By Reynolds Holding The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

LegalZoom’s planned initial public offering evokes a future beyond dying law firms. It’s coincidence that the U.S. self-help legal website’s $120 million filing has landed just as New York partnership Dewey & LeBoeuf is evaporating. But the rise of the online provider of legal documents sends old-line lawyers a sharp warning.

Founded a decade ago, LegalZoom is one of the first companies to file for an IPO under the newly loosened U.S. regulations for emerging enterprises. Its prospectus reports $156 million of revenue and $12.1 million of net income in 2011, after losses the two previous years. Document orders and subscriptions for legal advice have risen steadily, hitting 490,000 and 228,000, respectively, last year. Having served about 2 million customers, the company’s plan now is to attract more long-term subscribers and expand internationally.

Lawsuits, appropriately enough, pose a risk. LegalZoom has already been accused in several cases of unauthorized legal practice, though not of botching documents or services. While the cases have been settled, more are likely. LegalZoom almost certainly can’t be deemed to be practicing law when it supplies forms for customers to complete, and it offers legal advice only through an attorney network. But lawyers probably won’t give up suing to protect their turf.

That, however, is ultimately a losing strategy: Small businesses and individuals can often handle simple legal problems on their own. And when they need lawyers and basic documents LegalZoom can typically supply them cheaply. Other players with low overheads like Mindcrest and DirectLaw also offer creative ways to navigate legal issues, often through websites. All represent a challenge to traditional law firms that a rearguard action won’t defeat.

But it doesn’t need to be a fatal threat. Smaller traditional firms may thrive by beefing up services online while touting personal contact with clients, something the LegalZooms of the world can’t offer. Behemoths, meanwhile, can invest in cost-saving technology while stressing sophisticated lawyering. And the profession in general could take a lead from the UK and Australia and allow outside investors to inject financial heft.

It looks past the point of no return for Dewey, crushed by debt, a divisive culture and the greed of prima donna rainmakers. But plenty of work awaits surviving legal eagles – just not the ones who fear change and innovation.

By Reynolds Holding The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

An Oracle lawsuit is giving Google a golden opportunity to regain its non-evil image. The search giant has been thumped lately on privacy, antitrust and governance grounds. But it looks almost virtuous in a patent spat with Larry Ellison’s Oracle.

Since its 2004 initial public offering that came with a vow to make the world better, Google’s halo has toppled. The company has rattled privacy advocates. Infractions have included using customer data from Google+, YouTube and sister sites to inform internet searches, and tricking Apple’s Safari web browser on iPhones into overriding privacy settings – something the company reversed only after getting caught.

Corporate governance hasn’t been stellar either. Founders Larry Page and Sergey Brin and Chairman Eric Schmidt control 66 percent of shareholder votes with only a quarter of the stock, thanks to super-voting shares issued in the IPO. And the founders are proposing a third class of non-voting shares, ensuring their future dominance over minority investors. Meanwhile, antitrust troubles loom. Regulators seem bent on proving Google uses its roughly 65 percent market share in search to muscle out, say, YouTube’s competitors.

That’s why the Oracle case may be oddly welcome. The software behemoth claims Google infringed patents and copyrights by copying parts of Oracle’s Java software platform for the Android smartphone operating system. Google says it used only publicly available portions and created the rest.

Many legal experts doubt the material at issue – computer language connecting programs and operating systems – can even be copyrighted. But it’s particularly irksome to techies that Oracle acquired Java by buying Sun Microsystems which, in true Silicon Valley spirit, never objected to Android. To them, Oracle looks like a patent troll, acquiring legal rights just to sue.

In fairness to Oracle, jurors have already found copyright infringement, although it may have been narrow enough to be legal. Patent and damages issues also remain to be decided. But in a milieu that prefers open innovation to costly lawsuits, Google is looking like a hero by default, at least in this particular conflict. The company should enjoy the love while it lasts.

By Reynolds Holding The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

America’s murky bribery law is finally getting a dose of clarity. Morgan Stanley showed last month how to avoid legal charges for infractions by one of its executives, and an appeals court will soon define whose palm cannot be greased. That’s good news for multinationals sweating unpredictable enforcement of a confusing statute.

The problem isn’t the Foreign Corrupt Practices Act so much as how broadly prosecutors have been interpreting it. And with few companies willing to risk an indictment by testing that interpretation in court, it becomes the law by default.

The definition of “foreign officials” is Exhibit A. The FCPA says they’re employees of a foreign government or its “instrumentality” and can’t be bribed. While the Department of Justice insists “instrumentality” includes private companies owned in part by the state, accused bribers say only firms that perform government functions qualify. Legislative history supports the accused. But a federal judge sided with DoJ last year – until he tossed the case for prosecutorial misconduct.

A federal appeals court will soon weigh in for the first time, deciding whether to uphold the bribery convictions of U.S. telecommunications executives who paid employees of Haiti Teleco, partially owned by the National Bank of Haiti. The court’s ruling will be the most authoritative statement yet on what constitutes “foreign officials.”

Most companies, of course, try to dodge trouble before it happens, often by creating costly FCPA compliance programs. But prosecutors have never said what sort of programs might forestall charges. That changed last month, when DoJ and the Securities and Exchange Commission let Morgan Stanley off the hook for a managing director’s bribes because its anti-bribery policy was so strict and comprehensive. By listing the policy’s features, the watchdogs finally gave firms a blueprint for avoiding liability for the actions of a few bad apples.

But it shouldn’t be up to prosecutors to make the law. That’s Congress’ job. It still needs to amend the FCPA to define “foreign officials” more precisely and, like the UK and other countries, make top-notch compliance programs a defense to bribery charges. Unfortunately, legislation to that effect has stalled and is even less likely to pass since bribery allegations emerged against Wal-Mart in Mexico. Lawmakers say they don’t want to appear soft on bribery. They prefer, apparently, to look merely irresponsible.

By Reynolds Holding 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

U.S. judges can be plenty tough without getting personal. Few can send a chill up business spines faster than Delaware Chancellor Leo Strine. He honors a rich tradition of tart lectures from the state’s bench. But his recent scolding of sand and gravel firm Martin Marietta Materials and its spin doctors, though on target, sounded a bit catty.

Delaware Chancery is a court of equity, meaning its judgments are guided by fairness as much as law. That leads to long and fact-packed opinions that read like sermons. While Jed Rakoff, a New York federal judge, can – like others – be blunt and colorful, few match a Delaware judge in high dudgeon. Former Chancellor William Chandler, for instance, in 2005 described former Disney boss Michael Eisner as having “enthroned himself” as “monarch of his personal Magic Kingdom.”

But Strine has made a particular art lately of the judicial zinger. And while his rhetoric often delights lawyers and bankers – not to mention journalists – it’s sometimes a stretch. In a 2009 opinion involving a shareholder lawsuit against American International Group, for instance, he described the civil complaint as supporting “the assertion that AIG’s inner circle led a … criminal organization.” Some lawyers in the case said they believed the comments showed Strine was biased against AIG.

And then on May 4, the chancellor took Martin Marietta to the woodshed over its $5.3 billion hostile bid for larger rival Vulcan. Vulcan claimed that Martin had misused confidential information intended only to facilitate friendly merger talks. In a meticulous 139-page opinion, Strine dismantled Martin’s protestations of innocence. Among other nuggets, he wittily described the two companies as “rock stars” of the materials business.

The chancellor also called out Martin’s “flacks” for pushing the company to “spew” confidential data in regulatory filings. This seemed a reasonable general poke at public relations firms’ outsized influence in M&A deals, as well as a slap at lawyers for not controlling the disclosure. But it also had an overtone of unfair personalization, considering he named specific PR firms – Kekst and Joele Frank, Wilkinson Brimmer Katcher – which aren’t in a position to defend themselves. Strine’s words carry extraordinary weight, but used injudiciously they could leave his audience cold.

By Reynolds Holding 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Wall Street’s M&A spin doctors have taken a thumping on the record. Delaware Judge Leo Strine has called out two firms – Kekst and Joele Frank, Wilkinson Brimmer Katcher – for blabbing confidential information in Martin Marietta Material’s hostile $5.3 billion offer for rival Vulcan. The sand-and-gravel outfit will pay the price of a court order delaying the bid. But the general reputation of deal flacks won’t emerge unscathed.

When the companies began friendly talks two years ago, they agreed to keep each other’s information confidential unless disclosure was legally required. Martin then went hostile, becoming obligated to disclose under securities laws. But Vulcan claimed a breach of the secrecy pact, because, among other things, Martin had triggered those laws voluntarily.

The claim was no slam dunk. For starters, Vulcan hadn’t negotiated a prohibition on hostile offers, so why should it get one indirectly through the confidentiality contracts? What’s more, the documents said the information could be used for a “transaction” between the parties, and the hostile bid arguably qualified.

But Strine concluded that, whatever the documents said, the premise all along was that the two had contemplated a friendly merger with the strictest secrecy, and Martin was after the fact changing its tune merely as a litigation tactic.

At times, Strine’s analysis has a flavor of mind-reading, but it’s tough to dispute on at least one point: Martin had “larded” its regulatory disclosures with anti-Vulcan rhetoric that exceeded what even a generous reading of the agreements permitted. The primary culprits, suggested Strine, were the PR firms that had advised Martin to broadly criticize its target’s resistance. The “flacks” received internal Vulcan data and “blow-by-blow” accounts of negotiations, the judge said. And they had made decisions that should have been left to the lawyers.

By Reynolds Holding The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

All we are tweeting is give peace a chance. Twitter is going to allow its engineer-inventors to veto lawsuits against alleged infringers of patents they develop. That’s a model for curbing the kind of expensive legal salvos that Apple, Microsoft and others are lobbing just to slow each other down. If the rest of the technology world one day falls in line, innovation could benefit.

Apple and Samsung’s 20-lawsuit, 10-nation battle over smartphones and tablets may be the most prominent, but patent brawls have engulfed plenty of big-name tech firms, from Oracle to Google to Microsoft. In March, Yahoo sued Facebook over 10 web-advertising patents, the first major case involving social media.

The lawsuits have fueled a costly arms race, with Microsoft shelling out more than $1 million apiece for 800 patents bought from AOL earlier this month. Such acquisitions allow firms to launch infringement suits against competitors while countering legal ambushes with claims of their own. Promoting innovation, the supposed purpose of patents, has little to do with it.

The U.S. Congress tried to fix flaws in the patent system last September. But the law that passed didn’t address a major problem. Too many patents remain vague and overly broad, allowing holders to assert rights they were never meant to have.

Twitter’s plan might help. Its agreement with its innovative employees will permit the company to use patents to fend off infringement claims but prohibit it from acting as the legal aggressor without the inventor’s permission. An engineer’s veto would survive even if he or she leaves Twitter or the company transfers the patent.

In part, the plan is spin designed to lure top-notch engineers, who tend to prefer to let creativity bloom, and make Twitter’s customers feel good. And it’s relatively easy for a company that lacks a big patent arsenal to make such a move. But the idea will still pressure rivals to adopt similar policies, something Facebook and Foursquare say they will consider.

By Reynolds Holding The author is a Reuters Breakingviews columnist. The opinions expressed are his own. U.S. law school deans could do with a little Econ 101. Tuition at the likes of Yale and Stanford keeps rising faster than inflation, despite a dwindling supply of aspiring lawyers. And job prospects for graduates are getting worse. For all their sophisticated skills, legal educators still haven’t mastered the law of supply and demand.

The young often weather periods of high unemployment by flocking to graduate school. After the dot-com bubble burst in 2000, for instance, the number of law school applicants soared some 40 percent, reaching a peak of almost 99,000 in 2004. But in the recent downturn, applications to many professional schools have been about as scarce as jobs.

While MBA and other graduate programs show signs of renewed popularity, law schools are still suffering. Applicant numbers have tumbled to about 67,000 for the fall 2012 class, the lowest since 1987. And there are dozens more law schools today than 25 years ago.

Part of the problem is the high price of legal education. Tuition has quintupled at private law schools since 1985, averaging nearly $40,000 last year, according to the American Bar Association. Including living expenses, it costs over $230,000 for the three years required to earn a JD from Chicago’s Northwestern, the school’s website says.

That kind of bill leads to highly indebted young lawyers. Recent American University grads owe an average of about $151,000, and few are likely to be in position to pay it off soon. The national median salary for 2010 law graduates was $63,000, down 13 percent from the year before. Only about seven out of 10 have even secured jobs that require passing a bar exam.

The institutions are victims of their own success.  They began attracting hoards of students in the mid-1990s when firms were splashing out $160,000 annually to first year associates. All the new enrollees paid for more professors, higher salaries and spiffier classrooms.

But these higher learning programs are now stuck with unsupportable expenses. Some may close, while others will almost certainly have to cut costs and woo students with lower fees. It isn’t rocket science, but law schools seem quicker to understand torts than simple economics.

By Reynolds Holding

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

If Apple and a clutch of publishers plotted together, they didn’t need to. U.S. trustbusters say the iPad maker and five electronic book producers conspired to raise download prices. But the model they came up with makes sense even without collusion, giving the publishers perhaps their best chance of survival.

The book business has changed radically in recent years. The old model of selling wholesale and letting retailers set prices worked fine in the world of printed books and bricks-and-mortar stores. But the arrival of digital tomes allowed Amazon, for one, to slice prices to $9.99 per e-book, providing relatively cheap content that helped make its Kindle e-reader gadgets popular. Prices like that ate into publishers’ profit margins.

Apple came up with a better deal. Before introducing the iPad in 2010, it proposed a so-called agency model, in which publishers would set the retail price for books while Apple took a 30 percent cut. The plan also required publishers not to sell their titles cheaper to anyone else. As with its music sales through iTunes, Apple acts as a sales agent, with no power to discount prices.

The scheme seems to be working for publishers, retailers and even consumers – with the possible exception of Amazon, whose dominance in the e-book market has ebbed.

And there’s nothing illegal about the agency model per se. But the Justice Department says Apple and the publishers colluded to raise the price of e-books, costing consumers tens of millions of dollars. The regulator cites private meetings of the publishers’ chief executives at Manhattan restaurants and says the companies entered into essentially identical agreements with Apple over the course of three days in January 2010.

By Reynolds Holding 

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Donald Verrilli may have had a Billy Martin moment. Despite the U.S. solicitor general’s stumbling effort defending President Barack Obama’s healthcare law before the Supreme Court this week, the White House gave him a vote of confidence. That’s what Martin, the volatile New York Yankees manager, used to get just before he was fired. Verrilli’s miss may not change the case’s outcome, but it costs him credibility – if not his job.

The greatest legal vulnerability in Obama’s signature reform is its mandate that all Americans buy health insurance. If that’s constitutional, say critics, then Congress can make people buy virtually anything. To satisfy the top U.S. court’s conservative justices, Verrilli had to explain how the law still respects limits on Congress’ power.

For starters, he could have said Congress can’t regulate strictly local affairs that don’t involve commerce. But it can stop people from gaming a valid nationwide system by, for instance, buying insurance only when they’re sick. Instead, Verrilli rambled on about everyone eventually needing healthcare and the mandate making insurance affordable. The conservatives weren’t impressed, even after their liberal colleagues came to the lawyer’s aid.

It may not matter, because the justices often make up their minds before oral argument. But they do respect the solicitor general’s positions more than most, and Verrilli’s failure to offer persuasive answers may have undermined his credibility with the court. He may even doubt it himself. “Lucky me,” he said, after Chief Justice John Roberts told him on Wednesday that he had 15 minutes more to argue.

The White House probably hasn’t helped matters. Expressions of confidence can be anything but. George Steinbrenner, the legendary Yankees owner, expressed “complete confidence” in Martin before firing him – for the third of five times – in 1983. And 1972 Democratic presidential candidate George McGovern said he backed his running mate, Thomas Eagleton, “1,000 percent” before dumping him.