Strategic Legal Technology

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.

In a November posting, Portals and KM, I discussed how law firms should think about portal strategies in connection with knowledge management. A column in Portals Magazine, Viewpoint: Maximizing the Movement, by an Accenture consultant, argues that KM can justify portals. 

The column opens with an interesting statement: “It is a dangerous time for portals. We have been hearing the hype for two years, and organizations are now looking for the value. ” The author goes on to argue that KM, which previously went through hype, is now delivering business value, in part because the KM can be delivered via the portal: “By integrating knowledge management capabilities with specific business processes, the portal becomes a significant way to meet and address these concerns but getting started may be confusing. ”

To clear up the confusion, he suggests a seven step process to align KM, portals, and business processes. I don’t agree with every detail in the list, but do agree with the author’s emphasis on defining needs, establishing metrics, starting with a pilot, and managing the cultural changes. For me, this column just reinforces my view that portals are not a magic answer - it’s what they deliver that’s important.

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.

An article in LegalIT (a UK publication) provides some good analysis and practical tips for law firms considering outsourcing non-lawyer functions to offshore locations. The article also helped me see a connection between offshoring and adopting new technology. 

Outsourcing: Quantifying offshore risks, posted on February 5th, explains that many UK firms are considering offshoring but that achieving its benefits may be harder than first appears. The article explains “danger signs” such as under-estimating the impact on the firm and failure to test adequately. It then describes four steps such as designing the framework and managing the transition that are necessary for offshoring to succeed.

I found two specifics of particular interest. First, the article notes that a hidden cost of offshoring is failing to improve “internal processes, which in many cases need to be improved” and that “using offshoring in the belief that it will provide a quick fix to fundamental process issues is wrong.” In my view, this is true for any “automation” project. Just applying technology - or offshoring here - is not enough. Achieving real benefit from technology or outsourcing typically means “business process re-engineering” or at least confirming that existing processes are efficient.

And second, the article notes that offshoring requires changes in how people work and managing cultural changes are tricky. The same is true for many new technologies. It may be hard to remember now, but many firms struggled to adopt e-mail. And cultural issues are a major topic of discussion among knowledge managers.

So reading this article made me realize one reason I found the offshoring topic interesting. I had not articulated this to myself previously, but offshoring raises many of the same “change management” issues as do new technologies. The benefits are potentially great, but they are not free, and good planning is required.

Perhaps the “hottest” area in legal technology right now is discovery, which is increasingly shifting from paper to digital. There seems to be activity on many fronts.  

At the Legal Tech show last week, there were many vendors offering a range of solutions. Almost every legal publication I read regularly has a range of articles on electronic discovery. And law firm technology managers are increasingly focusing on how best to serve clients in discovery and on their own records retention policies.

Those following electronic evidence discovery may be interested in a recent article appearing in the ABA Journal eReport. I recently spotted on LawTechGuru a reference to UNLOCKING ELECTRONIC EVIDENCE - ABA Task Force Offers Draft E-Discovery Standards, which is an article about proposed ABA E-Discovery Standards (note that this is a PDF file on the Federal Judicial Center web site). The article summarizes the key proposals. Separately, another set of potentially influential e-discovery principles was published in January by The Sedona Conference.

It will be interesting to see how court rules and decisions evolve over the next couple of years. Law firms that want to serve their clients effectively should be sure to have a good grasp of the law concerning and the technology options to manage electronic discovery.

“Social Networking” was front page business section news in the New York Times yesterday. Broadly speaking, it’s a form of knowledge management in that it can facilitate relationship management and expertise location. But will it really work? 

The idea of social networking is that you can tap into friends of friends for business purpose (along the lines of the six degrees of separation theory). The New York Times article, “Social Networks: Will Users Pay to Get Friends?,” raises the question “whether social networking [web] sites can ever make a lot of money by connecting friends of friends in mini-networks of trust.” It explores the arguments on both sides of the question but, in my reading, leans toward the view that the answer is no.

I am listed on Linkedin, one of the companies the article mentions. While there is an element of fun, if not competition in seeing how many connections one can list, I have not yet used Linked in for business purposes. I have neither issued a request to connect to someone nor received one. I have no complaint about Linkedin; I suspect I’d have the same reaction using the competition.

Social Networking is not limited to start-up web sites. Interface Software’s flagship product Interaction offers social networking features. A third-party white paper on Social Networking and Interaction is available free with registration. In my opinion, the paper is a bit thin on details and examples, but for those interested in the topic, it is worth at least skimming.

For law firms, which depend on personal relationships to maintain and generate business, the idea of social networking is critical. Whether it can translate to software, however, and the changes in behavior implicit in software, is a question that remains unanswered.

Effective knowledge management requires a multi-prong approach: collecting documents, identifying expertise, capturing context, the ability to browse and search the materials collected, among others. An important element of any KM system is the ability easily and effectively to conduct full-text search across multiple collections. A recent article describes how (Cleary, Gottlieb, Steen & Hamilton is addressing the full-text search aspect of KM. 

In The Engine That Could on law.com (2/5/04), Brenton B. Miller, director of knowledge management at Cleary, writes about how and why his firm acquired a full-text engine to search their knowledge repositories. Miller describes how the firm has created numerous useful KM systems and points out that

“We have become victims of our own success, however. With dozens of intranet practice sites and Notes-based discussion forums and other databases to choose from, our lawyers are often baffled by where to begin and frustrated with the incompleteness of any one internal content source. ”

To address this issue, his firm decided to acquire a full-text engine that would index the multiple forums and databases and produce useful hit lists. Miller describes the evaluation process and selection criteria, which included integration with their document management system, effectiveness of the search results, and various technical considerations. Though the project to install the full-text engine is still underway, the results look promising.

The approach at Cleary is a good illustration of the multi-prong approach. The firm appears to have various “human processes” in place to create valuable KM content. Now they are adding “automation” in the form of sophisticated search to provide better access to the collected content.

In a Complex World, Even Lawyers Need Lawyers (New York Times, 2/3/04) reports that an increasing number of law firms are creating the position of general counsel to advise on ethics and other issues. It is possible that the GC could become a proponent of knowledge management. 

I do not claim expertise on the details of ethics and conflicts rules, but it strikes me that a KM system could help manage the legal risks a law firm faces in three ways. First, a KM system could be a source of information to check for the existence of parties that might create a conflict. One type of KM system is a transaction database that tracks deals. In some firms, these databases include party names and the record is created or updated at the end of the deal. In theory, a firm should update its conflicts checking system with any new parties after the matter is opened. But it certainly would not hurt also to check transaction databases for party names.

Second, a KM system might also help avoid positional conflicts. Positional conflicts arise when a firm inadvertently takes positions on both sides of an issue.

And third, a KM system can reduce the chance of malpractice by arming lawyers with vetted legal know-how.

I would not try to sell a law firm on KM based on these arguments. But a GC trying to managing his or her firm’s legal exposure might do well to consider how KM systems could help.

You are probably familiar with the concept of open source software (Linux, for example, or WordPress, the software I use for this blog). Could the concepts behind and the advantages of open source software apply to law? From a client’s perspective, open source transaction documents could be a big cost saver. I recently came across an interesting set of documents that are, arguably, a form of open source law. 

Open source software offers several potential benefits:

It seems to me that these benefits could apply equally to the law itself, or at least to aspects of it, particularly transaction documents. Why should every lawyer and firm have its own “boilerplate” language. I’m not minimizing the need for customized documents. But where a lawyer is not trying to achieve anything beyond creating a standard right, obligation, or protection, why not use a standardized approach?

I first started thinking about this concept after reading a proposal by Marc Lauritsen of Capstone Practice Systems. Marc proposed an open source approach for legal applications software.

I recently came across what may be a good example of open source law: The National Venture Capital Association has created a set of model documents for venture capital financing. NVCA says the aim of the documents is to “reflect industry norms; be fair, biased toward neither the VC nor the entrepreneur, consistent with industry norms; present a range of ‘typically seen’ options (again, consistent with industry norms); and include explanatory commentary where necessary or helpful.”

Regular readers of my blog know that I am not in the habit of long quotes, but I think the rational stated on the web site is worth reproducing here:

Annually, our industry closes several thousand financing rounds, each consuming considerable time and effort on the part of investors, management teams and attorneys. A conservative estimate is that our industry spends some $200 million in direct legal fees annually to close private financing rounds. In an all-too-typical situation, the attorneys start with documents from a recent financing, iterate back and forth to get the documents to conform to their joint perspective on appropriate language (reflecting the specifics of the deal and general industry best practices), and all parties review many black-lined revisions of the documents, hoping to avoid missing important issues as the documents ooze to their final form. In other words, our industry on a daily basis goes through an expensive and inefficient process of “re-inventing the flat tire.”

It is our hope that the availability of an industry-embraced set of model documents which can be used as a starting point in venture capital financings will

reduce the time and cost of closing financings

provide all parties with the most current set of best industry practices

enable all principals to focus on the high-level issues and trade-offs

reduce the time-consuming and bleary-eyed review of hundreds of pages of documents

prevent slip-ups from creeping into the final closing documents

eliminate legal traps for the unwary (e.g., unenforceable or unworkable provisions)

These are all great reasons to think more about the idea of open source law. The same rationale applies to a range of transaction documents. What is particularly interesting is that many of the law firms that participated in this project are AmLaw 100 firms.

From a client’s perspective, the economics of this approach seems compelling. Again, I stress that customization is required. But if clients could start with well-established and well-understood documents about which there was general agreement, it would lower costs and allow lawyers to focus on crafting those clauses and paragraphs that really do require careful customization.