E-Discovery Update: Perspectives on 2007 New York LegalTech

The 26th annual New York LegalTech which ran from January 29-31, showcased the latest products and product announcements in legal and litigation support technology. While some joked that Filterfresh Coffee Service was the only vendor in the exhibit floor not offering an e-discovery service or product, closer examination of the exhibitors showed continued innovation in a variety of areas, including time and billing, matter management, legal research, work product creation—and yes, electronic discovery.

1. New Names, Familiar Faces

One striking aspect of this year’s NY LegalTech was the number of new companies and products on display. After years of seeing the same companies in the legal technology marketplace, why the sudden burst of interest? One part of the answer is that not all of these new names are wholly new entrants into the market.

As the result of increased interest in the litigation support industry by private equity groups and investors, many existing litigation support vendors found themselves acquired by other businesses—or acquiring smaller businesses themselves. LiveNote, now part of Thomson, and Dataflight, now part of Lexis-Nexis, are two popular and long-standing companies whose products and intellectual property are being leveraged as part of a larger offering of diverse solutions. The legal community will be watching closely to see whether the corporate reorganization accompanying these new affiliations will affect the speed and quality of the innovation for which these and other similarly-situated companies are known. In the meantime, though, these long-standing organizations and their products are appearing under a different banner than we’ve seen them before.

In addition to reorganized litigation support providers, exhibit booths of wholly new companies and products also contained many familiar faces. In many cases, sales and development teams in these newer companies include major players from established companies who understand the legal industry and its needs, but who have parted ways with their former employers over differences in strategy, corporate philosophy—or corporate downsizing after a merger or acquisition. With a combination of deep knowledge and new investment capital, these new companies are creating new and potentially compelling alternatives to long-established litigation support platforms and service providers. Granted, the development budgets of smaller companies doesn’t match the power of Thomson West or Lexis-Nexis, but these new organizations are also free to innovate without the burden of continued backwards compatibility on their products.

2. Long Live the World Wide Web!

One technology point was abundantly clear at LegalTech 2007: attorneys really like the Internet and the World Wide Web. The past few years have seen a spirited competition between decentralized, replicating technology solutions and centralized information repositories accessed through thin or web clients. For the most part, that debate seems to have been settled; every software vendor interested in staying in business was showing how its solution is fully accessible over the web using an interface that closely resembles the local desktop experience.

Thanks to the easy availability of high-speed internet connectivity in almost any place in the United States where a lawyer might travel, attorneys have grown comfortable with tapping centralized information repositories to pull down information on demand. Assuming connectivity is available, this permits all users in a system—whether in the office or on the road—to access current information and documents without the danger of creating unsynchronized pockets of unique information. True web interfaces for products has also reduced lawyers’ dependence on cranky Citrix connections to access centralized information. By contrast, the alternative approach of replicating content to a mobile computer and synchronizing databases upon re-connection looks complicated, prone to failure, and difficult to administer.

Web-enabling litigation support databases has been a particularly successful development. Replicating large image collections is a slow, painful process—and one that’s not always possible on an hour’s notice. Making this same information available over the Internet greatly simplifies an attorney’s ability to work effectively on the road. Using a web browser as a universal interface has also made it possible to serve content using a variety of different back-office solutions. Where attorneys once spoke exclusively of Concordance and Summation as discovery document management solutions, these programs are now only two of many different solutions that are accessible through a browser. The net result, clearly seen at LegalTech, is re-invigorated competition between service providers and software developers to offer the best possible browser-based discovery document management solution. Regardless of the outcome, law firms and corporate law departments are the winners of this fight.

Certain applications, of course, will continue to support off-line access. Depositions, hearings, and trials require stand-alone systems that can reliably operate even if they are cut off from the outside world. These situations also require some means of data replication to synchronize final courtroom presentations and databases with the near-final versions prepared in advance. However, for many common or labor-intensive tasks (e.g., document review) that may take place both inside and outside the law firm home office, net-enabled solutions appear to have gained a rock-solid beachhead that is only growing in size and importance.

3. Document Review and Analytics

Several years ago, a few visionary (some said delusional) service providers began offering premium-priced analysis of discovery document collections. Rather than merely find all documents containing keyword X or that were written or received by person Y, these new services used bleeding-edge technology to identify relationships between documents and perform meta-analysis of the entire document collection, answering real world questions like, “How many people were involved in the Smith-Jones merger deal?” The technology and insight that these solutions offered were fascinating, but the price and complexity of these solutions made them suitable for only the largest, biggest-budget legal matters.

Today, document analytics have not only come down in price, but have also been accepted by an increased number of legal teams who have grudgingly admitted that discovery document collections have grown too large to permit individual review of each document. Instead of brute force, analytical technology can be deployed to organize the documents by their likely relevance and value to the litigation. Using this methodology, documents at the very end of a review project—which may or may not be completed due to time or budget limitations—will be the least likely to contain interesting or relevant information. It’s an intellectually appealing approach, and one that will only grow in importance.

In contrast to the few pioneers of a few years ago, LegalTech 2007 offered a broad range of vendors offering document analytics, both as outsourced services and as products that could be deployed inside a law firm or law department. Even more compelling, many of these vendors were able to present case histories of how real clients had used their solutions in real-life situations to add efficiency and save money. Courts have not yet ruled as a matter of law upon the adequacy of using these systems to review materials for privilege, but such opinions are only a matter of time under the more flexible approach to privilege preservation permitted by the amended Federal Rules of Civil Procedure.

4. E-Discovery, E-Proliferation

Whatever else they may have done, the amendments to the Federal Rules of Civil Procedure concerning the discovery of electronically stored information have finally forced a majority of the legal community to recognize that e-discovery is an important component of many legal matters, even outside the litigation context. As a consequence, many solutions providers are rushing to prove that they, too, are eligible to claim a piece of the estimated $1.6 billion dollars that was spent on e discovery services in the past year. The results range from carefully crafted solutions optimized for the sophisticated management of electronic information in general retention or litigation-specific contexts to simple approaches that provide specific functionality or extend existing software systems so that they can read, import, or otherwise analyze electronic documents.

As seen at LegalTech, one result is that the e-discovery market remains a bit of the Wild Wild West, with new e-discovery processing solutions and solutions providers popping up like mushrooms after a rainstorm. Though the diversity of e-discovery exhibitors would suggest that this frantic pace is likely to continue for the near future, it’s hard to see how all of the e-discovery solution providers at LegalTech 2007 will still be around for LegalTech 2008. Over time, companies will be acquired, reorganized, or simply left behind as competing technologies and vision are tested, validated, and sometimes discarded by ever-sophisticated consumers.

Outsourced e-discovery services will likely face particularly strong consolidation pressures, as law firms and corporate clients pay increased attention to developing standards and heightened expectations regarding consistency, quality, and the ability to replicate results through well-documented procedures. Right now, setting up a new e-discovery services bureau requires capital, not experience, as a wide variety of processing products are available on the open market. However, newly minted service providers that do not invest the time to fully understand the many problems that occur over the course of processing electronic documents will likely lack the specific steps and documentation required to properly support clients in those situations. As consumers of e-discovery services—lawyers, law firm clients, and judges—grow increasingly sophisticated about this practice area, “shoot from the hip” service providers may find their deliverables—and business models—challenged. Some shops will survive and thrive, but others will not.

Conclusion

Legal services in 2007 cannot exist without substantial support from technology and professionals skilled in applying technology to discrete situations. New York LegalTech showed the broad palette of options available to attorneys in any legal practice, and, unintentionally, demonstrated the substantial and continuing investment that developers and visionaries are making in the legal technology market. Both in the exhibitors and in the legal technology thought leaders who shared their insight through formal presentations and casual conversations, LegalTech showed the promise of newer, better—and less expensive—ways of helping attorneys serve their clients competently and efficiently.