Wilson Sonsini Goodrich & Rosati
Wilson Sonsini Goodrich & Rosati
Founded: 1961 as McCloskey, Wilson ’ Mosher
Sales: $215 million (1998 est.)
NAIC: 54111 Offices of Lawyers
Best known as a full-service law firm that serves mainly high-technology and biotechnology companies, Wilson Sonsini Goodrich & Rosati provides counsel to more than 300 public and 3,000 private companies. Its lawyers represent firms such as Apple Computer, Hewlett-Packard, VA Linux Systems, Novell, Netscape Communications, and Micron Technology. Wilson Sonsini also serves investment banks and venture capital firms that financially support both technology and other clients. Based in the heart of Silicon Valley with a satellite office in San Francisco, the law firm also operates offices in Austin, Texas; McClean, Virginia; and Kirkland, Washington, to serve companies in those regional high-tech centers. Although a young firm compared with many Wall Street law firms, Wilson Sonsini numbers among the leaders in securities, litigation, mergers and acquisitions, intellectual property, and other practice areas of modern corporate law. Probably its most important contribution is serving computer, Internet, and biotechnology firms that are creating the so-called “new economy” in the Information Age or postindustrial society.
Origins and Early Practice
With the advent of the first mainframe computers, American society soon after World War II began to enter the Information Age in which knowledge was the basic commodity, instead of raw materials that fueled the Industrial Revolution. Thus it was in the early stages of what futurist Alvin Toffler called The Third Wave that a new law firm originated. Wilson Sonsini Goodrich & Rosati began in Palo Alto, California, when three attorneys formed a predecessor firm.
After graduating from Princeton and Yale Law School, John Arnot Wilson worked for Cleveland’s Thompson, Hine and Flory and the Atomic Energy Commission before deciding to move to California. In 1957 he established a solo practice in 1957 in Redwood City, but then in 1960 he moved to nearby Palo Alto where he shared office space with two other lawyers, Paul McCloskey and Roger Mosher. The three in 1961 created the partnership of McCloskey, Wilson and Mosher to serve such early clients as Tymshare, ESL, ONC Motor Freight, Coherent Laser, and the town of Woodside. They also served Hiller Helicopters, where Wilson earlier had worked as its inhouse counsel.
In 1966 the firm hired Larry W. Sonsini, its first associate and a new graduate of the Boalt Hall School of Law, University of California, Berkeley. “The cultural background of Silicon Valley was embryonic when we started here,” recalled Sonsini in the August 25, 1997 Forbes. “There weren’t a lot of old-line businesses and old-line service support companies like law or accounting firms, banks, or investment banks. We started with a very fresh slate. Consequently, the valley was able to mold itself in such a way as to be responsive to entrepreneurism, growth, and achievement.”
At first the law firm had a few high-tech clients who often used prominent San Francisco law firms. Still, the firm’s location near Stanford University positioned it to represent companies formed from research conducted there. By 1966 the early partnership had established ties with some key players in the new venture capital field, including Laurance Rockefeller, Davis and Rock, and Draper, Gaither and Anderson, that provided vital private funding for several of the law firm’s startup clients.
The small partnership in 1968 completed its first IPO for Wilson’s client Behavioral Research Laboratories. Wilson turned that project over to Sonsini, who became the firm’s expert on securities.
In 1969 the partnership created WM Investment Company to take advantage of stock options that some of its startup clients offered instead of cash for payment of services. Other law firms eventually adopted this pioneering practice as a way to invest in their clients’ long-range success.
The 1970s and 1980s
In the 1970s the law firm gained new partners and a new name. John B. Goodrich had earned a J.D. from the University of Southern California in 1966 and an LL.M. in taxation from New York University in 1970 before joining the firm and starting its Tax Department in 1970. In 1971 Mario M. Rosati, a graduate of the Boalt Hall Law School, University of California, Berkeley, was recruited to build the Trust and Estates Practice. After McCloskey left to enter politics, in 1973 the firm changed its name to Wilson, Mosher ’ Sonsini. Roger Mosher’s departure to start his own firm in 1978 led to another name change, Wilson Sonsini Goodrich & Rosati.
The renamed firm in 1980 provided legal counsel to Apple Computer when it went public, which really disappointed Wilson Sonsini’s rival Fenwick & West, also based in Palo Alto, which had helped Apple incorporate in 1976. Since that time, both law firms continued to represent Apple, the firm that started the personal computer revolution.
Wilson Sonsini had grown to 32 lawyers by 1981 and by 1984 had gained experience in the first two phases of its business plan, namely serving new firms through the first stage of startup financing and second-stage work such as IPOs, other securities work, intellectual property issues, taxation, employment, environmental issues, and real estate.
In 1984 the firm entered the third stage of providing mature technology firms with counsel concerning mergers and acquisitions when Larry Sonsini represented ROLM Corporation in its $1.8 billion acquisition by IBM. The law firm had helped ROLM get started in 1969 and had handled its IPO in 1975.
The ROLM transaction helped the firm realize that it needed more manpower if it were to provide a full range of legal services. By 1986 it expanded to 97 lawyers, sometimes by lateral hiring of mature attorneys from rival law firms. Historically a rare event, such raiding of other firms for top talent began to be a major trend in the late 1970s and early 1980s after the National Law Journal and the American Lawyer began publishing articles about law firm internal finances and partner compensation. The general transformation of big law firms to become more business oriented also was influenced by the U.S. Supreme Court ruling that it was unconstitutional to restrict professional advertising.
In the late 1980s Wilson Sonsini gained new opportunities to serve its clients when high-tech firms began being sued by angry stockholders upset over stock declines. These class action lawsuits proliferated in the 1990s when some individuals became known as “professional plaintiffs” because they sued literally dozens of companies.
Practice in the 1990s
By the 1990s Wilson Sonsini represented so many technology firms that it sometimes ended up serving one client in a transaction with another client. Several observers questioned the conflicts of interest in such relationships. Clients seldom complained, however. For example, in 1995 Wilson Sonsini represented its client Seagate when it acquired Conner Peripherals, another client. CEO Finis Conner signed a conflict-of-interest waiver and said in the August 3, 1998 Fortune, “Having him [Larry Sonsini] in the deal was okay with me because I felt he would add to it. He is very sensible about things. It all went extremely well.”
Wilson Sonsini continued to help venture capitalists and new business owners get together in the 1990s. It represented venture capital firms like Morgan Stanley Venture Partners, Mayfield Fund, Norwest Venture Capital, and U.S. Venture Partners. Name partner Mario Rosati estimated that he represented about 25 percent of the entrepreneurs who sought his assistance to gain financing from such firms. Wilson Sonsini also helped the National Venture Capital Association work with Congress in 1998 to pass the Internal Revenue Service Reorganization Bill (HR 2676), which clarified some wording in the federal tax code.
Meanwhile, the law firm’s stock investments in its clients proved lucrative. For example, in 1998 the firm estimated that it had made $25 million in those investments over the past ten years. The bull market of much of the 1990s proved a real boon to the firm, but the downturn in 2000 hurt some investors.
Wilson Sonsini usually limited its investment in any single firm to $25,000 to $50,000. “We intentionally keep ownership small to avoid any appearance that our equity participation may affect our legal advice or our legal judgment,” said Rosati in the October 1, 1999 Venture Capital Journal. Some critics, however, argued that any investment, no matter how small, hurt lawyer-client relationships.
With the healthcare and biotechnology industries expanding, Wilson Sonsini represented several life science firms in the 1990s, including Abgenix, ArthroCare, Cardiac Pathways Corporation, Cell Genesys, and Vi vus. Nontechnology clients included The Home Depot, U.S. Office Product Company, and Monaco Coach Corporation.
Our mission is to be a strategic business partner with each of our clients by leveraging our expertise and experience to provide innovative, responsive, and cost-effective legal solutions. We understand that the law is a means to accomplish our clients’ business objectives, not an end in itself. Our clients are business people, principally in the technology sector, and the challenges they face must be seen first and foremost as business challenges.
For years Larry Sonsini, as the chairman of the law firm, resisted opening new branch offices. He thought that national and even international practice could be conducted from the firm’s home in Palo Alto. Rival firms meanwhile were establishing branch offices in various cities, and some attorneys thought that Wilson Sonsini was wrong not to do likewise. In any case, in 1999 Wilson Sonsini opened its Austin, Texas office. In December 1999 the firm announced the opening of a northern Virginia office, effective early 2000. Chairman Larry Sonsini said, “Northern Virginia is our first foothold on the East Coast,” in a press release of December 8, 1999, but that the firm also was looking at other East Coast options, including a branch New York City office. The firm’s East Coast presence served several Mid-Atlantic clients, including BAAN, GenVec, Rudolph Technologies, and WomenCONNECT.com.
In 2000 Americans heard the big news that the courts had declared Microsoft an illegal monopoly, but many may not have realized that a Wilson Sonsini partner had played a key role in that decision. “Star litigator Gary Reback is Enemy No. 1 at Microsoft,” declared Fortune on August 3, 1998. For years Reback had argued that Microsoft’s linking its Internet Explorer to its Windows operating system and penalizing computer manufacturers who tried to offer other Internet browsers was illegal and stifled technological innovation. Representing such Microsoft rivals as Netscape and assisting the U.S. Justice Department in its lawsuit against Microsoft, Reback and other attorneys won at least the early rounds of this ongoing dispute that some have compared to the breakup of Standard Oil in the early 20th century.
Wilson Sonsini ranked as the 46th largest U.S. law firm based on its 1998 gross revenues of $215 million, up from 1997 when it was number 46 with $174 million in gross revenues. The firm’s partners in 1998 received average compensation of $620,000, ranked number 34 by the American Lawyer in July 1999. Although more law firms represented high-tech firms in 2000 and several large New York law firms had established California branch offices to serve such clients, it seemed that Wilson Sonsini was well prepared to continue to be a major player helping Information Age clients.
Principal Operating Units
Corporate and Securities; Employee Benefits; Employment Law; Intellectual Property; Litigation; Real Estate/Environmental; Tax; Venture/Investment Funds; Wealth Management.
Fen wick & West LLP; Cooley Godward.
- McCloskey, Wilson & Mosher is founded in Palo Alto, California.
- Firm creates WM Investment Company to invest in clients’ companies.
- The firm’s Tax Department is started.
- A Trust and Estates Department is formed.
- The firm is renamed Wilson Sonsini Goodrich & Rosati.
- A real estate practice is started.
- An environmental practice is created.
- The firm starts its Life Sciences Group and organizes its WSGR Foundation.
- The firm opens its first branch office, located in Kirkland, Washington.
- Offices are started in Austin and San Francisco; Venture/Investment Fund Group is created.
Allbritton, Chris, “Silicon Valley’s Man with a Mission Faces Off Against Microsoft …,” Los Angeles Times, May 10, 1998, p. 2.
Baum, Geoff, “Accountant, Lawyer, Banker, Flack,” Forbes, August 25, 1997, pp. 99-100.
Brandt, Richard L., “Interview: Gary Reback,” Upside, February 1998, pp. 92-94 +.
Davies, Erin, “Silicon Valley Law,” Fortune, August 3, 1998, pp. 219-20, 222.
Fineberg, Seth A., “Congress Approves Revised Rollover Law,” Venture Capital Journal, August 1, 1998, p. 1.
Fryer, Bronwyn, “The Firm,” Gentry, July 1998, pp. 71-75.
Home, William W., “A Maverick Matures,” American Lawyer, September 1996.
The Making of Silicon Valley: A One Hundred Year Renaissance, Silicon Valley Historical Association, 1995, p. 43.
Neidorf, Shawn, “Silicon Valley Lawyers Embrace VC-Like Role,” Venture Capital Journal, October 1, 1999, pp. 35-37.
“Silicon Valley: How It Really Works,” Business Week, August 18-25, 1997, pp. 66-78.
Stevens, Amy, “Fee-for-All: Savvy Lawyers Find Way to Make Millions: Win Pro Bono Cases - Wilson Sonsini Will Earn $3.5 Million to Represent Abused Prison Inmates - Giving a Chunk to Charity,” Wall Street Journal, November 29, 1995, p. A1.
Sweeney, Jack, “Busy Plaintiffs Keep Silicon Valley on Edge,” Computer Reseller News, November 28, 1994, p. 1.
Wild, Joff, “The Battle for Clients in the Golden State,” Managing Intellectual Property (London), May 1996, p. 14.
—David M. Walden