Mike Dillon: Excellence in New Communications award mention

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© 2008 The Daily Journal Corporation.
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September 26, 2008

OPENING UP ON OPEN SOURCE

Sun Microsystems' GC Talks Law Firm Models - and Software

Exactly 20 years after launching from Santa Clara Law School into Silicon Valley's law firm scene, Michael A. Dillon became general counsel of tech titan Sun Microsystems Inc. In his early years in the Valley, Dillon sampled civil litigation, corporate work and intellectual property law. But in 1993, upon joining Sun as corporate counsel in its microprocessor arm, he discovered that in-house work was his calling. Dillon left Sun between 1999 and 2002 to be general counsel of fiber-optics company ONI Systems Inc., which soon went public. Networking specialist Ciena Corp. bought ONI in 2002, and Dillon hopped back over to Sun as vice president of legal support for technology and engineering. By 2004 he was general counsel, a position he says comprises "the most fun, enriching, enjoyable things I've ever done in my life." Daily Journal staff writer Jill Redhage met Dillon at Sun's sprawling, college-like campus in Santa Clara to learn his views on company blogging, financial disclosure regulations and what's wrong with the traditional law firm model. Here's an edited version of what he had to say:

DJ: Where did your interest in technology begin?

Dillon: I think I've always had a little bit of the frustrated inventor in me. Growing up, I used to love reading books about Edison and Tesla and other famous inventors. Yet, to be candid, I probably didn't have the discipline, or affection for mathematics, to become a true engineer. So, being associated with a technology company where there's a lot of innovation feels right to me, despite my lack of engineering experience.

DJ: The Association of Corporate Counsel's Value Challenge, an initiative to reconnect costs and value in the legal industry, launches this month. You're on the ACC's board of directors and the steering committee for the challenge. What are some of the ideas that may come out of these discussions and eventually be implemented?

Dillon: Part of the purpose of this challenge is to help create a situation in which the in-house professionals and the law firm professionals get together and talk about what are the new models going forward. A lot of those models are based on the accessibility of information via the Internet. With the advent of the Internet and all the professional networking that's happening, it gets much easier to identify the talent that you need for specific projects without going to a law firm. One of the things you'll hear from in-house professionals all the time is 'I don't hire a firm, I hire a lawyer.' Now, if you can find the lawyer without having to go through the firm, the model changes radically. I personally believe that over time, and in a not-too-distant time, in-house legal departments are going to be having greater connectivity and sharing of information and networking through tools and also through associations like the ACC. We're just going to start sharing information about those individual attorneys, which is going to create a real paradigm shift in the legal environment.

DJ: How will our traditional views about law firms change?

Dillon: The inherent disconnect is that we are part of a business. We have to be maniacally focused on efficiency. Law firms don't necessarily have to do that. They can just increase billable hours - the number or the fees - to keep their profit levels up. So that's the mismatch. Over time the law firms that are responsive to the needs of in-house counsel will get more and more business. In order to be responsive, they're going to have to look at alternative fee structures [and] outsourcing some of the work either to lower cost areas in the United States or outside the U.S. They're going to have to look at working more effectively with peer law firms that have other specialties. It can manifest itself in a variety of ways.

DJ: That idea of going to less expensive legal markets, or using small-to-midsize firms - is that something that you all have already done?

Dillon: As I told my team, it's a journey, not a destination. One of the things is that in the [United States] four or five years ago, we used 400 different law firms. Over the last few years, we've become much more disciplined on the firms we use and how we engage with those firms, and so the number of firms that we use has gotten smaller. That allows us to manage the relationship more effectively.

As part of this, we continue to look at those firms, and then we look at other firms. One of the things we're looking at now is, 'Should we look at alternative law resourcing models?' For example, given a department our size, we have any number of people who are out on maternity or paternity leave for months at a time. You don't necessarily need to go to a law firm to have somebody; you have a variety of legal vendors, like Axiom or Virtual Law Partners, that you can employ to fill that need. I think you're going to see a tiering of outside legal services that we use to fulfill the needs of our company.

My belief is that in the future you're going to have some really massive international law firms, and then everything else is going to be more niche - specialized.

DJ: You've made the point that the legal media can play a role in re-shifting the focus of the legal industry from profits-per-partner to the value lawyers provide their clients. What metrics should be the focus and why?

Dillon: There's a variety. I come back to being a businessperson at a Fortune 200 company. We publicly expose our internal financials to the world every three months. We're incredibly transparent and open about these things because investors need to understand whether we're a good investment, what the future of the company holds, whether we're investing in research and development - all of these things. There's none of that with law firms. With law firms, the only thing that's reported is profits-per-partner. That creates this competition among the law firms saying, 'We've got to get to the top of that list. OK - we're going to have to charge more fees.' And they need that, because that is one of the attractors of talent. Because [people say], 'I want to go work for that firm. Their partners make the most money.'

What would be more productive is if we had greater transparency into how efficient they are as law firms. What's their overhead structure? How much turnover do they have? What are their operating costs as far as attorneys? How do those compare to each other? Once you start having those sorts of measurements to efficiency, and you have the ability to compare firms against one another, then the firms will pay more attention to those areas, which will help create a healthier relationship with the customers - meaning, in-house legal departments.

Something I talked about with my ACC directors - I believe organizations like us, which have a collective weight in the industry, should be doing more to leverage our organizations to try to require that that information be provided.

DJ: Sun supports open-source development of technology. What are some of the legal challenges that accompany Sun's support of open-source development?

Dillon: The premise behind open source is that you make your products and technology widely available for free and that creates greater adoption. And when you have greater adoption, there is a greater affinity between those technologies and software and your company. So, your company has additional opportunities, whether it's to sell optimized hardware or support services or education or a variety of other things.

What we've been doing at Sun over the last five years is open sourcing everything. In fact, we now describe ourselves as an open systems company, because, for example, we have a whole line of products coming out that is a combination of software and storage together, and it's all open. All of the intellectual property is accessible and disclosed publicly. For a legal department, it has been one of the most intellectually stimulating and thrilling things you could ever go through.

Solaris is a great example. Our operating system had been around for 20-plus years, and it's got third-party code in it, and largely Sun-developed code. We had to go through a very intensive process of reviewing all that code and using tools that we created to ensure that we have the rights that we need to open-source the technology. Then you have a lot of legal input and participation in [deciding] what type of licensing model [to use]. There are a variety of licensing models in the open-source world, and they all have different benefits and different restrictions. You try to find the right licensing model that matches what your clients' business goals and focus are. It's a very nuanced type of legal work.

[We also look at] how you brand your open-source products and create a community - you can't just throw the technology over the fence to the world and say, 'Have fun.' A great example is we acquired a company earlier this year called My SQL. It's a database software company. It's incredibly successful People are downloading that product all over the world in just about every environment - corporate, government, education - and it's got a huge affinity and a very strong, vibrant community. Making sure that your lawyers understand how to help the business people create that is a large role that we play and a big benefit that we provide to the company.

One of the things I'm really proud of is I'd say that five or six years ago, when I came back to Sun, we had two or three attorneys that were very, very focused on and had an in-depth grasp on open-source technology. Now I would say probably half of all of our attorneys, including some that aren't in the IP space, teach at or give presentations at business conferences on open-source things. We have an open-source certification program, so our lawyers have different degrees, like a bachelor's or master's degree in open source technology. That's what we are as a company now, and our lawyers have to understand it to be successful here.

DJ: What do you do when you're not at Sun?

Dillon: I have three children, who keep me very busy, and are all in their teenage years. I love outdoor activities. I like to kayak. I like to mountain bike and road-ride and garden. I love to travel. I love to read.

DJ: And you have some time to do these things?

Dillon: Yeah. One of the interesting things about working here, and one of the reasons that our employees have such a strong affinity for the company, is that it's a very different culture here. It's a culture that's very team-oriented, very consensus-oriented. It's not a top-down, hierarchical culture on the legal or business side. As a consequence of that, we trust our employees to a very high degree. How that manifests itself is, for example, that I don't have an office. I keep my things online and in a briefcase. I haven't had an office in three years. Half of my employees in the legal department don't have offices - they either work from home or they work mobile, dropping in. Employees don't work 8-to-8; work and your life just sort of blend seamlessly. I'm at the car wash on a Sunday - I'm using my Treo to send messages to people in Singapore. But it doesn't feel intrusive.

Seven or eight years ago, I used to hate Sunday nights, because I knew on Monday morning there would be a tsunami of stress coming my way, and I didn't know what it was going to be. I never have that anymore.