e-discovery 2.0

In their latest survey, entitled “E-Discovery Market Trends: A View from the Legal Department,” Enterprise Strategy Group (ESG) analysts Brian Babineau and Katey Wood analyze a number of interesting statistics and provide a range of insightful conclusions.  By surveying general counsel from large, mid-market (500-999 employees) and enterprise-class organizations in North America they were able to dive into a range of eDiscovery topics, including pain points, operational expenses and prioritizations on a go-forward basis.  Some are more intuitive than others, but in either case the results serve as good calibration metrics for those who endeavor to understand the corporate eDiscovery state of the nation.

“Most corporations are not tracking e-discovery spending…” In what may be the most notable finding of this ESG report, 60% of survey respondents claim that they did not track annual eDiscovery spending in 2010.  The authors correctly note that the eDiscovery process, “which can be highly unpredictable due to its project-by-project nature to begin with, has historically been outsourced to service providers charging at variable rates and often billed back to companies via their law firms.”  Despite the significant challenges of tracking eDiscovery spending, it’s nevertheless irresponsible for organizations to keep their heads in the sand regarding such a significant operational expense.

As the old saw goes, “you can’t manage what you can’t measure,” so it’s almost inconceivable to think that so many organizations aren’t tracking such a significant expense category.  For organizations who want to create a repeatable business process, as opposed to the fire-drill chaos that is typically associated with eDiscovery, it’s vitally important to accurately capture core eDiscovery metrics.  For starters, it’s useful to understand basic collection parameters, such as of the typical numbers of key custodians, average data volumes per custodian, data expansion rates, de-duplication statistics, etc.  Once these metrics are in place, it then becomes possible to manage the process and reduce costs.

Katey went on to expound in an exclusive quote for EDD 2.0:

“E-discovery can be managed as a strategic business process with an understanding of costs, performance and outcomes. When there’s no basis for reporting or comparison, it’s pin the tail on the donkey.  Corporate litigants won’t ever know they’re getting their money’s worth if they don’t even know what they’re spending.”

“E-Discovery accuracy/efficiency isn’t being measured, in large part.” Similar to the failure to measure eDiscovery costs, a full two thirds of GCs (67%) aren’t tracking the “efficiency and/or accuracy of e-discovery document review.” Until corporate counsel can link expectations of competency/efficiency with oversight and performance metrics, outside law firms will likely avoid having their feet held to the fire.  This passive stance makes transparency and process improvement difficult at best.  Additionally, this model of having expectations for efficiency, with low or no accountability, doesn’t bode well for the quick adoption of enabling technologies like predictive coding, since the driver has to inherently be the need/desire for increased efficiency (which axiomatically equals lower law firm review bills).

“Corporate information governance and litigation readiness (especially defensible deletion) are a priority, but not yet a reality.” From an internal prioritization perspective, more than two thirds (69%) of respondents identified their desire to expire/delete data more consistently, “thereby limiting unnecessary data retention for future litigation requests.”  Savvy enterprises correctly recognized the “multi-prong threat of unregulated data retention: the large amounts of irrelevant data ultimately produced for legal review, the greater difficulty of hanging onto potentially litigious documents past their required retention periods.”

This finding is very encouraging, and it ties into the upward momentum the industry is seeing regarding information governance generally – particularly linking the reactive (right) side of the EDRM with the logically connected and proactive (left) side of the EDRM.  As a good first step it’s critical to see organizations now associating good information governance hygiene with lower costs and better eDiscovery response times.  The ESG finding also triangulates with results from the recent Information Retention and eDiscovery Survey, which found that companies having good information governance hygiene were often able to respond much faster and more successfully to an eDiscovery/investigation requests, often suffering fewer negative consequences.

The only downside to the positive information governance trend, as reported by the survey, was that,

“while there are great benefits to defensible deletion, internal initiatives for implementing it too often are stymied by difficulty in obtaining cross functional consensus and authorization, particularly as it touches so many other critical processes like regulatory compliance and legal hold.”

“Legal hold processes are still very manual.” Another similar question revealed that many companies are attempting to get their information governance house in order, but are still in the very early stages.  When asked about their  current legal hold notification and tracking process, a whopping 69% of organizations said that they are using a “manual process performed by internal staff using e-mail and spreadsheets, etc.”  And, another 6% said they either had no formal process or tracking mechanism.

Given the risks attendant to flaws in the preservation process this area is ripe for improvement.  The good news is that 54% of survey respondents are intending to improve their legal hold process, with 25% planning improvement within the next 12 months.  This is a healthy acknowledgement that there is risk, and with a modicum of investment (time, personnel, procedures, and technology) the legal hold area can be brought up to current best practices.

The ESG survey is a welcome temperature gauge into the state of corporate legal departments.  It notes, in conclusion, “with the staggering growth, diversity and dispersion of data, the pain e-discovery is currently causing large and serial litigants are only a symptom of the larger problem of unwieldy and under-developed information management affecting all businesses.”  With data insights from the ESG survey, it’s becoming clear that foundational information governance elements (like deploying auditable legal hold procedures, tracking eDiscovery spending, updating data maps, etc.) are desperately needed by the many organizations that want to turn eDiscovery into a repeatable business process.  The good news is that many of these organization have improvements in mind for the next 12 months, and the challenge will be to make sure these proactive projects maintain the same level of organizational urgency that it often present for more reactive tasks.

We’ve all heard the phrase that “everything is bigger in Texas” and the little “mini-conference” held in Dallas, TX last Friday was no exception.  The Discovery Subcommittee held a small, one-day conference to tackle some big issues related to preservation and sanctions that could ultimately lead to amendments to the Federal Rules of Civil Procedure (Rules).

The Subcommittee’s primary purpose was to discuss “preservation and sanctions issues” by using the following topics as guidelines:

• The nature and scope of the current “problem”
• The role of technology
• Possible solutions to the problem

Counsel from large companies like Google, General Electric, and Exxon Mobil participated side by side with outside counsel from both plaintiffs’ and defense bar to discuss what some characterized as a lack of clear direction in the current Rules.  Government lawyers, academics, and federal judges including Judges David Campbell (D. Az.), Shira Scheindlin (S.D.N.Y.), Paul Grimm (D. Md.), John Facciola (D.D.C.), Lee Rosenthal (S.D. Tx.), Michael Mosman (D. Ore.), and Nan Nolan (N. D. Ill.) helped round out the field to make for a lively discussion with multiple perspectives represented.  The following summary highlights some of the key viewpoints and areas of contention debated throughout the day.[1]

The nature and scope of the problem

An underlying theme throughout the day was whether or not preservation and sanctions challenges warrant amending the Rules.  Not surprisingly, counsel for large organizations that commonly bear the brunt of large and frequent document requests lobbied for rule amendments that provide more certainty around when the duty to preserve evidence is triggered, the scope of that duty, and how sanctions are applied.

In support of this position, some corporate attorneys argued that the lack of certainty in the current Rules unfairly requires organizations to err on the side of preserving evidence early and broadly to avoid the risk of sanctions.  Since preserving evidence can be extremely expensive and the duty may be triggered before litigation even begins, they argue that changes to the Rules are necessary.  One corporate attorney framed the issue by providing specific details about costs associated with preserving data for different cases.  He explained that in one situation, his organization has spent more than $5 million to locate, collect, preserve, and maintain data for an ongoing matter even though a complaint has never been filed.  He went on to explain the dilemma by stating: “not preserving asks us to take a chance with our reputation.”

In response, a few attendees questioned how preservation related expenses could spiral so high even before attorney review.  Others pointed out that if the current Rules were better utilized, specifically the meet-and-confer provisions of Rule 26(f), then many preservation challenges could be minimized.  Supporters of better Rule 26(f) engagement complained that counsel for large organizations often refuse to discuss preservation related issues and thereby fuel problems related to the scope of preservation themselves.   Others suggested that if organizations enforced better information management policies instead of keeping “everything forever”, then the magnitude of the problem could be reduced.

Technology

The Subcommittee members generally agreed that the evolution of technology has led to massive data growth which creates new electronic data challenges.  Electronically stored information (ESI) is often duplicative, typically resides in many different technology systems, and can be difficult to locate on a case by case basis.  There was some thoughtful discussion about how data archiving and cloud computing technology are important tools for helping organizations manage these information problems more effectively.  Another commentator acknowledged that although “predictive coding” may be helpful for “reviewing” data, it requires significant human involvement and simply does not solve the problem at hand.

Surprisingly, aside from the comments above, the technology discussion focused mainly on the issue of what constitutes “possession, custody or control” under Rule 34 in today’s environment of social media, cloud computing, and mobile devices.  Unfortunately, there was no discussion of either the role legal technology solutions play in minimizing risk and cost or of the impact the current Rules have on public policy.  For example, the Subcommittee did not address whether organizations that invest in technology in order to automate their internal data management and electronic discovery process should be afforded more protection under Rule 26(b)(2)(B) (“not reasonably accessible because of undue burden or cost”) than organizations that choose not to invest in technology.  If an organization’s technology investment (or lack thereof) is not a factor, does Rule 26(b)(2)(B) have the unintended effect of stifling meaningful legal technology investment by some organizations?  Similarly, do advancements in legal technology diminish the need for a Rule amendment that, at its core, is geared toward reducing costs?  In my opinion, the manner in which organizations are using technology today is an important factor that warrants deeper discussion and a subject I intend to address in a future publication soon.  Stay tuned.

Possible solutions

Discussion about possible solutions to the problem revealed more about the contrasting viewpoints in the room.  Notably, the Department of Justice representatives and those typically aligned with the plaintiffs’ bar tended to lobby for better adherence to the framework contained in the existing Rules in lieu of drafting new Rules.  These folks generally appeared to fall into the “No New Rule” or “Not Yet” camp, and cited the relative newness of the 2006 Rule Amendments and the fact that only about one percent of federal cases involve sanctions in support of their position that Rule amendments are premature or not needed.  Along the same lines, many called for further study and evaluation of the issues through organizations such as The Sedona Conference and the 7th Circuit Electronic Discovery Pilot Program.  Others referenced the importance of looking to evolving case law for more guidance before moving forward with Rule amendments.

In stark contrast, those on the other side of the aisle that typically represent large organizations, lobbied for bright line rules or at least “guideposts” to provide more certainty regarding preservation.  For example, one participant suggested that the duty to preserve evidence should begin when a complaint is served.  Another suggested that the duty should be triggered when a potential litigant is “reasonably certain to be a party to litigation” – a standard that is arguably narrower than the commonly applied “reasonably anticipates litigation” standard articulated in Judge Scheindlin’s frequently cited Zubulake v. UBS Warburg line of decisions.

Those calling for more certainty regarding triggering events also provided recommendations for addressing the scope of the preservation duty and the application of sanctions.  A suggestion to incorporate language that presumptively limits the number of custodians (10) and documents (by age) met resistance on the grounds that trying to apply a one-size-fits-all rule fails to acknowledge that the facts and circumstances of every case are different and so too are the litigants.  Similarly, recommendations to limit sanctions for evidence spoliation to situations where a litigant’s conduct is “intentional” or “willful” were met with a chilly reception by those favoring better adherence to the current Rules.

Conclusion

Time did not permit comprehensive discussion and analysis of every perspective, but the mini-conference highlighted the complexity surrounding preservation and sanctions issues and revealed some polarized viewpoints about how to solve those issues.  Perhaps one glimmer of consensus was the acknowledgement that “pre-litigation” obligations to preserve evidence before service of a complaint is often challenging for large organizations.  However, whether this and other issues should be addressed through better education, more stringent enforcement of existing rules, or by modifying the existing rules to include more “guideposts” remains unsettled.

What do you think?  Please respond to the poll, above right, to let us know whether you think amending the Federal Rules of Civil Procedure (FRCP) is necessary to address some of the preservation and sanctions issues discussed above.

To join the conversation and receive automatic updates when new information is posted to this blog, please subscribe to e-discovery 2.0.

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[1] A more exhaustive list of participants and sample questions was incorporated into the Federal Rules Advisory Committee’s June 29, 2011 memorandum announcing the mini-conference.  Similarly, the events leading up to the mini-conference are described in more detail as part of my previous postings on the same subject.

It is my great pleasure to welcome Matt Nelson to the E-Discovery 2.0 writing team. Matt is our third licensed attorney and, like Dean Gonsowski and Brandon D’Agostino, will be writing on the legal aspects of electronic discovery. In doing so, he will draw upon his prior experience as a litigation attorney at Ropers, Majeski, Kohn & Bentley, and as a legal technology consultant at Kroll and Summation. He’s a really bright guy with a wry sense of humor, and I’m looking forward to hearing his perspective on the broad range of issues that legal professionals engaged in e-discovery wrestle with every day.

Given the size of our writing team, it’s worth taking this opportunity to say a few words about what you (the reader) can expect from our blog. Our team meets on a monthly basis to discuss topics of interest. In doing so, we hope to speak with one voice on broad range of issues:

• Kurt Leafstand and Venkat Rangan will write about the latest technology trends and their impact on electronic discovery;

• Brandon, Dean, and Matt will cover case law and best practices from both a corporate and law firm perspective; and,

• I will continue to write about the business of electronic discovery, and its development as an industry.

All of us aim to inform in a style that’s engaging and easy to read. We hope you enjoy reading our posts as much as we do writing them.

Every car dealer knows he should focus customers on the monthly payment, not the total cost of the car. Every credit card solicitation (or sub-prime mortgage, for that matter) starts with the offer of 0% interest, not the actual interest rate or fees the customer will pay after the first 6 months. The reason is simple: once you lease the car or put a balance on the credit card, it’s very hard to switch away when – as often happens – you find yourself paying much more than you should later on.

I was reminded of these examples when reading about Kroll Ontrack’s offer of “free ECA” and Stratify’s recent press release announcing “free early stage filtering” for electronic discovery. Taking each in turn:

Kroll Ontrack Advanceview

Based on feedback from several customers in Washington DC, New York, and the Mid-West, Kroll Ontrack often provides Advanceview at no charge. That means customers can get “custodian de-duplication” and “1 keyword and date filter pass” for free, although Kroll still charges $200-250/hour for doing the work. The resulting data set is then processed and loaded into its review platform for $1,500-$1,800 per gigabyte.

Is this a good deal? For the vast majority of customers, the answer is “no” for three reasons.

First, customers typically end up paying more than they would using alternative products. For example, in the chart below, we compare the cost of using Kroll Ontrack to that of Clearwell for a 100 gigabyte project. In both cases, we assume customers are doing de-duplication, filtering, keyword searching, first pass review, and load file creation. As with any comparison of this sort, you have to make some simplifying assumptions. For example, we excluded data hosting fees and professional services fees from the analysis.

Whether customers are better off with Kroll depends entirely on how much data is culled out for free before customers incur the high, back-end charges. Given that all Kroll is doing for free is custodian de-duplication and running one set of keywords and date filters, the typical cull rate is likely be anywhere from 20% to 50% — nowhere near the 80% cull rate required for Kroll to be more cost effective than Clearwell.

The second reason why this is not a good deal is that it gives customers no certainty about costs. Culling rates from de-duplication and blind keyword searches are unpredictable and vary widely, meaning that some projects will cost more than expected while others will cost less. But every project has budget that’s determined up front and, as any litigation support manager will tell you, you get much less credit for being under budget than you get pain for going over budget. That’s why cost certainty is one of the leading requests from anyone involved in electronic discovery.

Finally, excluding data based on a single round of keyword searches and date filters is not in line with The Sedona Conference best practices. Rather, Sedona recommends that customers iterate their keywords and culling strategies to hone them appropriately.

Iron Mountain Stratify OnPoint

It is not yet possible to do the same detailed analysis on Stratify’s OnPoint which offers “free early stage filtering”, because it’s impossible to tell exactly what that means. In its artfully-worded press release and data sheet, Stratify promises to provide “free processing and loading of unlimited data for early stage filtering”. Does that include de-duplication? Does that include any keyword searching? My guess is “no”, in which case all they are really doing for free is offering to load data into their review platform so that they can then charge you – not a very compelling offer. But if anyone does know the answer to these questions, or if Stratify would like to clarify exactly what’s being offered for free, then please let me know and I’ll post an update.

Once data is in Stratify’s system, it charges a “one-time fee starting at $500 per gigabyte” for “reviewable data”. But it does not say if that’s the only fee. What about monthly hosting charges? Fees for additional reviewers? Again, it’s not yet clear what the downstream cost of review really is using Stratify, so it’s impossible to know whether this is a good deal.

If there’s one lesson from all of this, it’s “buyer beware”. Just as when you buy a car, sign up for a credit card, or click on that offer to get more corn on Farmville, you need to look beyond the “free offer” and understand what it’s really going to cost you.

Jason R. Baron was a keynote speaker at a recent electronic discovery summit and he mentioned an electronic data discovery topic that “ought to be blogged about.”  So, with that kind of softball I had to take a swing, particularly because it’s been a topic we (at e-discovery 2.0) have been discussing lately.

The genesis of this blog (per Jason) is the recent “skepticism” evidenced by the bench regarding the defensibility of custodian based collections.  ARMA has a good piece on this very topic, entitled “Is ‘Manual’ Collection of ESI Defensible?”  The core notion is that the tried and true practice of custodian based ESI collection is now under fire by courts, which appear to be looking at this practice with an increasing level of distrust.

“While it is common for companies to use automated data-collection software and hardware, some corporate litigants opt for more informal, “manual” collection methods (i.e., searches performed by individual records custodians) when responding to ESI requests. Companies may choose the manual collection of ESI to reduce costs, particularly if they have limited levels of litigation or lower risk levels posed by the litigation itself.”

While there’s no dispute that the “automated” collection methods available in litigation software referenced above have a number of features that make this approach more efficient, the question is whether a “manual” (i.e., custodian based) collection process is somehow less defensible.  If this is truly the case, then many midsized companies without the budget to purchase such e-discovery applications will inherently be found deficient – which is a daunting notion.

Take the recent case of Ford Motor Co. v. Edgewood Properties Inc., 257 F.R.D. 418 (D.N.J. 2009) where the dispute arose out of the demolition of a Ford assembly plant in New Jersey.  Ford and Edgewood entered into a contract whereby Ford agreed to provide 50,000 cubic yards of concrete to Edgewood in exchange for Edgewood removing it from the site.  When the concrete turned out to be contaminated, the dispute started in earnest.

The crux of Edgewood’s complaint was that it was unhappy with Ford’s production and somehow suspected that the dearth of documents was due to the electronic data collection process.  Edgewood sought to “’confirm the adequacy of Ford’s manual document collection process’ by using a third-party vendor to perform keyword searches on documents not in the existing repository of ESI, but instead, documents within the possession of certain Ford custodians.”

To reconcile the dispute the court looked to the Sedona Conference’s work in the area:

“In The Sedona Conference Best Practices Commentary on the Use of Search and Information Retrieval Methods in E-Discovery, Practice Point 1 states that “[i]n many settings involving electronically stored information, reliance solely on a manual search process for the purpose of finding responsive documents may be infeasible or unwarranted. In such cases, the use of automated search methods should be viewed as reasonable, valuable, and even necessary.”(emphasis added). Once again, the Court confronts this peculiar situation insofar as Edgewood has a point that the document collection method used by Ford is not necessarily contemplated under the Sedona Principles, but that agreement by the parties at the outset as to the mode of collection would have been the proper and efficacious course of action.  However, “[a]bsen[t] agreement, a [responding] party has the presumption, under Sedona Principle 6, that it is in the best position to choose an appropriate method of searching and culling data.”

Accordingly, the court found that the lack of agreement coupled with Ford being in the best position to make a call about the methodology, was a deciding factor in generally upholding Ford’s manual collection process.

“It would be improvident at this juncture to grant Edgewood the relief it seeks when it has not shown any indicia of bad faith on the part of Ford. To countenance such a holding would unreasonably put the shoe on the other foot and require a producing party to go to herculean and costly lengths (especially in a document-heavy case such as this) in the face of mere accusation to rebut a claim of withholding. This scenario is not contemplated by the Federal Rules.”

While Ford wasn’t penalized for its manual collection, this practice has come under fire in several other opinions.  In the highly controversial case of Phillip M. Adams & Assoc., LLC v. Dell, Inc., 621 F. Supp. 2d 1173 (D. Utah 2009) custodian based collection/preservation policies were similarly under fire.

“ASUS’ practices invite the abuse of rights of others, because the practices tend toward loss of data. The practices place operations-level employees in the position of deciding what information is relevant to the enterprise and its data retention needs. ASUS alone bears responsibility for the absence of evidence it would be expected to possess. While Adams has not shown ASUS mounted a destructive effort aimed at evidence affecting Adams or at evidence of ASUS’ wrongful use of intellectual property, it is clear that ASUS’ lack of a retention policy and irresponsible data retention practices are responsible for the loss of significant data.”

Adams was in fact cited by Judge Scheindlin in her latest opus – Pension Comm. of the Univ. of Montreal Pension Plan v. Banc of America Sec. LLC, No. 05 Civ. 9016, 2010 U.S. Dist. Lexis 4546, at *1 (S.D.N.Y. Jan. 15, 2010), where she found fault with the Plaintiff’s reliance on manual collections:

“This instruction does not meet the standard for a litigation hold. It does not direct employees to preserve all relevant records–both paper and electronic-nor does it create a mechanism for collecting the preserved records so that they can be searched by someone other than the employee.  Rather, the directive places total reliance on the employee to search and select what that employee believed to be responsive records without any supervision from Counsel.

From the foregoing, it’s probably too early to call the skepticism over manual collection a trend per se.  Certainly, lobbing a preservation notice over the proverbial wall to custodians without the requisite level of supervision is a recipe for disaster.  Education (about the matter and the required tasks), compliance (with the preservation instructions) and ongoing monitoring (to ensure that compliance continues over time) are all critical responsibilities that must be thoughtfully undertaken by counsel for a defensible ediscovery process.

The question then becomes, is the problem here really about the “manual” collection efforts by the custodians or more simply the fact that they aren’t supervised with the requisite degree of care?  If this is the case, which I’d opine that it is, then “properly executed” manual collections should be fine (i.e., defensible).

But, as Ford indicates, if your company is going to rely upon a manual collection modus operandi, then it may be advisable to let the opposition in on the use of this tactic.  This approach may be mandated by local rule or it may just be the type of transparent cooperation that’s all the rage these days.

Learn More On Litigation Support Software & Electronic Discovery Litigation

As a long-time reader of The Economist, I was excited to find that this week’s edition writes at length about the exponential growth in electronically stored information (ESI), and how people are using technology to manage it.  I believe this is one of the most significant “mega-trends” impacting our economy, and I was thrilled to see it recognized by a mainstream publication. But when I read the 14-page special report, I was disappointed to find that its analysis of the legal and regulatory implications of “the data deluge” is really weak.

The survey does a good job of teeing up the issue:

The world contains an unimaginably vast amount of digital information which is getting ever vaster ever more rapidly. This makes it possible to do many things that previously could not be done: spot business trends, prevent diseases, combat crime and so on. Managed well, the data can be used to unlock new sources of economic value, provide fresh insights into science and hold governments to account.

It goes on to talk about how companies like Walmart, which has 2.5 petabytes of point-of-sale transaction data, is using business intelligence software to analyze the 1 million transactions it does every hour. By doing so, Walmart is able to improve the efficiency of its supply chain and the effectiveness of its marketing. The article also describes how companies like Amazon and Google use web analytics software on click stream data to improve their services.

What’s missing is an equally intelligent analysis of the legal and regulatory implications of all this data. The move from paper to ESI (email and files) has created a user-generated, written record of everything that happens in a company. That’s incredibly helpful when, after the fact, questions or disputes arise. Rather than relying on incomplete recollections, courts and regulators can now consult a written record – one where every document is time-stamped and very often attached to a person’s name via email. That enables judges and regulators to get better information which, in turn, leads to better decisions. It’s hard to quantify the value of that, but there’s no doubt it’s substantial.

There is, however, a catch. Because the volume of ESI is so great, it’s really expensive to gather, sift through, and then produce information. Add the requirement that the process needs to be defensible (i.e., easily explained in court), and the whole thing gets really expensive really fast. Hence the need for electronic discovery software: it’s the only cost-effective way for companies to manage their ESI from a legal and regulatory perspective.

That’s why I believe e-discovery software will be as big a category as web analytics software or business intelligence software – it’s a different side to the same coin. Or, more specifically, a different dimension to managing digital information stores which, as The Economist points out, are growing tenfold every five years.

Update: Nick Patience at The 451 Group has also posted on this topic, at almost exactly the same time as me.

Learn More On Litigation Software & Litigation Support Software.

If you have been to LegalTech before, you know that – by the end of the day – you could use a nice stiff drink to recover. So why not do it with some company? We (Aaref, Dean, Kurt, and Will) will be at the Bridges Bar at the Hilton at 7pm, and we are happy to buy drinks for the first 50 E-Discovery 2.0 readers who join us (we will have a big E-Discovery 2.0 sign on our table, so feel free to just stop by and introduce yourself). It’s a great way to meet us, suggest ideas for what we should cover on the blog, and get warmed up before going to the B-Discovery event later that evening.

Come early though. We mentioned the idea to Brandon, who runs the E-Discovery 2.0 group on LinkedIn, and he invited his group to arrive shortly after, so the seats (and the drinks!) may go fast.

It’s a new year in legal technology, and the visions of sugarplums dancing in our heads quickly give way to visions of LegalTech 2009. After all, who can help but dream about another opportunity to brave the icy streets of New York City in February? Fond memories of attempting to wolf down a stale croissant and cold cup of coffee while jostling for an uptown cab outside the New York Hilton can set even the most jaded litigation support manager’s heart aflutter.

The weather and the Manhattan traffic may remain the same, but, as we’re all painfully aware, this year’s show takes place in the context of a dramatic global recession that is having a huge impact on the legal industry’s use of technology, particularly electronic discovery. It’s in challenging times that innovation often thrives the most, so this year’s LegalTech may actually yield a surprising number of new ideas and technologies.

Innovation aside, this year’s LegalTech will likely have a bit of a different “look and feel” from last year:

	LegalTech 2008	LegalTech 2009
Dining hot spot	Le Cirque	Le Hot Dog Cart
Evening activity	Attending swanky club parties hosted by eager and generous vendors	Watching Law and Order in your hotel room while eating Chinese take-out
Cheap giveaway	Demo CDs	Devalued CDOs
Hilton elevator waiting time	20 minutes	20 minutes
Top discussion topic while waiting for the elevator	Managing the costs and risks of electronic discovery	Managing the costs and risks of electronic discovery

Some things, of course, never change. Fortunately, the team at Incisive Media has been working overtime to put together a stellar lineup of practitioners, legal experts, and judges to provide insight into some of the key issues of legal technology. While electronic discovery is top-of-mind for many, there’s a lot of more than that on tap. Key sessions include:

• Patrick Oot, Director of Electronic Discovery and senior litigation Counsel at Verizon will lead the first-ever LegalTech Town Hall meeting, to be featured on YouTube. The Town Hall will be an interactive discussion where participants will be able to submit questions in real-time to a panel of experts for immediate feedback and insight on the topics that are of top concern.
• John W. Woods, a partner at Hunton and Williams, will deliver a keynote on “How eDiscovery is Changing the Relationship Between Law Firms and their Corporate Clients”. Clearly there’s a sea change going on here, which seems to be being accelerating by the economy, and it will be very interesting to hear what John has to say.
• Finally, LegalTech would not be complete without a contribution from a leading light of the bench. And this year, none other than United States Magistrate Judge John M. Facciola of Peskoff v. Faber and United States v. O’Keefe will be presiding. Ralph Losey said he’s “just about my favorite judge of all time” and it’s sure to be a fantastic session to get up to speed on the cutting edge of electronic discovery law.

The fantastic speaker lineup, of course, just scratches the surface. LegalTech is also an incredible networking opportunity to meet with fellow practitioners and vendors. However, it can be a little overwhelming, particularly to first-time attendees. So, we thought we’d close with a video that Monica Bay put together last year that provides a quick “how-to” guide for making the most of your time at LegalTech.

As a final note, I’ll be attending the E-Discovery 2.0 LinkedIn Happy Hour before B-Discovery’s LegalTech event.  It’s at the Hilton’s Bridges Bar from 8:00 – 9:00pm on Monday February 2^nd.  Come by and say hello.  If you are not a member of the E-Discovery 2.0 LinkedIn group, sign up here.  See you at the show!

We love investing in technologies and business models that are able to shrink existing markets. If your company can take $5 of revenue from a competitor for every $1 you earn – let’s talk! – First Round Capital

At first glance, this statement may not make much sense, but I think it is actually quite profound. The idea becomes clearer when you think of it from the perspective of a customer. To paraphrase: if you can save a customer $5 by charging them $1, you have a great business. Yes, you will shrink the market, but you will blow your competition out of the water. Consider some examples:

• A small business hungry for leads pays about $1.40 for each call (or unqualified lead) it gets from placing an advertisement in the Yellow Pages, and it has to pay for the ad up front. Compare that to an average cost of 40c per click (or unqualified lead) on Google AdWords – and the 40c is only paid if someone clicks;
• When I took a 2 day trip to Guyana in March, it cost my wife 87c a minute to call my hotel using AT&T. Compare that to 28.6c a minute she could pay for the exact same call using Jajah;
• It must cost over $50 (I’m guessing) to place a personal ad in a newspaper. Compare that to a zero cost for the same ad on Craig’s List. And based on my experience, Craig’s List is more effective (I know someone who met their fiancée on Craig’s List, but have yet to meet anyone for whom a newspaper worked out);
• Many companies doing e-discovery gather data based on custodians, date ranges, and keywords and send it out to service providers like Applied Discovery or Kroll at $2,000 per GB – and then wait weeks for the results. Compare that to paying $200 per GB for a (E-Discovery 2.0) product that enables you to analyze the data in-house – and gives you the results in hours.

All this begs an obvious question: how can someone offer customers the same (or, in many cases, more) value at a fraction of the cost of existing players? That’s where new technology or business models come in. Google and Craig’s List do not spend money on printing and distributing huge volumes of paper; Jajah avoids connection fees and other costs by leveraging VoIP; and, E-Discovery 2.0 products leverage the latest innovations in search, open source, web and storage technologies.

It is ironic that the technology industry is so obsessed by growth, given that its greatest achievement is often shrinking a market.

The other day, I came across the fascinating statistic that over 50% of products returned every year to stores across America have absolutely nothing wrong with them. Apparently, consumers used them for an average of 20 minutes and then gave up, because they were too complicated.

At this point, most customers of traditional enterprise software could be forgiven for thinking: “I wish I could do that.” Enterprise applications are notoriously feature-laden, complicated to use, and difficult to install. They make their users feel stupid, by presenting them with complex pictures that look like amoeba or toolbars with 150 different options. Why does enterprise software seek to punish its customers in this way?

Partly, because customers ask for it. Whether they are buying a dishwasher or an accounting application, people habitually over-estimate their ability to figure out how a complicated product works and, as a result, pay more for features that they never use. Partly, it’s because enterprise software is designed by engineers who think everyone is as technically proficient as they are, and by marketing people who view every additional feature as a new selling point.

By contrast, Web 2.0 applications such as FaceBook, Flickr, StumbleUpon, or Meebo are incredibly easy use. Even an idiot who has never seen these applications before can use them without an instruction manual or a training course. You could say that’s because they are trivially simple applications. But I think it’s primarily because, if they were not so easy to use, people would simply click away and try something else – i.e., they would die.

That to me is the real lesson that Web 2.0 apps can teach enterprise software: make something that is easy to use, easy for someone to install, and easy for them to evaluate. Get people addicted to your application because it’s so good (the average FaceBook user spends 4+ hours a day on the site). No doubt, this is harder to do with enterprise applications because they are inherently more complex. But figure out a way to hide the complexity, packaging all the functionality users need into a design that’s easy to use. This is a key characteristic of e-discovery software applications; it’s the genius of salesforce.com’s CRM application and Apple’s iPod; and, it needs to be a core skill of any company creating enterprise applications today.