UTBMS in New Orleans

I'll be talking about the Uniform Task-Based Management System's proposed I/P billing codes at the AIPLA Midwinter Meeting in New Orleans. Here are the writen materials for those of you who can't make it

Until the last decade, law firm billing was relatively straightforward. Firms billed their clients in greater or lesser detail, typically providing in-depth narrative descriptions of the tasks and processes underlying their hourly charges. When issuing bills and providing the underlying detail, each firm followed its own approach.

In recent years, however, clients have become more focused on requesting additional billing information from their outside law firms, or asking that billing data be presented in specific formats. In some instances companies have wanted to analyze their costs along various dimensions to provide benchmarks for the more systematic evaluation of legal costs. In others, there has been a desire to develop a database of costs on discrete legal activities. Along with these trends, the rise of electronic legal billing and data exchange has created a flood of new information.

In order to address these and other challenges, many consumers of legal services have began to move toward "task-based billing" systems where standardized codes are used to identify common tasks and activities performed by different service providers. These types of management information systems are well-known in project accounting circles where costs and revenues are allocated according work breakdown structures of deliverables and tasks that need to be performed in order to complete a project. Perhaps the most well-known of these task-based billing systems outside the legal serves profession is the Health Care Procedure Coding System established by the U.S. Health Care Financing Administration (HCFA) in 1978 for the billing of health care services under Medicare and Medicaid. By similarly requiring legal bills to be categorized according to a standard set of tasks and activities, rather than by matter and day of month, it was hoped that service providers and consumers could get a better handle on where those dollars were going.

The Uniform Task-Based Management System

This new approach led to a confusing proliferation of different task and activity descriptions, until, in 1995, a consortium of legal service providers and consumers created the Uniform Task-Based Management System ("UTBMS") with standard code sets for four areas of law: litigation, counseling, bankruptcy, and projects. Each of these four UTBMS "codes sets" includes a hierarchical list of alphanumeric codes and corresponding terms and definitions that describe the universe of legal work in a discrete area of legal practice or specialization. The first element in each code is a letter identifying the corresponding area of law - "L" for litigation, "C" for counseling, "B" for bankruptcy, and "P" for projects - or a general cost type - A for activity or E for expense - as discussed in more detail below.

At the highest level of the hierarchy are "phases" that occur largely in sequential order during the course of a case or matter. For example, in the UTBMS "L" litigation billing code set, includes the following the phases at the top of the hierarchy:

L100 Case Assessment, Development, and Administration
L200 Pre-Trial Pleadings and Motions
L300 Discovery
L400 Trial Preparation and Trial
L500 Appeal

Each phase consists of a number of "tasks" providing further detail under the phase level in the coding hierarchy. Tasks are intended to capture tangible work product produced or business results achieved so that, for each billing period, the time charges by attorney or other professional are recorded by task. The intent is to provide a true picture of the labor cost of each task.. For example, here are the task codes under the L300 discovery phase code above:

L310 Written Discovery
L320 Document Production
L330 Depositions
L340 Expert Discovery
L350 Discovery Motions
L360 Other Discovery

Each of the phase headings and tasks also includes short descriptions such as

L300 Discovery. Includes all work pertaining to discovery according to court or agency rules.

L310 Written Discovery. Developing, responding to, objecting to, and
negotiating interrogatories and requests to admit. Includes mandatory
meet-and-confer sessions. Also covers mandatory written disclosures as under Rule 26(a).

Also provided with the legacy UTBMS code sets are optional "activity" codes that are intended for use with all of the legal areas in order to describe how work is accomplished within a given task code. Activities codes represent the second field to be (optionally) recorded by timekeepers after a task code:

A101 Plan and prepare for
A102 Research
A103 Draft/revise
A104 Review/analyze
A105 Communicate (in firm)
A106 Communicate (with client)
A107 Communicate (other outside counsel)
A108 Communicate (other external)
A109 Appear for/attend
A110 Manage data/files
A111 Other

However, instead of (or in addition to) activity codes, many consumers of legal services allow there providers to provide the typical detailed descriptions services. In addition to phase, task, and (optional) activity codes, expense codes are also provided for recording out of pocket costs, sometimes referred to as "disbursements," such as witness fees and transcripts:

E101 Copying
E102 Outside printing
E103 Word processing
E104 Facsimile
E105 Telephone
E106 Online research
E107 Delivery services/messengers
E108 Postage
E109 Local travel
E110 Out-of-town travel
E111 Meals
E112 Court fees
E113 Subpoena fees
E114 Witness fees
E115 Deposition transcripts
E116 Trial transcripts
E117 Trial exhibits
E118 Litigation support vendors
E119 Experts
E120 Private investigators
E121 Arbitrators/mediators
E122 Local counsel
E123 Other professionals
E124 Other

According to an article in the February 2, 2004 issue of "Legal Times," a joint study by the Association of Corporate Counsel and Serengeti Law found that a mere 4.4 percent of the 266 companies that were surveyed required the use of uniform task-based codes in 2002. And, perhaps more troubling, about one-fourth of those companies admitted that they don't use the coded data at all.

So, what's stopping task-based billing for legal services? The April 2004 issue of "Corporate Counsel," describes the UTBMS code sets are so unwieldy that the resulting mass of information often becomes overwhelming. According to a July 2003 article in Lawnet, law firms have also found it unrealistic to expect lawyers to code each and every time entry with two codes. "Lawyers look at the codification of legal services, and they're appalled by it," said David Briscoe, of Altman Weil. "They say, 'There's no way I'm going to take the time to learn this, and, besides, what I do does not fit into the list of codes.'" Electronic legal billing software providers have also been overwhelmed with the sheer number and variety of billing code sets.

The Canadian UTBMS Initiative

In November 1986, a Canadian UTBMS project was instigated at the suggestion of the Insurance Corporation of British Columbia (ICBC). Their legal department saw the value of the UTBMS system that had been developed in the United States. However, the uniform codes developed for the U.S. are not directly applicable to the Canadian legal system due to minor differences in process and terminology. Recognizing the value of a uniform code set for the Canadian legal community, ICBC requested the assistance of The Conference Board of Canada in bringing together a broad coalition of law firms and corporate legal departments from across Canada to address this issue.

An intellectual property code set was developed by the Canadian consortium. However, the code set is quite detailed and uses a variety of terminology that is unique to the Canadian legal system that would be difficult to apply to large multinational legal service consumers.

The UTBMS Update Initiative

The UTBMS Update Initiative (at http://www.utbms.com) was formed in the Spring of 2005 in order to address these and other issues by updating and enhancing the current code sets. The Initiative adopted a three-prong approach focussing on: 1) code updates, 2) international and 3) intellectual property. Shortly after its formation, the Initiative's intellectual property committee collected proprietary billing code sets from various intellectual property legal services consumers and began the difficult process of distilling those materials into a generally-acceptable standard.

In April 2006, the Initiative's intellectual property committee completed its draft patent billing code set and draft trademark billing code set, and voted to join the LEDES^TM (Legal Electronic Data Exchange Standard) Oversight Committee. The Intellectual Property Task-Based Billing Codes Sets have now been laid-open for three months of public comments on May 26, 2006. Once all of the comments are in, the IP committee members hope to be able to publish final code set versions by January 2007.

The UTBMS Intellectual Property Code Sets

Due to the transactional nature of most copyright-oriented projects, the UTMBS IP committee members decided to focus on just patent and trademark billing codes for the time-being. Their proposed UTBMS Intellectual Property Code Sets are arranged in a manner similar to the existing code sets, with phase and task hierarchies. Both IP code sets also use the same (optional) Activity and (required) Expense codes, along with some additional expense codes that are unique to intellectual property. Since the "P" prefix was already in use for the existing Project codes, the proposed Patent codes have been tentatively designated with "M," while the proposed Trademark codes have been designated with "T." However, it has been suggested that the project codes set receives such little use that the "P" designator should be transferred to patents. It has also been suggested that the single-character alpha designators be replaced with multiple-character designators (such as "PAT" and "TM") if this change can be accommodated by existing electronic billing systems.

Here are the phase headings for each of the IP code sets:

Intellectual Property Task-Based Billing Phases

Patent Code Set	Trademark Code Set
M100 - Assessment, Development, and Administration	T100 - Assessment, Development, and Administration
M200 - Patent Investigation and Analysis	T200 - Trademark Investigation and Analysis
M300 - Domestic Patent Preparation	T300 - Domestic Trademark Preparation
M400 - Domestic Patent Prosecution	T400 - Domestic Trademark Prosecution and Renewal
M500 - Foreign Patent Preparation	T500 - Foreign Trademark Preparation,
M600 - Foreign Patent Prosecution	T600 - Foreign Trademark Prosecution and Renewal
M700 - Other Patent-Related Tasks	T700 - Other Trademark-Related Tasks

The M100 and T100 phase headings for patents and trademarks correspond to the L100 headings for litigation. However, the "Experts/Consultants" and "Settlement/Non-Binding ADR" were removed because it was felt by the committee that these items would be unlikely to occur during the assessment phase of an intellectual property matter.

Most client representatives on the committee also expressed a strong need to be able to easily separate their foreign domestic intellectual property costs. However, it was also agreed that the phase headings also needed to be internationalized in order to prevent the code sets from becoming country or region specific, like the Canadian intellectual property code sets mentioned above. The proposed scheme therefore distinguishes "domestic" and "foreign" phases.

It is expected that a client will identify for its intellectual property legal service providers which is the "domestic" jurisdiction. All matters outside that jurisdiction will then fall into the "foreign" phase headings. This arrangement allows cost centers in different countries of multinational consumers of legal services to separately identify how to differentiate among its domestic and foreign legal services billings.

For example, a German corporation with legal departments in the U.S. and Germany might choose to designate Germany as the domestic jurisdiction for legal service providers in all countries. This arrangement would allow the German corporation to easily compare matters where U.S. law firms that were managing foreign counsel in Germany against matters that were being handled directly by German firms. Alternatively, the same corporation might choose to identify the U.S. as the domestic jurisdiction for legal service providers in the U.S. which are managed by the legal department of its U.S. subsidiary, while Germany is identified as the domestic jurisdiction for all other legal service providers. For example, this latter arrangement might be chosen if the legal departments in the U.S. and Germany are essentially autonomous cost centers.

It was also generally agreed among the committee members that application preparation costs were significant enough to need to be separated from application prosecution costs.

Here are sample patent and trademark task identifiers for M300 and T300 involving patent and trademark "Domestic Application Preparation," respectively:

Intellectual Property Task-Based Billing Phase and Task Samples

M300 - Domestic Patent Preparation
M310 - Provisional Patent Application Preparation - Domestic	All actions associated with completing a provisional patent application that is to be filed in the ("domestic") home country or region of the applicant, including review of invention disclosure materials and prior art, interviews with the inventors, drafting and revision of application, preparation and execution of formal documentation (such as assignments, transmittals, and biological deposits), filing of application, and reporting to the client. Note that government fees and external expenses (or "disbursements" in the U.S.) are included under E100.
T300 - Domestic Application Preparation
T310 - Provisional Application Preparation and Filing - Domestic	All actions associated with completing a trademark or service mark application that is to be filed in the ("domestic") home country or region of the applicant, including obtaining the specimen of use from the client, scanning the specimen for electronic filing, discussion with the client to ascertain the dates of first use and first use in commerce, drafting and revision of the application, preparation and filing of the application by electronic or paper formats, and reporting the results to the client. This section includes all domestic trademark and service mark applications filed on the Principal or Supplemental Register. Note that government fees and external expenses (or "disbursements" in the U.S.) are included under E100.

It will be apparent from these examples that "reporting" letters to clients (such as for receipt of an Office Action or other official communication from a patent Office) have not been broken out separately from the tasks that are likely to be authorized by the client as a result receiving the reporting letter. Although service providers put varying degrees of effort into such initial tasks, the need for simplicity in the code sets was believed to overweigh the value of such minute breakdowns of billing information for clients. In fact, the task codes are numbered in groups of ten so as to allow clients to add additional codes for any such further breakdowns, and also allow additional codes to be added by the LEDES in the future to reflect significant changes in intellectual property procedures. In addition, each phase is also provided with an "X99" task code (where "X" is the phase series) that service providers can use for tasks not captured in the in the existing codes for the particular phase, and/or that clients can designate for any special task information that they would like to collect.

Several new expense codes have also been added to capture out-of-pocket expenses that are unique to the intellectual property fields. Those include

E125 Translations
E126 Drawings
E127 File History Copies
E128 Official Fees, excluding post-issuance fees in E129
E129 Official Fees paid after issuance
E130 Searching and Monitoring

Note that when searches, monitoring, drawing preparation, or other activities are completed by the law firm, rather than a third-party vendor, those activities are recorded under a task code, rather than an expense code.

The Intellectual Property subcommittee of the LEDES Oversight Committee is looking forward to receiving your comments on the proposed Intellectual Property Task-Based Billing codes. Please send your comments to Bill Heinze at BillHeinze@tkhr.com.

William F. Heinze*
Thomas, Kayden, Horstemeyer & Risley, L.L.P.
100 Galleria Parkway, N.W., Suite 1750
Atlanta, GA 30339-5948 (USA)

Tel.: (770) 738-2382
Fax: (770) 951-0933
Mobile: (404) 729-0729
E-Mail: BillHeinze@tkhr.com (business)
E-Mail: BillHeinze@yahoo.com (personal)
Profile: http://www.tkhr.com/Bill.Heinze

News Service: http://www.ip-updates.com/

*Admitted to practice in the Commonwealth of Virginia. Not admitted in Georgia.