with entrepreneurial clients," says Lawrence Wilder. "There's not a lot of room for back office people in e-commerce, so every lawyer has to be a front line person." Staying connected, as Wendy Gross at Torys explains, is essential: "I spend a great deal of time travelling around with my computer, my cell phone and my interactive pager to clients' premises. Lawyers are expected to be 100 per cent technically proficient and e-commerce clients expect virtually instant service and accessibility almost any time of day because transactions are increasingly negotiated over the Internet in real time." Microform CEO Howard Pearl doesn't mince words when he describes what he expects from his lawyers. "The solutions e-commerce provides remove the barriers of time, space, distance and even language between client and customers, so that's what we expect in our relationship with professionals too."
That these client expectations are unreasonably demanding, clamorous to the point of being shrill, is no surprise. It simply mirrors what is happening in the New Economy. As Gary Hamel and Jeff Sampler wrote in The E-Corporation, the Cover Story for the December, 1998 issue of Fortune magazine: "The Internet is not just another marketing channel; it's not just another advertising medium; it's not just a way to speed up transactions. The Internet is the foundation for a new industrial order...It's worth noting that (historically) each time the business model changed, a new group of leaders emerged. Woolworth's never really escaped Main Street. Sears, for the most part, remains stuck in the mall."
The Woolworth's and Sears (perhaps we should also say Eaton's) examples are applicable to law firms. Preppy khakis and polo shirts aside, this is a high-stakes contest with serious consequences for those firms that lose out. Practically every heavyweight full-service firm in Canada has publicly targeted e-commerce as a top priority. Who will win? Who knows? It's a new skill set. Yet among the digirati, many are of the view that some firms have already lost. As George Takach at McCarthys notes: "Some firms just don't get it. They're already too far behind to catch up. It's all about first-mover advantage and building critical mass and credibility quickly." An unkind cut? Perhaps. But the opening moves for dominance in this massive new practice area by the major firms in the Toronto market should be seen for what it is: the careful circling of scorpions.
Julius Melnitzer is a Toronto legal affairs writer.