Strategic Legal Technology

Will general counsel and the ACC demand for more value from law firms drive firms to consider offering online legal services? 

Bob Ambrogi’s Crowdsourcing the Law (Law Technology News, 1 Aug 2010) describes some interesting new web services - OpenRegs and Spindle Law - that got me thinking about online legal services.

OpenRegs.com, according to the website, “is an easy-to-navigate regulatory portal. Every day, federal agencies issue dozens of rules that affect you, your business, and your family. We make it easy to keep track of proposed and final regulations and to submit comments to the agencies.” In the old days, clients used to pay DC-based law firms to deliver this type of information.

Spindle Law is “is a new kind of legal research and writing system”. It presents a taxonomy of law through which a user can drill down to find authority for points of law. It is a ’social media’ or ‘crowd sourcing’ approach. Ambrogi writes

“Spindle Law resembles a treatise, in that it assembles rules of law together with the authorities to back up those rules. Structurally, it organizes the law into a tree, with each branch leading to ever-narrowing branches. Thus, the broad branch “courts” leads to narrower branches for “evidence” and “civil procedure,” and each of those branches leads to increasingly narrower branches.”

I can see how Spindle Law’s graphic approach, coupled with community contributions, could lead to a valuable legal research tool. While not an immediate threat to law firms, a system like this could evolve to be an important resource for in-house counsel. Why pay even associate rates if a quick consultation of Spindle Law were to yield a reasonably reliable answer?

With all the talk about law firms providing value, I don’t see much evidence of law firms finding ways to deliver their collective know-how to clients. In fact, many large law firms barely have functioning knowledge management resources for their own lawyers, much less ways of delivering know-how outside the firm.

It seems to me that law firms could kill two birds with one stone. They could, by marshaling their deep know in practices in which they specialize, develop resources / systems that both support their own lawyers (especially for alternative fee arrangements) and that they could deliver to clients as ‘added value.’ Both OpenRegs and Spindle Law should serve as inspiration for forward thinking firms that want to add value.

The last 18 months in the legal market look very different than the last two decades: firms are actually differentiating their offerings. So perhaps we will see innovative online legal services that deliver firm know-how directly to clients.

Recently I learned via a Wilson Sonsini Goodrich & Rosati (WSGR) Tweet (@wilsonsonsini), that the firm had launched On-Demand Learning Resource to Help In-House Attorneys Keep Current and Earn MCLE Credit. I think the firm has done a very nice job with this initiative. 

The Technology

WSGR is using an on-demand learning (ODL) platform from Altus, Inc.. I have not kept up on ODL platforms but I like this interface. A main page presents the available classes. Clicking through to a class presents a page with the class (each about one hour) broken down by sub-topic. Each sub-topic ties to a slide in a presentation. Mouse-over the topic displays a pop-up of the presentation page.

Once you click a link, the system opens a new window with the Flash audio-visual player. It displays good quality video of the speaker, a topic list, the current presentation slide, and an option to view the written transcript. The transcript is keyed to the audio of the presentation and whatever the speaker is currently saying is highlighted (a nice plus for the hearing impaired). Transcripts are searchable. For those who want to listen or view on the go, MP3 and MP4 are available for viewing on players such as iPod.

For more information about the system, see Just-in-Time Training: On-Demand Learning Platform Drives Firm’s Success in Legal Management magazine by Larry Brown, WSGR Senior Manager, Training & Professional Development, published by the ALA (May 2009, PDF from the ALA website).

Content and Clients

To learn more about this, I spoke to Larry and his colleague Chris Boyd, WSGR Senior Director of Professional Services. They explained that while many firms offer live CLE or real-time webinars, they were not aware of many firms offering clients pre-recorded, on-demand CLE. Given the firm’s internal success with this approach, WSGR wanted to offer additional value to its clients and friends.

Chris and I know that one of the big challenges knowledge managers face is creating content and keeping it fresh (see our article Getting the Most “K” for the Least “M": Baking KM into the System, published in the June 2006 ILTA white paper). Because the firm regularly produces CLE for its own lawyers, content creation is not an issue. And, as it turns out, the firm was videoing its CLE programs anyway, though the Altus format requires some marginal cost to produce.

Chris and Larry report that client response has been positive. That does not surprise me. Inhouse counsel are clamoring for more value. And many for CLE credits. So it makes sense that they would want to take advantage of WSGR’s new service.

In a tough economy with daily BigLaw lays-off announcements, it’s nice to see a firm innovate to help clients and prospects. Wilson Sonsini Goodrich & Rosati (WSGR) announced today a new online service, a term sheet generator. 

The WSGR Term Sheet Generator,

“will generate a venture financing term sheet based on your responses to an online questionnaire. It also has an informational component, with basic tutorials and annotations on financing terms. This term sheet generator is a modified version of a tool that we use internally, which comprises one part of a suite of document automation tools that we use to generate start-up and venture financing-related documents.”

Few US law firms have released interactive legal services in recent years. The WSGR online system illustrates how some investment and innovation can serve clients and extend a firm’s reach. WSGR is already the go-to firm for Silicon Valley start-ups and this service will further cement its leadership position.

Running through the term sheet generator, I can see it’s a sophisticated tool with extensive “logical branching.” That is, as you select options, the screen often changes dynamically to ask for additional information. I’m not expert in this practice area but it feels like a “heavy duty power tool”.

I suspect entrepreneurs will find it useful. I’ve invested in start-ups led by friends. My most successful entrepreneur friend is not a lawyer but has a deep understanding of the legal framework of start-ups. He’s complained bitterly about legal fees and BigLaw associates who know less about deal docs than he does. I think anyone like him will love the WSGR term sheet generator.

I doubt it eliminates the need for a lawyer. What it does, however, is allow an experienced entrepreneur to get started, to do the leg work. Then, when it comes time to working with a lawyer, the focus can be on those aspects of the deal or docs that really need advice or hand-crafting.

I wonder if other large law firms will invest some lawyer time to create equally useful and innovative online services. Lay-offs may be necessary but do not win new business and gain market share or share-of-wallet. Innovation, however, can.

Magic Circle firm Allen & Overy has launched a separate entity to apply technology to solve a commercial contracting challenge. 

A&O launches document management company reports on A&O’s launch of docGenix, whose “mission is to develop innovative legal documentation risk management solutions for the international financial markets, initially focusing on OTC derivatives.”

Right now, docGenix is focusing on ISDA (International Swaps and Derivatives Association) agreements. The company will tag ISDA documents to make them easier to manage and analyze. It’s not possible easily to explainthis without being a bit techie.

Lawyers have to learn about XML, a computer tagging language (Extensible Markup Language). If not because of docGenix then because the SEC will soon mandate public disclosure filings in XML cousin XBRL.

As I understand it, docGenix will turn contracts into “instantiations of database records” which I’ve long thought is the right view of a contract. What does that mean? Many contracts can be thought of as a series of fields with values. Those values can be placed in database fields and then be sorted, compared, manipulated, and managed. Historically, there has been no linkage between contracts and databases. XML allows that linkage. One “view” is a contract as most lawyers visualize it - lots of text with some numbers thrown in. Another view is a bunch of numbers connected by some text but what’s really important are those numbers (and the names of parties and locations of assets - all of which are also fields).

I think that this is an exciting development. Leases, especially portfolio of leases, would benefit from a similar treatment.

PeopleFinder, a new system by leading Australian law firm Mallesons, makes clear that previous views of client facing technology have been too narrow. 

Client-facing typically has meant extranets, document creation software, or content-rich systems, including online legal services. While new instances of these come to market periodically, innovation is now rare and existing systems no longer serve as a marketing differentiator.

Consider instead the idea of client service systems. With this broader view, law firms can take a different and better direction, one not bound by content.

PeopleFinder illustrates the way. A recent College of Law Practice Management blog post, InnovAction Award Entry by Mallesons Stephen Jaques describes the system. [Note that Malleson’s won a InnovAction Award in 2007 for its TalentNet, mentioned in some of my prior blog postst.] According to the blog post, provided by Mallesons in its award entry, PeopleFinder

“has resulted in over 10,000 more calls each month being answered by a person rather than voicemail…. an initiative designed to lift client service and promote Mallesons’ high standing in the Australasian professional services market.”

PeopleFinder enhances client service by integrating multiple internal information sources to determine lawyer and staff availability and location. The goal is to direct incoming client calls to the lawyer or staff person best able to respond on the spot, while the client is still on the phone. This speeds client service and avoids phone tag and the resulting client frustration.

PeopleFinder, available on the firm’s Intranet, indicates the status of each person, for example, Available, Busy, Out of Office, or On Leave. Users can set their status but absent intervention, the system infers it by evaluating Outlook calendars, instant messaging (IM) activity, BlackBerry usage, keyboard activity, and VOIP status. PeopleFinder does not reveal confidential calendar information such as the details of a meeting - it only conveys available times.

The system helps users connect to the right person, offering choices such as automatically dial an office or mobile phone, initiate IM, or send a text message. PeopleFinder also revives the useful Camp On feature of older central phone switches. If a phone line is engaged (busy), you can be notified and connected automatically when the line opens. Additional features help users deal with time zones, determine when someone will next be available, find a colleague’s office with a dynamically generated floor plan, and identify others working on a file (matter).

PeopleFinder reflects several conceptual and technical innovations:

• A coherent vision of and broad buy-in to improving how quickly the firm responds to clients
• Recognition that existing data can be collected and analyzed to find people and determine their status
• Integration of multiple back-end systems such as Cisco CallManager, MS Exchange, MS Active Directory, PeopleSoft, Metastorm Workflow, and several databases
• Creation of a Web 2.0 interface that makes usage easy

Now that Mallesons has changed our mind set from client facing to client service, it will be interesting to see if other firms innovate.

[Note: The firm shared information about PeopleFinder with me and I allowed the firm to review this blog post in advance. ]

In the late 1990s, large law firms started creating web-based interactive legal advisory systems. What happened to that trend? 

Market data on the number subscribers, and revenue is not available; as far as I know, the best listing of these types of systems is my Online Legal Services list. Anecdotal evidence suggests that online advisory system development crested around 2002 or 2003 and that many firms did not earn the hoped-for return.

We may be seeing another round of investment now; see below for two relatively new services. Here is why I think we may see a resurgence:

The technology cost to create web-based systems has fallen. Hardware, software, and hosting is all much easier and cheaper today than a few years ago.

The lawyer time cost has also fallen. First, law firms invest more in marketing now, both out of pocket expenses and lawyer time. In 2000, the cost of creating an online system seemed enormous. Today, in comparison to other marketing hard and soft costs, the development effort just may not seem as big relative to other initiatives. Second, the growth of knowledge management in many firms coupled with lower cost technical means of accumulating information means that firms are more easily able to “mine” work that they already do for other purposes. That is, firms realize they have a lot of useful information and the marginal cost to re-package it for web-based delivery is not that great.

The explosion of web-resources generally - e.g., Google, newspapers online, Wikipedia, and government statistics - creates subtle market pressures for law firms to keep up.

Here then are two services I came across recently:

MoFo IT Advises: ‘Listen to Your Users’ in Law Tech News (3 July 2008) reports on a new Morrison & Foerster affiliate that offers an online legal service: the “International Privacy Database is a comprehensive, current assessment of the obligations of various privacy and data security requirements and includes in-depth analysis of virtually every privacy law in the world… We created a subsidiary, Summit Privacy Resources, to offer this content via subscription. It was created so that this information could be shared with entities that presently are not clients. Started in April 2007, the system is now in pilot production.”

Construction law made easy by large Australian firm Minter Ellison “is a dedicated online resource for all construction, property and infrastructure industry professionals.”

The MoFo system is by subscription; the Minters one requires free registration. A future post will cover another system I recently came across.

Baker McKenzie has recently launched an online legal service, this one with a bit of a twist. 

Lawyers Weekly reports (4 April 2008) that “BAKER & MCKENZIE’S global climate change practice last week launched the CDM Rulebook website – a freely available, comprehensive online database of the rules relating to the Clean Development Mechanism (CDM) under the Kyoto Protocol.”

The CDM Rulebook is “the definitive online database of the CDM rules.” There is no hardcopy version because of green concerns and frequent updates; a separate page on the site suggests how to cite it. The site is elegantly designed, with multiple useful navigation features and extensive hyperlinking. It strikes me as an excellent paradigm for presenting other complex legal material on the web.

The twist is that “Baker & McKenzie has developed the CDM Rulebook with funding from eight donor organisations,” including the United Kingdom Foreign and Commonwealth Office, the Swedish Energy Agency, the Australian Department of Climate Change, the United Nations Development Program, and the World Bank.

Ten years ago when I worked for Jnana developing interactive legal advisory systems and the business models to support them, I did not consider the idea of not-for-profit funding. So it is interesting to see that a large law firm was able to take a creative approach to building a content-rich system

[Unrelated to above but to online services: See my 10 May 2008 “Roundup” post re the The Online Compliance Consortium, ” to help establish best practice and standards for larger law firms in the arena of compliance and specifically compliance training."]

Open source software has had a dramatic impact on how business and consumers use computers. Could the same be true for law? 

I blogged about the idea of open source law four years ago. Lawyers Open Their File Cabinets for a Web Resource (New York Times, 27 April 2008) reminds me of that idea. The article focuses on JD Supra, which stocks “a free, virtual law library by persuading lawyers to do something highly unusual: to post examples of their legal work online for use by one and all, no strings attached. Many of the documents are articles and newsletters that can be understood by ordinary mortals who want more background on a legal issue, or who would like to find lawyers with expertise in a particular area.”

JD Surpra moves the market closer to the open source model by providing a sharing platform. Several steps are still needed to get to the web-based collaboration, iterative improvements, and free sharing of a true open source approach. My March 2008 blog post, New Collaborative Web Sites for Legal Market reported on JD Supra, as well as Legal Onramp, which is more geared toward the B2B market.

Inhouse counsel frequently express concern about escalating legal costs. They can’t reduce demand so they need to find cheaper ways to deliver advice. Is an open source approach a realistic cost-saving approach now that the platforms to support it exist? Of course, there are many reasons not to pursue the concept: it’s a bad idea, lawyers have not done it in the past so why should they do it now, the free-rider syndrome, and lack of incentives to share. On that last point, I will leave it to others to ponder why whole communities of software developers happily share work product and lawyers do not. [I think the answer involves more than just confidentiality.]

Two relatively new web sites offer the legal market a way to market services, share documents, and build community. To some extent, each is trying to apply the Facebook or MySpace paradigm to lawyers. 

First, some history. Fifteen years ago David Johnson, David Post, and I (then all of Wilmer, Cutler & Pickering, now WilmerHale) published Colleagues Exchange (Corporate Legal Times, March 1992). We proposed an online system for lawyers to find and connect with each other across firms and to share work product. It was commercialized as Counsel Connect by then American Lawyer (now ALM / Incisive) and was subsequently purchased by LexisNexis.

Now, two companies have launched web services conceptually similar to Counsel Connect. I’ve had personal and positive experience with Legal Onramp (LOR), which “provides content, connectivity and execution services to help legal professionals deliver higher quality work in less time and lower cost. We are working with leading professionals from major corporations and leading law firms to provide technology and services that will meet the business imperatives of the future.” It is a by-invitation community exclusively for legal market professionals, offering discussion forums, social network features, a marketplace, and shared work product. Net-Working - Web 2.0-enhanced sites get in-house counsel talking (Inside Counsel, March 2008) features LOR.

A more recent market entry is JD Supra, which “promotes the free exchange of information to benefit the legal community, legal consumers, the media and the general public.” It offers community, networking, consumer resources, real-time news, and a large document collection. (The JD Supra FAQ provides more explanation.)

Both are promising ways for lawyers and clients and to interact and share information. My take is that LOR is targeted more at high end, B2B services; it explicitly targets inhouse counsel. JD Supra appears targeted at both B2B and B2C and, at least right now, focused primarily on content rather than community. As an early proponent of this type of idea, I hope to see both sites succeed. I think given the economic pressures and bad market dynamics in both the B2B and B2C legal markets, both have excellent prospects.

I write less now than I did a few years ago about online services. I’ve not lost interest; rather, it just seems there are few new developments to report. That said, over the last few months, some interesting items did cross my desk. 

• Linklaters launches new document drafting product (legalweek.com, 10/17/07) reports on an expanded offering of the firm’s Blue Flag product to allow “drafting of certain leveraged finance agreements.”
• Combining online service, social networking, and open source law, Tractis offers online contract management, shared templates, and e-signing. It’s mainly in Spanish right now, so hard for me to assess. More information, see the related blog, Negonation. Spotted at Robert Ambrogi’s LawSites. See also Doug Cornelius’s comments on Tractis; he’s tried it.
• Proskauer has put an entire book, International Litigation and Arbitration , free on the web, without registration. It’s not an interactive online service, but it’s a lot of deep content. An interesting move.
• British firm Denton Wilde Sapte has teamed with several other firms to offer guidance on European data protection laws: ”Information and Privacy Solutions provides registered users with comprehensive guidance and information on the local data protection regimes of several European countries. (Thanks to Joy London of excited utterances for spotting this.)
• DC-based Dickstein Shapiro offers PolicyPartner, a web service to “provide your company with compliant, current, clear, consistent and cost-effective human resource (HR) compliance guidance.”
• For the Australian market, HR Advance offers ” a website designed to make human resources (HR) management easy for your business… HR Advance gives you access to a comprehensive library of fully customisable HR documents including contracts, policies, forms, correspondence and checklists. All documents come with extensive notes on their use and application.” As I read the HR “About” page, it is a joint undertaking of an Australian chamber of commerce and law firm.
• My Dec 20, 2007 post, New Expert System Platform, describes a new legal market expert system platform.

Richard Susskind’s most recent round of predictions about the future of online services notwithstanding (see Will Lawyers Exist in 100 Years in the Times Online, London, late 2007), I am not holding my breath for an explosion in online services. I hope I am wrong though. Perhaps the public flotation of law firms in Australia or the UK Legal Reforms will dramatically change the market and lead to the development of consumer-oriented interactive online systems. If so, that might lead to more high end systems as well.

I have long thought that rule-based systems have great promise for creating online legal advisory systems. So I am glad to see the entry of a new, web-based system for creating systems. 

Jureeka.net “is a web service that lets lawyers and law students automate their expertise and provide real-time guidance to clients. Jureeka was motivated by the belief that law can be made accessible to the public, given the proper tools.” It appears to offer an open-source approach for law students and professors and a commercial platform for others. A demo and tour provide some illustration for how the system works but absent registering and trying to build a rule-base (which I did not do), it’s hard to tell how easy or hard it is to build a system.

The About page does not provide information about the company or the people behind it. I cannot speak for the academy, but for business buyers, I think that the lack of information is a potential hurdle.

In spite of these caveats, I decided a blog entry was warranted because any development in the legal rule-engine / expert system platform arena is worth noting.

[More from Prism about online legal services: blog posts; articles; list of law firms offering interactive, online services]

A new product illustrates one way to automate legal advice. 

DECISIONmaker Software, LLC recently released artificial intelligence software to guide HR professionals in complying with the Family Medical Leave and Americans with Disabilities Acts. The company and its founder, Alan Rolnick, an experienced labor lawyer, teamed with Proskauer to develop and vet the legal content. (Metropolitan Corporate Counsel reports on this in A Revolutionary New Software Product Benefits Employment Law Practitioners And Their Clients; see also the Proskauer Labor & Employment practice page).

In the late 1990s, I worked for Jnana Techologies, an expert system (AI) platform developer, where I helped law firms and law departments create interactive advisors conceptually like this one. (See my articles on virtual legal advisers.)

Building an interactive advisory systems is not trivial but the real challenge is the business model. Lawyers have little incentive to invest non-billable hours “porting” their know-how into software. So I am glad to see an experienced lawyer with the vision and drive to create an advisory product to serve a giant horizontal legal market.

I spoke to Mr. Rolnick, whose view is that use of this tool will be good for law firm business. For clients, the product will reduce risk and resolve some issues (though the software specifically states that neither DecisonMaker nor Proskauer are rendering legal advice). The software will also, however, identify more situations where traditional legal advice is required. So this product will benefit clients and potentially increase law firm work. Plus, it frees lawyers to work on higher value matters. His view is consistent with the arguments in my articles.

I have long been surprised that legal publishers have not pursued the interactive advisory market. More so than law firms, they have the capital and editorial resources to build product (though may lack the deep practice experience). Perhaps DecisionMaker is a harbinger of other sophisticated advisory products built by entrepreneurial lawyers. More such efforts could chip away at both publishers (and law firms) as I suggest in my presentation, Legal Publishers in 2007 and Beyond.

Of course, a possible seminal change in law firm structure - going public - could change this analysis. Capital Market Access? Be Careful What You Wish For, a recent blog post by Adam Smith, Esq., discusses the business challenges law firms might face were they to raise capital in the market. Perhaps a firm forward thinking enough to go public would also see the wisdom in investing to create a series of interactive advisers. To be sure, the lawyers would lose billable time in the short term doing so. But the long term value creation could be recognized in a higher market value.

The online legal services market (for interactive legal advice) has been quiet - until now.  

Earlier this decade, many law firms developed and promoted online legal services. To my chagrin (some readers know that I had a personal stake in virtual legal advisors when I worked for Jnana) the level of activity seems to have fallen. So I was pleased to see the news in Legal Week that Allen & Overy has released a new online service called Diligence.

From the Allen & Overy Diligence web page: “diligence is a secure on-line legal risk management resource covering pre-insolvency enforceability issues in connection with trading derivative transactions with different counterparty types on a cross-border basis.” Interestingly, one of the cited benefits is “saves time and money spent on outside counsel or on in-house resources previously devoted to pre-trade analysis.” Here’s one firm not afraid to look the innovator’s dilemma in the eye.

The Legal Week article also reports “The new product will operate alongside A&O’s flagship on-line products, Netalytics and CSAnalytics, which are now generating more than $2m (£1m) [sic] in annual revenue — up from $1.5m (£755,000) [sic] last year.” More on this level of revenue in a future post.

6/9/07 Update: Just came across another new (to me) online legal service: Reed Smith’s Trademark Management Mapping Program, “a proprietary software system that provides a web-enabled “snapshot” of an IP portfolio.”

Contracting and Legal Issues: Navigating the Negotiation Process. That’s the topic of a presentation by Janet Parkhurst, Esq. at the ALM Outsourcing Conference 215pm session. 

[This blog post comes to you live from the ALM-sponsored Legal Industry Outsourcing Forum (May 23, 2007, NYC). Notes and comments are real time with minimal editing and posted as a session ends. I am taking notes in Microsoft OneNote, so use the outlining format.]

1. Negotiation process
a. “Boots to the ground and nose to the grindstone”
b. Make sure you have people on the ground in offshore locations
c. Whoever is negotiating the deal needs to do it full time
d. Be prepared for cultural gaps - both between service providers and customers and between onshore and offshore entities
e. It’s always close of business somewhere. Time differences can be advantage in service delivery, but when negotiating, the time zones are hard to manage. Who has to be up in the middle of the night?
2. Deal structure
a. Competitive bidding or soles source. Usually deals start as competitive and then down select to one provider late in negotiation process.
b. Options include Master Service Agreement (MSA) with Statements of Work (SOW), line of credit or facility approach (make service available)
c. If you outsource multiple types of services, you may want to select multiple vendors, for expertise and for risk mitigation
d. Timing is a key consideration. Complexity and short time frame are inconsistent. Avoid creating false deadlines, which can lead to signing in haste
3. Key contract terms
a. Intro: Agreements (any, including LPO) typically are 50 to 80 pages. Deals are complex. Following are terms of greatest concern
   b. Scope of service
i. Know what you do today (your current process)
ii. If you outsource document production, you need to know how you do it now, internally.
iii. Involve subject matter experts (SME) in the service being negotiated
iv. You must include details in SOW. This helps avoid disputes over what service provider must do.
v. “Sweep provision” reflects services not specifically mentioned but necessary to deliver the services specifically mentioned
   c. Performance management
i. Post signing, this is the most critical. Manage expectations on both sides
ii. Service levels
1) Define and align customer expectations. Since LPO is immature, defining service levels is still hard (at least relative to IT). One approach is customer satisfaction levels (by survey) but this may be too subjective. It is better to have more objective measures of success.
2) Define supplier expectations. (Relates to Service Level Agreement, SLA)
3) Create remedies
4) SLA determines and defines success. Don’t expect platinum service if you are only paying for silver. This is sometimes a bitter pill for customers to swallow.
5) SLA and price relate
6) Remain flexible. SLAs may need to improve over time.
   d. Benchmarking
1) Relates to SLA - a provision that lets customer keep up with competing customer organizations and with pricing of other providers. Keep agreement aligned with market. LPO market is immature so benchmarking now is hard. Not clear if there are good benchmarks available.
   e. Governance
1) Oversight is required, not optional. Lawyers must be involved in managing LPO relations, especially where substantive legal w
ork is involved.
2) Spell out which issues will be decide through a formal governance process. But consider what you as customer really want to be involved in. Be realistic about the level of scrutiny and approval you really want.
3) Avoid clauses that reference future “mutual agreement.” Know what happens if you fail to mutually agree
   f. Insourcing and Re-sourcing
1) The right to pull work back in internally or to use a different provider helps manage the performance. Make this right granular (
meaning it does not trigger termination) so you can pick and choose what you change. For this right, expect the provider to ask for price adjustments.
2) Make sure that exclusivity, pricing, and extraordinary event provisions tie in properly
3) Distinguish this right from rights to down- or up-size based on change in business.
   g. Staffing considerations
1) More important in LPO than other outsourcing agreements because of ethical considerations. Law firms must have controls to avoid aiding the unauthorized practice of law (UPL), to protect confidences, and to avoid conflicts.
2) Terms that can help with this include employee background and reference checks
3) Training and appropriate certifications should be contractually required
4) Make conflicts and ongoing obligation, down to individuals at outsourcer. Maintain right to re-check conflicts regularly.
5) Consider service levels re turnover, which is especially important where measuring outputs may be hard.
   h. Data protection and confidentiality
1) Rules vary by industry and geography. Contract should comply with rules of the most restrictive jurisdiction
2) Contract should allow amendment to reflect changes in rules. Specify who bears costs.
3) Be prepared for a breach - have terms that specify who is in charge of and how to mitigate the damage
   i. Proprietary rights
1) Specify who owns any IP created. Especially an issue in IT, but also applies to lawyer work product. Consider local and domestic law. Indian law, for example, requires that employees assign rights. Be sure contract requires provider to obtain these.
2) Licenses to technology used by supplier
   j. Pricing
1) This is a more a business than legal issue
2) Allow for increases or decreases in amount of services used
3) Who bears cost if extra hours are required - contract may specify premiums for off-hour work
4) Which locale’s COLA (cost of living adjustment) applies
5) Explicitly address currency exchange rate risks
6) Be aware of tax holidays that may expire or new taxes - who pays?
   k. Force majeure
1) Read the events and know the geography. Find out which force majeure events have occurred in the past.
2) Include provisions for prompt resumption and/or substitute service
3) Business continuity is ideal - but can you afford it?
   l. Term and termination
1) Length of term affects other provisions. For example, shorter term may mean fewer benchmarks.
2) In practice, agreements rarely terminate; more often they are renewed. Termination for problems is rare
3) Termination fees are about leverage in the event of problems. You may not get them, but they help in negotiations
4) Understand the implications of termination - how easy is it to get out, what is the wind-down process, what are the costs (stated and internal costs not part of contract) and who bears them
   m. 50 Ways to Leave Your Vendor
1) Cause, convenience
2) Termination assistance (specify length of time and scope), even if for convenience
3) Cooperation with successor
4) Employee re-hire rights
   n. Dispute resolution
1) It is fairly common to invoke dispute resolution process, largely because relationships ARE long term
2) Consider choice of law and venue (or arbitration)
   o. Limitation on liability
1) Providers attempt to disclaim liabilities and there are typically caps on liability
2) Customer may want caps and exceptions (e.g., for confidentiality breach or gross negligence)
3) Make sure performance credits are not viewed as liquidated damages. They are meant as disincentive for bad performance
4) Third party beneficiaries - understand potential rights of or benefits to clients
4. Avoiding pitfalls
a. Manage the agreement
b. Avoid honeymoon - watch from outset
c. Plan for the unexpected such as regulatory changes, scope adjustments.
d. Align expectations of both sides, including end users of customers
e. Know how to bring work back in house.

During the dot-com boom, several start-ups offered business to consumer (B2C) legal web sites. Offerings varied but all failed. Now, we are seeing a re-birth, backed by heavy hitters. 

Avvo is a new start-up founded by executives with experience at successful web businesses. Today, Avvo announces that “that former LexisNexis CEO Lou Andreozzi has joined Avvo’s board of directors. In addition, Stanford Law Professor Deborah Rhode and former president of the American Bar Association and law firm veteran Robert Hirshon have joined the company’s legal advisory board.”

The home page says “We are currently in ’stealth’ mode, so we cannot say too much. However, we can say that we are dedicated to helping consumers better navigate the highly confusing legal industry, and we are building something that no one else has built before.” So I don’t know what service(s) will be offered.

I suspect that adding experienced legal management and ethics talent to the advisory board is an effort to avoid the fate that befell dot-com predecessors. It will be interesting to see what services Avvo offers consumers (interactive advice, connecting prospects to lawyers, other) and how it navigates the tricky ethical issues.

Legal technology worlds collide: online legal services meet records management and e-discovery. 

E-mail archiving solution vendor Fortiva offers an online tool (”Policy Builder“) to generate a corporate electronic communication policy covering topics such as acceptable e-mail use and records retention. The tool is free; registration is required.

The interface of this web-based document assembly system is easy. It displays a detailed table of contents; you can edit or move any policy section. Most sections just let you edit default text but some contain business or legal logic. The tool generates a nicely formatted, customized PDF policy suitable for circulation. It covers a lot of ground; I suspect that a fair bit of lawyer time went into it.

Vendors may see a better business case for online legal services than do law firms. Vendors spend significant sums to establish credibility and generate sales leads. A free policy tool is innovative marketing. Given a choice between no policy, paying legal fees to write one, or using this tool, I can see that many companies/prospects would opt for the tool.

Marketing is a major corporate expense. Maybe this policy builder is a harbinger of a new technique: free policies in exchange for registration information. I see no threat to BigLaw yet. But BigLaw should ask whether the economic return on a free online tool is better than, say, a Wall Street Journal ad campaign?

A court has ruled that an online legal service engaged in the unauthorized practice of law (UPL). 

A recent 9th Circuit case, In re Reynoso (2/27/07), holds that bankruptcy advice provided by an expert system “was the conduct of a non-attorney” and therefore “constituted the unauthorized practice of law.” When I first heard about this from a friend and then read Software Cited for Unauthorized Law Practice at Inside Opinions, I feared the worst.

Lest someone accuse me of UPL… what I write here is not a legal opinion. I think this case is easily limited by its “bad” facts: a non-lawyer created the system, arguably false advertising, and questionable software-generated statements placed on a bankruptcy filing. This case may even offer protection from UPL charges for a well-vetted system, prepared by a licensed attorney, and fairly advertised.

In any event, this business to consumer (B2C) UPL case is easily distinguished from a business to business (B2B) situation. My articles about online legal services suggest that law firms or law departments that use expert systems to deliver advice to existing clients are not at risk for UPL.

Almost a decade after Linklaters first introduced Blue Flag, one of the earliest online legal services, we can wonder why there are not more B2B expert legal systems. Though UPL may be a lingering concern, I suspect it is minor compared to business model barriers.

On a related note, for a very useful legal ethics resource generally, see legalethics.com (the UPL section is here). This site, originated and still co-written by Peter Krakaur, has just been re-launched as a blog.

Foley & Lardner understands the value it can provide clients beyond traditional legal advice. 

In Foley & Lardner Promotes Legal Technology, I discussed Foley’s innovative extranets. Via Law Technology News (Dec 2006), I learned about Foley’s Private Equity Matchmaker (PEM). According to a Foley press release (10/06), PEM enhances

“the ability of Foley attorneys to refer business opportunities to the firm’s clients… Through its automated search function and deal-matching capability, Private Equity Matchmaker brings together Foley clients from around the world who are seeking capital with those who are actively pursuing private equity investment opportunities, classified as ’seekers’ and ’sources,’ respectively… Currently, PEM features 150 sources and more than 50 seekers.”

Other firms may provide investor match-making services informally, but Foley uses proprietary technology to institutionalize, formalize, and deepen this function. Lots of firms can paper a deal, but how many systematically help the client get or invest money?

It’s a great idea but I’m curious about how it works. I suspect lawyers must populate it with leads, which raises the “what’s in it for me” question. If entering a bit of data may help a lawyer’s own clients, that may elicit active participation. In any event, the effort may be minimal. An article in Mass High Tech: The Journal of New England Technology (11/24/06), Legalize IT, quotes a Foley partner: “We all spend plenty of time sitting in on endless conference calls, and this should be something they can do while someone else is doing all the talking. They can enter the information and then move on to the next task.” I think that means the data entry is client billable, which further lowers the threshold to doing it.

Investors today need more than information; they need insight. Can BigLaw monetize insight beyond dispensing advice? 

Information drives winning investment strategies but traditional Wall Street information advantages are evaporating. The Internet has diminished the impact of huge budgets to buy information. Reg FD provides equal access to corporate insiders, eliminating the old inside edge. And wide-spread algorithmic trading and hedge fund growth makes it much harder to develop winning proprietary trading strategies. So the Street needs new approaches.

The premium now is on unique information and using the right information at just the right time. Let’s call it the transition from information to insight and action. Two recent articles illustrate this. Seeking an Edge, Big Investors Turn to Network of Informants (Wall Street Journal, 11/27/06) explains how Gerson Lehrman Group has set up a network of experts – from truck drivers to doctors – who provide investors with industry tidbits. No one tidbit may be significant, but investors put together a mosaic that tells a story and drives decisions.

From Reuters, Automatic Trading Linked to News Events (New York Times, 12/11/06) explains that Reuters has begun “selling two trading services that allow subscribers to set up automatic trading orders based on the news [to] give subscribers the ability to mine past and present Reuters news articles in real time and automatically buy, sell or hold a stock based on market-moving events.” Reuters is not offering new information, it’s just making its existing info more actionable.

So, can law firms sell insight to investors? Of course, other organizations are interested in insight as well. BigLaw regularly collects and digests volumes of information to deliver traditional legal advice. Perhaps using technology similar to Reuters, law firms could find a way to monetize their insights beyond one-off advice. The most likely way to do this is via some type of online service. Of course, like other legal online services (directory, articles), the profit might not be in the subscription revenue. Rather, it could be in deepening the client relationship and generating additional fee-paying matters.

Legal technology can be a competitive weapon for large law firms. 

Foley & Lardner Leads the Way With Client Extranets (Legal Times, 11/30/06) reports on how Foley uses technology to serve clients.

The firm has created customized extranets to share documents with client; one client uses the system to track 200 matters. Foley also offers “templates to generate legal documents, such as nondisclosure agreements, based on specific business rules.” The author notes that

“Legal-technology tools, such as templates that can be easily used to create documents such as nondisclosures and other types of agreements, allow clients to perform many of their own tasks without external attorney assistance. The result is that clients are less dependent on outside counsel for agreements for each customer or vendor. Technology tools such as these drive down costs on lower-value legal work and allow law firms to focus their efforts on the clients’ most critical need: high-level legal counsel.”

I have written extensively about online legal services (articles and blog posts), so am pleased to see that the idea of delivering legal guidance interactively for lower value work still has legs.

The author notes that heavy reliance on client-facing technology is not risk-free. This can be managed, however, “by selectively marketing the systems to the most innovative attorneys and by hiring an internal technology consultant to ensure that the systems are properly demonstrated and supported.” Foley actively promotes its tech prowess, but more on that later.

The dot-com boom is dead. Long live the dot-com boom. Two sites recently caught my eye as examples of why the boom has created a lasting legacy. 

One site is a source for specialized information. Automatic external defibrillators (AED) are life saving devices that re-start a chaotically beating heart; you can see them in airports, gyms, and offices. AED Risk Insights “provides AED law information, risk management and public policy services to organizations with AEDs, those considering the purchase of AEDs, AED suppliers, attorneys, legislators, the media and others seeking to understand the complex issues surrounding the deployment of AEDs in public settings.”

Another example is ARMA’s recently released Risk Profiler Self Assessment for records managers and for those concerned with e-discovery. “The Risk Profiler Self-Assessment for E-Discovery helps companies fully understand their potential weaknesses in litigation and discovery before they reactively implement the wrong vendor-supplied solution…. The assessment is a user-friendly, automated, guided self-assessment tool that provides a diagnostic analysis of your organization’s strengths and weaknesses. The secure, online assessment will guide you through your organization’s most vulnerable areas.”

The ease of creating web sites and ubiquitous web access for business has changed the economics of both old-fashioned printed newsletters and dispensing advice. The barrier to create a niche information product such as AED Risk Insights or a self-help service such as the Risk Profiler is much lower now than pre-Web.

AED Risk Insights is, according to founder Richard Lazar, “not a substitute for talking to a lawyer; rather it’s a tool and resource to comply with the law, both for lawyers and business people.” But these and other web sites may affect the legal ecosystem. On the one hand, they may help lawyers in their work; they may even increase the demand for advice by alerting clients to issues.

On the other hand, if specialized services proliferate, BigLaw may have to climb ever higher up the value chain or perhaps compete head-on by offering their own focused online services. Online legal services have not fared as well as I expected, but seeing these two web sites, I wonder if we won’t see a second round in the next few years.

In the BigLaw market, what is the fate of online legal services such as interactive advisory systems? It does not look good now but I am optimistic longer term . 

Five Year Review Back to the Future in LegalIT (UK) provides a great perspective on recent legal technology trends. The section on online legal services observes that many large firms built online services but few turned a profit. “[Linklaters’ Blue Flag] remains the only major online legal service to have turned a profit…. But in most cases, firms quietly retired their online legal service brands shortly after the dotcom bubble burst.”

I believe that the cost pressures law departments face will create demand for online legal services. I prevously reported a Cisco-led multi-client effort earlier this year to create a virtual human resources law advisor. A few more GC who think outside the box or a well-capitalized third party willing to develop systems on speculation could tip the market.

Soon investors will likely be able to buy law firms in the UK. That should be good news for legal market innovation. 

Legal Week reports on October 17th that the UK government is pressing ahead with the Clementi Commmission proposed reforms, which would allow 100% outside ownership of law firms.

I have already previously suggested that outside investment should foster innovation, including online legal services.

An October 5th press release (PDF) reports that Mavent has supplied Fannie Mae with an expert system to review loans for compliance with various statutues, regs, and guidelines. 

According to the release

“The Mavent Expert System is a comprehensive automated solution that submits loan data for reviews against nearly 300 legislative acts, 200 license types, and the rules and regulations of over 60 regulatory authorities. The solution’s review functions include: loan level lender and broker license reviews; state consumer credit laws relating to such terms as usury, fee restrictions, prepayment penalties, and late fees… A network of more than 40 law firms, including such prominent firms as Hudson Cook and Reed Smith, supports the Mavent Expert System. Mavent’s outside counsel has approved each rule in the Mavent Expert System. The legal rules are identified and explained in approximately 7,000 pages of detailed legal rules documentation. [emphasis added]”

Based on my experience as a knowledge engineer, consultant, and evangelist at expert-system platform developer Jnana Technologies, I have long been excited about the prospect of capturing legal know-how in interactive expert systems.

I am intrigued by the participation of 40 law firms in this project, especially the economics. To me, an expert system represents an opportunity for a law firm to help cement a relationship and possibly identify matters requiring traditional counseling. It’s hard to tell from the press release or Maven web site, but I suspect that law firms acted here merely as content providers (at hourly rates??) If so, I wonder if these firms may not someday regret selling expertise on this basis, rather than finding ways to deliver interactively to their own clients. I am excited to see a new expert system in action, but worry that law firms may be letting more nimble players eat away at what, for today, seems the periphery of the business but may someday be viewed as core.

Comments from anyone who was involved in this project are welcome.

I have long championed the idea of online legal services (online services list here and collection of articles here). So I was intrigued to read a recent American Lawyer magazine article (July 2005) that mentions a new online services initiative. 

Clients Unite (at p. 22) reports that last year “lawyers from eight major companies that control more than $1 billion in outside counsel legal work - including Microsoft Corporation, General Motors Corporation, and Cisco Systems, Inc. - have been meeting and exchanging information to try to improve the delivery of legal services.”

The article continues with an interesting tidbit: “In late May this coalition took its first step toward a collective purchase when it invited roughly 20 law firms, plus some other companies, to bid to create an online system that human resources departments could use to get automated answers to routine questions…”

Automating moderately complex, high volume work has long seemed to me an attractive proposition. But the market for online interactive legal services has not developed as I expected or hoped. Perhaps aggregating the demand of several large companies will change the landscape.

Separately, the article also reports that group member Jeffrey Carr, GC of FMC, will create a Web site to rate law firms. I think that’s a great idea too; see my prior blog post on that topic.

Update as of 7/20/05: An article very similar to the one cited above, Clients Unite, is now online here.

Reed Smith recently announced a joint venture with DolphinSearch to create ComplianSeek, a product designed to help investment advisors meet regulatory requirements. This looks like what I have previously called an embedded law system. 

I previously suggested that law firms could and should create systems that “offer preventive law, detection of potential problems, and automation of routine legal tasks.” (More on embedded law systems here and here.)

ComplianSeek appears to do this:

“The ComplianSeek™ patented content search platform employs document selection criteria tailored to conform to the regulatory requirements of the Investment Advisers Act and provide investment advisers with a seamless retention and auditing environment that accommodates regulatory change as well as allows ready access to relevant email.”

This is not Reed Smith’s first foray into online legal services. In late 2003, the firm released its 5o-state guide to medical privacy law (see statehipaastudy.com or my blog post.)

It will be interesting to see if Reed Smith develops additional online services or if any other law firms follow suit.

I will add ComplianSeek to my online legal service list when I next update it.

Legal market regulation in the UK is on the way to significant liberalization. It will be interesting to see if that affects the development of online legal services. 

Government to implement key Clementi reforms in LegalIT (March 21) reports that the British government will move to adopt the Clementi Commission recommendation that “will allow outside investors to own law firms and other professionals to form partnerships with solicitors.” Public offerings are not out of the question.

Assuming this does move forward and corporations or shareholders can own law firms, then outside capital may lead to innovation in legal services. Investors who see opportunities to rationalize the provision of legal services could invest in law firms and fund development of technologies that would significantly alter current practices. For example, one reason for the relatively slow uptake of online legal services may be the lack of capital to pay for lawyer hours to develop fully-featured systems. If so, the outside capital allowed by relaxed regulations could lead to more online services, if not from the large firms then from mid-tier firms that receive outside funding.

The same logic could also lead to other changes in practice. Investors may see other inefficiencies - for example, the billable hour - and fund firms with the goal of changing current practices, eliminating inefficiencies, gaining market share, and earning sizable returns.

All this is speculative, but assuming the British government moves forward, we could see some previously unimagined changes in the legal market.

Though online legal services may have plateaued (see here), a Wall Street Journal article yesterday reports that online compliance training is booming. 

In Training Firms Find Niche in Compliance Needs (subscribers to online WSJ, click here), the Journal reports on systems to educate workers and protect against legal liability. A “growing number of small businesses… deliver ‘learning-management’ systems – software and content to train and certify employees on everything from how to write legally sound e-mails to keeping up with the mandates of the Patriot Act.” A major reason for the growth “is a renewed zeal among companies to show they’ve made a good-faith effort to promote an ethically sound culture.”

The article provides useful insight but, in my opinion, does not make sufficiently clear the distinction between a technology platform and content. It opens with a discussion about Pathlore, which is a learning management system. From the Pathlore web site, it appears to focus on a system to manage and deliver content and track learning, though the company has several content partners. The article also discusses LRN, which is familiar to many in the legal market. LRN, from what I understand, focuses on creating and delivering content and compliance, not on selling a platform per se.

I leave it to others to determine if Pathlore and LRN compete head-on (as the article seems to suggest). But lawyers and executives who seek compliance and ethics online training systems need to distinguish between platforms and content.

Judging by the entries on my list of firms with online services, a few firms have already taken advantage of this market opportunity. There is probably room to do more.

I recently updated the list of online legal services that I maintain. There have been a few changes since the prior update in June.  

New to the List: UK firm Morgan Cole offers tools to manage corporate employee policies and an employment e-learning service. US firm Littler Mendelson Bacon & Dear PLLC offers web-based immigration case management.

Changes to the List: Allen & Overy has added several new online services and Linklaters has added a competition law e-learning service.

I have previously suggested that corporate cost pressures will cause inhouse counsel to seek “embedded law systems,” that is, software that automatically detects possible legal problems. A recent press release by Aungate and an article on law firm outsourcing practices cause me to re-visit this idea. 

Aungate is a unit of Autonomy, a company that provides sophisticated text retrieval and analysis software. The company announced yesterday that is has launched “a new sexual harassment and discrimination detection module that is designed to automatically alert the enterprise to acts of sexual harassment and discrimination, by analyzing the content of emails, voice and instant messages.” I cannot tell from the Aungate site how the company built the business or legal logic for this module. But consider if a law firm had partnered with the company on this product. That firm might either automatically receive reports that it is paid to analyze (and could lead to opening new matters) or at least have its logo and link displayed prominently to inhouse counsel who review the system outputs.

Separately, in “Law Firms Gauge the Outlook for Outsourcing ” the National Law Journal on October 8th reported (article available at biz.yahoo for the moment) that several large law firms have “recognized the profit of expanding an outsourcing practice to attract new clients and serve existing ones.” Outsourcing contracts are typically complicated agreements that require tremendous monitoring.

I am not certain that law firms even monitor the expiration date of contracts so that they can offer clients re-negotiation services. Imagine the potential to help clients monitor contract performance with online systems. That would certainly tie the client closely to its law firm. There is a whole software category dedicated to contract management (see my list of software) and it seems likely that corporations will adopt more active approaches to managing contracts.

Existing online systems require users to visit a web site and either search for content or run through an interactive session. The advantage of an embedded system is that corporate users need not take any action - results are automatically generated by actions of software. It may be that this will remain the exclusive realm of software companies, but creative law firms might find a way to participate in this emerging area.

I recently wrote about Trends in Online Legal Services. One of my legal market friends offered some interesting comments that help explain why online services have so little traction.  

Here is my friend’s analysis:

“1. Law firms aren’t equipped to provide ongoing content. The internal reward system at most firms doesn’t adequately compensate the expert for his time on such pursuits over the long haul.

2. Law firm turnover is around 20% at most big firms. That means the fellow who spearheaded or maintains the content site isn’t likely to be around for long. In fact, because of point 1 he’s likely to get kicked out.

3. In-house counsel, like everyone else, are used to getting web-based content for free. To get them to pay for it would require substantial marketing outlays, which most firms are unwilling or unable to make.

4. Those firms who have tried to do this right, by hiring dedicated staffs, spinning off side businesses, incenting them to provide great content, creating content that doesn’t require constant maintenance, and marketing the results properly – e.g., Littler Mendelson’s labor training modules – have lost money on the venture, and scared others away.

5. There’s little evidence that a firm’s creation or maintenance of sites of this sort improves the likelihood that it will get premium business from top clients, so it’s not demonstrably worthwhile as a loss leader. Nonetheless, those who have already made the investment to create an online business sometimes keep it in the hope that it will yield indirect benefits.

Assuming I’m right, it’s scarcely surprising that big firms have backed off. Still, I believe there’s an opportunity for small firms, boutiques or entrepeneurs to come at this successfully with an entirely fresh business model – e.g., Greg Siskind’s development of his immigration practice via VisaLaw.com, or Milberg Weiss’s use of its website to attract plaintiffs to its class action cases.”

In my prior post, Online Legal Services List Updated, I reported that in the last 18 months, there has been little apparent overall activity in online legal services. Updating the list of online legal services, however, did reveal some trends and tidbits.  

A Caveat. Please note that I base all information here on past and recent Web sites visits. Given the possibility that I missed pages, my comments my not be entirely accurate. Please let me know if you spot errors.

Online Compliance Training. Online compliance training seems to be an active area. Four firms – Blake Dawson (Australia), Clifford Chance (UK), Eversheds (UK), and Mallesons (Australia) – have added online compliance training in the last 18 months. This is in addition to several other firms and private companies already listed as offering compliance training. (Note that I “de-listed” Proskauer and Orrick Herrington; I had included them based on WeComply press releases saying the firms were offering online training but now find no current references on the two firms’ websites.)

Trademark Monitoring. Another area seems to be trademark and domain name monitoring. Some firms had already offered it and a couple of more have added these services in the last 18 months.

Document Assembly. I “de-listed” three firms - Ballard Spahr, Dykema Gossett, and Strook – that, according to e-Cogniata press releases, had purchased “e-Cognita’s Streamloaner™ Closing Management software” to automate commercial real estate finance practice.” These firms do not reference this product on their web sites and the e-Cognita web site is no longer active. On the related, more general topic of document assembly, I have read articles and heard stories suggesting an increase in the uptake of document assembly software among large law firms. If that is true, it seems the firms are using the software internally rather than exposing document creation services to clients. Please let me know if you know of client-facing document assembly services.

Contract Management. I have also “de-listed” companies that offer contract management software (hosted or packaged). I decided these are not really online legal services. I do, however, list contract management as a category on the list of useful software I maintain, which is distinct from online legal services.

I have updated the list of online legal services that I maintain. (I have also cleaned up the format a bit as well). The last full update was about 18 months ago. It’s fair to say the space is fairly quiet. 

I and many others have long thought that law firms and private companies would offer legal advice and guidance over the web. A combination of technologies allows creating systems that can advise, create documents, take users through intelligent checklists, route information via workflows, and present in-depth and well-organized content. (For purposes of this discussion, I do not include extranets, deal rooms, or matter management systems as online legal services.)

From about 1998-99 to around 2002, there was indeed a flurry of activity as many firms and companies developed online services. Since then, my impression, based on maintaining this list, is that there has been much less activity. For the most part, it seems that firms that created systems maintain them, but both “line extensions” and new entrants seem relatively rare. My impression is confirmed by casual conversations with some of those involved in creating or maintaining these services,

I find this a surprising result. Given the tremendous cost pressure inhouse counsel face, I thought that online services would be a growth market because it is a fairly sure way to reduce cost. Moreover, the “latent legal market,” identified by Richard Susskind, of corporate employees who need legal guidance but do not always receive it, is still present and presumably large. I have previously speculated on the Paucity of Online Legal Services and cannot add more now.

In my next posting, I will report on some of the trends and specific changes I noticed in updating the list.

In my prior post Thoughts on the Paucity of Online Legal Services, I suggested that one factor holding back development of online legal services is that the natural users, corporate counsel, lack the resources to develop them. It turns out this not universally true, as demonstrated by Honeywell International. 

Welcome to His Honeywell in the March 2004 issue of Corporate Counsel magazine describes a “a near encyclopedic legal services intranet” that the general counsel rolled out to the entire corporation. “Employees can access contract forms, obtain basic legal advice, view Honeywell’s entire patent and trademark portfolio, receive compliance training, and perform many more legal-oriented tasks without the help of a live in-house lawyer.” After an internal PR campaign in early 2003, more than 20% of Honeywell employees visited the Intranet and 80% of these visitors returned for more information. Anecdotal evidence suggests the effort is paying off, though the company has not been able to estimate the savings.

Lawyers first inclination is to ask who else is doing something and, when the answer is no one or only one or two others, the impetus to act is low. A few early adopters may suffice, however, to “tip the market,” that is, to cause other law departments to build their own online legal services. Once a few do so, others may feel compelled to follow. That, or perhaps a legal publisher or other third party will bring to market pre-packaged content, document assembly, and expert systems that will allow departments to buy rather than build the online services they need.

The article The Many Faces of E-Lawyering in the Jan/Feb issue of Law Practice provides a good survey of many online legal services topics. 

The article, edited by Richard Granat and Marc Lauritsen, the Co-Chairs of the ABA eLawyering Task Force, is a compendium of several shorter pieces: online services for consumers, e-learning tools, document assembly on extranets, managing cases online, browser-based advice systems, and legal cybernautics (you’ll have to click through to read this thought provoking item).

This is a good spectrum of topics and views, though I’m not disinterested since I contributed the browser-based advice systems section.

The unauthorized practice of law (UPL) is a potential concern for those who wish to offer online legal services. Do UPL Restrictions Apply to Impeachment Lawyers from the The Connecticut Law Tribune on law.com offers an interesting perspective on UPL. 

The article discusses the possible impeachment of the Connecticut Governor Rowland. Both the Governor and the legislative panel considering impeachment have retained lawyers not admitted in Connecticut. “According to six Connecticut ethics experts, the state statute on the unauthorized practice of law is simple and unforgiving: Without a Connecticut license, anyone practicing law in the state is engaged in the unauthorized practice of law.”

The Governor has retained Wilmer Cutler partner and former Solicitor General Seth Waxman. “Giving legal advice, said Waxman, is not the same as practicing law.” Excuse me? I am not an ethics expert and am no fan of UPL rules. But if this is true, then I don’t see why an online legal service could be considered practicing law (unless perhaps one wanted to use it in court, in lieu of a lawyer). Of course, the Connecticut case may also raise separation of power issues not applicable to typical UPL cases, but those following the UPL issue concerning online services will appreciate this article. If I’m reading it correctly (and I have not researched this issue), it appears to suggest that “law practice” can be read to mean only representation before a tribunal. Such a reading of UPL rules, it seems to me, would generally eliminate UPL concerns for online services.

I recently came across a very well-done white paper, Online Strategies for Law Firms 2004, on online legal services by Charles Christian, Editor & Publisher, Legal Technology Insider. It provides an insightful analysis of the current state of online legal services, especially in the UK.  

Christian discusses three strategies firms can follow: pure marketing, virtual legal practices (which includes both firms without a physical presence and automated services delivered via computer), and web-enabled practices (by which he means delivering traditional services in new ways such as a virtual dealroom). His “virtual legal practice” is what I call online legal services. He notes that “commoditised legal products” delivered over the web have not been very successful.

While that is consistent with reports I have heard elsewhere, that has not stopped firms from trying. In 2003, I identified online legal services from Allen & Overy, Foley & Lardner, Mayer Brown Rowe & Maw, MinterEllison, Morgan Lewis, PortfolioIP, ReedSmith, Shaw Pittman, VisaNow, and White & Case. Elsewhere on this site, I maintain a list of online legal services. (Note that inclusion in 2003 of a firm does not necessarily mean that the service offered in 2003 was new - I may only have come across it then.)

The bad news is that uptake is slow. The good news is that there is likely still a big opportunity for growth, both as firms find the right formula for online services and as corporate clients recognize that automated systems offer a promising way to deliver more legal advice for less money.

In celebration of Law Technology News’ 10th anniversary edition (October 2003), former managing editor Robert J. Ambrogi posed two questions to a dozen plus people, including me, who are deeply involved with legal technology. In The Future, The Past, Ambrogi asks one question about the future and one about the past. Excerpted here is the first question about the future and my answer. My next blog posting will answer the question about the past. [Note that answers were intended be very short.]

How will technology most significantly impact law practice over the next decade?

Large companies face tremendous risks for not complying with the law; at the same time, they are trying to reduce legal costs.

These pressures will lead them to begin using “embedded law systems.” Whether for preparing documents, managing contracts, administering benefits, tracking visa applications, or complying with regulations, the systems that run corporations will increasingly embed legal rules and reasoning.

This will reduce the demand for some routine types of law practice and create more competition for high-end work that cannot be automated. A key question is who will provide the content and expertise to drive the automated systems: law departments, law firms, publishers or new entrants in the legal market? The lawyers who work on these systems will need to develop new sets of skills, ones that facilitate translating legal expertise into systematic frameworks.

Why are there so few commercial online interactive legal advisors (online legal services)? One explanation is lack of demand. This seems unlikely. Both corporations and consumers are desperate for affordable advice and, unlike lawyers, seem not to care who provides it or how. Lack of an appropriate software platform is almost certainly not the explanation. Document assembly systems and expert systems are well-established.

Another explanation is that the expense to build interactive legal advisors outweighs the return. Translating legal expertise into software is hard work; so are marketing, distribution, and maintenance. It seems likely however, that for “horizontal” legal topics - those that affect every business such as employment law - the size of the market would cover development costs. Is there someone who could develop and profitably market online advisors?

Law departments – the natural customers and users of such systems – do not typically have the people or budgets to develop systems on their own. They cannot amortize development costs over a big enough base. Law firms have the domain expertise but lack the ‘knowledge engineering’ skill to translate the expertise into systems; they also have no marketing and distribution capability. Legal publishers have the competency and resources to create online advisors. That they have not suggests either that they think sales would not cover development cost or that they have better investment opportunities.

Enough law firms have experimented with online advisors that it is not clear many more will. A legal publisher could yet step forward. Or an entrepreneur might find a way, for example, by partially funding a development effort via pre-paid subscriptions from large law departments. The market has been very slow to develop but could tip very quickly; one demonstrated success could cause a rush into the space.

Law.com reports in Group Alleges Document Prep Service Provides Legal Advice by Nonlawyers (9/24/03) that the Texas “Unauthorized Practice of Law Committee filed suit on Sept. 17 against a California-based company, alleging that it operates a document preparation service which provides legal advice by nonlawyers.” In brief, the Texas state bar is taking action against the company We the People, alleging that the company’s service of helping consumer fill-out legal forms constitutes the unauthorized practice of law.

This may sound familiar too readers who keep track of UPL actions. Several years ago Texas tried to ban self-help publisher Nolo in a UPL action. After a public outcry, the Texas legislature intervened to change the law and make clear UPL did not apply to publishers of self help books. See a summary of what happened on Nolo’s site.

As I pointed out in my posting Online Legal Services for Consumers of 12 June 2003, large law firms that offer online legal services to their clients probably do not have to be concerned about UPL statutes. Where a service is delivered in the context of an attorney-client relationship, especially if in-house counsel is involved, it’s not clear the UPL statutes apply. (Disclaimer: I am not providing a legal opinion in saying this. This is merely my understanding from talking to several lawyers over the years about this issue.)

On a personal and editorial note, I find this Texas action disturbing. On the facts, it is not obvious to me that helping a consumer fill in the form can be considered practice. Even if it is, it appears to me a simple case of lawyers erecting an artificial barrier to entry against non-lawyers. When state bars focus their energy on lower cost alternatives than seeing a lawyer without a demonstration of actual harm while at the same time ignoring the incompetents in their own rank, it cannot but help smack of self-interested protectionism.

In a press release dated September 10th, Morgan Lewis announces Morgan Lewis Resources, the firm’s “NEW ENTERPRISE TO ASSIST COMPANIES WITH FEDERAL COMPLIANCE NEEDS.” According to the release, “Morgan Lewis, one of the 10 largest U.S. law firms, today announced the launch of Morgan Lewis Resources, a major initiative to help corporate clients meet their increasingly demanding federal regulatory requirements by providing companies a full spectrum of legal risk containment products and services.” It quotes the managing partner, who says “It is our vehicle for expanding the corporate compliance, training and immigration services we already provide to offer companies the higher level of protection they need today at a reasonable cost.†The service will “provide competitive, value-added products in immigration law services, employment training, OFCCP analysis and auditing, and HIPAA related compliance, counseling and training. Morgan Lewis Resources will later offer OSHA auditing, training and compliance, and employee benefits auditing and compliance.” The firm has created a separate web site at morganlewisresources.com.

Unless I missed something on this new web site, it’s is not immediately clear how this new service differs from traditional legal services. The site references the use of “templates” and “procedures” and “checklists” though I cannot tell if these differ from what many other law firms have. One explicit reference to technology is an immigration status tracking system (see Services > Immigration); another is “specialized software and census data packages” for developing “affirmative action plans specifically tailored to our clients’ needs” (see Services > OFCCP Audit).

It’s exciting to see a law firm offering a new package of “products and services.” To me, in the legal market, this would mean offering fixed-price services or using technology (beyond shared databases and portals) to deliver interactive advice or rich content. It’s possible that I missed such offerings on this web site or that the firm will offer these in the future. I look forward to seeing what innovations this service will offer in the future. From my perspective, there is much a firm could do using technology (see a list of firms offering online legal services) that would allow offering higher-value, more cost-effective guidance than is typically available today.

The September issue of American Lawyer reports, in Robert J. Ambrogi’s article Making Money Online (Finally) about a new online service, statehipaastudy.com.

Ambrogi explains that a healthcare coalition wanted a 50-state guide to medical privacy law, prior to the April 14, 2003 deadline for compliance with the Health Insurance Portability and Accountability Act. The organization put the request out to bid, which was won by law firm ReedSmith. ReedSmith, working with Hubbard One, created a web site driven by a database and that presents results in tabular format. It covers 50 states, 32 types of health care entitites, and close to 50 topics; according to the web site FAQ page, the “Privacy Study consists of a database which includes summaries of state laws and regulations that relate to the privacy or confidentiality of health information.”

The article reports that ReedSmith was paid well and that the firm has been retained by several companies as a direct result of the web site. (The full-text of the Ambrogi article appears on the ReedSmith web site.) The statehipaastudy site lists subscriptions prices: $5,000-$10,000 for a single state; $20,000 for a single organization for access to the entire site; and $50,000 for a law firm to use the site in representing multiple clients. Estimated annual update fees are less than $3,000.

This site strike strikes me as well-designed and comprehensive. I am unaware of other arrangements where a coalition of companies paid a law firm to create a web site that is sold on a subscription basis. (Regular readers of my blog may recall that Prism Legal maintains a list of online legal services.)

The article also reports that ReedSmith’s managing partner would consider eventually developing a product without industry backing. It will be interesting to see whether ReedSmith does so. Presumably, if the firm earns sufficient direct profit (from subscription fees) or indirect profit (from new matters obtained via the web site), then it will have motivation to create other content rich sites. I do not know how ReedSmith compensates lawyers, but if it is like most firms, it would need a mechanism to treat the content-creation work of another site as billable. As a general rule, unless lawyers who work on developing content for such sites are able to bill their time as if the work were an ordinary matter, there is a big disincentive to do the work.

Whatever the long-term outcome, I think that this is a good sign that online services are still emerging and proving valuable. With my experience working for Jnana Technologies, a provider of a platform for creating interactive expert systems, I wonder if it would be possible to further extend the functionality of this web site from providing information to answering questions based on specific facts.

A recent article on law.com, Online Divorce Services Spark Debate, discusses Web sites that offer consumers assistance with divorces via document creation. The two sites featured in the article are CompleteCase and legalzoom. The article explores the pros and cons of self-help sites: “Pioneers of the services claim that it is an affordable alternative to exorbitant legal fees. Many divorce attorneys say potential customers ought to beware, because divorce is a complicated process that requires legal counsel.”

Business to consumer (B2C) legal sites have raised ethical concerns since the first sites went live in the dot-boom. But business-to-business (B2B) sites, that is large law firms offering online services to their clients, likely raise fewer issues. The online services offered by large law firm typically deliver advice via in-house counsel or directly to sophisticated business users; in either event, the use of the service typical is part of an established attorney-client relationship. Consequently, large law firms offering or considering offering online services to their corporate clients probably face fewer ethical considerations than a B2C site.

Yesterday I noticed an ad in the Wall Street Journal for a new service that deliver news and quotes via instant messaging (IM). I tried it just now and it seems pretty useful and unobtrusive, at least so far.

A few years ago, most law firms would have scoffed at the idea that they would regularly send e-mail updates to clients or allow their clients to sign up for subscription alert services from the firms’ web sites. Yet many firms do this today. So, is IM the next wave? Will law firms begin to emulate the WSJ and deliver legal news via IM?

Arguably legal news and analysis requires some thought and reflection and therefore is not appropriate for IM. I suspect those same arguments were made about e-mail years back. The point is not necessarily just speed - it’s operating in the medium clients find most congenial. I now have a WSJ “buddy” name on my AOL IM list. I can send a message ("main") to receive a menu of options or a message containing my menu selection to get headlines ("1″) or quotes ("2″).

Firms that want to occupy a high share of mind of their clients should consider a service that emulates what the WSJ is doing. For clients who use IM, having the firm name right there on the buddy list (or equivalent) can be a powerful awareness builder. And if that client has a legal question…. well, I’ll let you fill in the rest.

In my prior two postings, I discuss two companies offering products designed to help prevent litigation by assisting with compliance issues. I observed that this is a space that law firms generally do not occupy. That is not entirely true. Law firm Bryan Cave is a technology innovator, having introduced its eCave suite of services some time ago. I first became aware of eCave when the firm introduced online interactive legal services a few years ago.

A recent article in CFO.com titled Learn Ethics in Your Spare , reports that “[t]he rising concern about insider training has led at least one law firm to take the unusual step of creating a Web-based ethics course to help companies train, test, and track training efforts. This do-it-yourself program, developed and sold by the law firm of Bryan Cave LLP, takes about 20 minutes to complete, and creates a paper trail.” The article also reports that Bryan Cave is talking to insurers about offering a discount on D&O policies at corporations that use the product. Furthermore, it gives the product a very favorable review, reporting that the online training is short, very well written, and easy to use. The reviewer was also impressed by links in the training to more in-depth materials.

It will be interesting to see if other firms offer online services or if the space will be left primarily to players outside the legal market or non-law firm players such as The Legal Research Center or LRN (The Legal Knowledge Company), both of which offer compliance training services.

In thinking about entering the world of online services, law firms face many challenges. One is that online services are a very different business than selling hours. Another is that the margin on selling hours is very high compared to almost any other business. What many firms may not realize, however, is the potential relationship benefits of online services and the potential ability to generate traditional legal matters.

A short piece in the June 16th Information Week titled Get A Handle On Risk reports on new Web-based self-assessment software offered by J.P. Morgan Chase to help companies comply with the regulatory requirements of Sarbanes-Oxley. I was intrigued by this since it sounded like the bank was offering an online service that has elements of legal advice.

A J.P. Morgan Chase press release dated June 10th states that “Horizon helps management document the controls established to mitigate risk, evaluate the effectiveness of business units’ compliance with defined controls, identify areas of risk which lack control procedures, and establish and monitor control action plans. By understanding the organization’s risk profile, management can make more informed strategic and expenditure decisions.”

It would be interesting to learn how much “legal” content Horizon offers. Perhaps the route to online legal services will not be through law firms, but through companies such as J.P. Morgan Chase where managing legal issues is just part of the ordinary course of business. I wonder if there is still an opportunity for law firms to offer clients an interactive, web-based service to help them comply with Sarbanes-Oxley.

Online legal services for consumers are useful and continue to abound, yet may pose serious problems. That’s the conclusion of two separate and perhaps contradictory articles: Plunging Into Paperwork - Online services can help you draft a will – if you’re careful from the June 9, 2003 Wall Street Journal (in a special section on retirement) and Law & Disorder from July 2003 SmartMoney magazine. Note that both publications are from Dow Jones (though SmartMoney is published jointly with Hearst).

The WSJ article describes several web sites that help consumers draft wills. “Depending on the site, consumers can find everything from simple, blank forms to interactive questionnaires that help tailor documents to individual needs.” The article discusses the risks of using these web sites and points out that they typically are not offering legal advice. While pointing out the many risks of drafting a will without a lawyer, the tone of the article overall suggests that it’s not a bad idea.

In contrast, the SmartMoney article is quite negative on self-help legal web sites. The sub-title is a good summary: “[T]he trail of bungled lawsuits, mangled bankruptcies and amicable divorces turned acrimonious shows just how much chaos can ensue when people take the law into their own hands.”

Are there implications here for large law firms that provide (or hope to provide) online assistance to their corporate clients? I don’t think so. The consumer space is very different. A large law firm would typically deliver an online service via in-house counsel. Use of the system would be monitored and employees would typically either be quite sophisticated users or have the option to talk to counsel or both.

The UK publication LegalIT in a June article titled Online legal services: Exploiting expertise, reports on new online legal services by Allen & Overy. For anyone interested in online legal services, this is a useful article.

The article notes that little has happened with online legal services of late (a disappointment to me, given my work with Jnana Technologies and efforts there to develop this market). The article interviewed Marc-Henri Chamay, who leads the firms online services. “Chamay argues that the only sure-fire way for law firms to sell web content is to embed this content thoroughly in their own internal processes and, initially at least, in the regular services that they sell to clients.”

It goes on to describe three new online services. One is a derivatives netting product. More information about it is available from a PDF file from the Netalytics website. The second product, CSAnalytics, also relates to derivatives. The third, Global ShareWeb , “is a knowledge repository marked up in XML and designed to feed into a bank’s risk management system or netting engines.”