A Compelling Business Case For Firm-Sponsored Self-Help Legal Software

The Realities of Modern Law Practice Dictate Innovation in Service Delivery, Such as e-Counsel

The Healthcare Industry is Ready for e-Counsel

Effective Marketing: Product Design & Positioning Strategy

Product Positioning Strategy

Business Issues of e-Counsel: How to Enhance Client Value, Data Security and Protection of Intellectual Property

Ensuring Security of Data

Intellectual Property Protections

Ethical Issues Do Not Prevent Proliferation of e-Counsel

e-Counsel is a Viable Tool to Enable Law Firms to Compete in the New Economy

ENDNOTES

Self-help legal software refers to the sharing of limited and general legal knowledge with clients, through the use of software-generated answers to their questions. Self-help law can be defined as "any activity by a person, in pursuit of a legal goal or the completion of a legal task that does not involve legal advice or representation by a lawyer." 2

A plethora of complicated legal and ethical issues accompany self-help law.  This paper addresses the economic reasons for this approach and analyzes the associated ethical concerns.  Moreover, the paper addresses these issues within the context of a software tool that is designed to be marketed by law firms to the healthcare industry.  The proposed software tool, hereinafter called "e-counsel" (trademark pending) is currently under development.

Today's digital economy is experiencing a revolution at all levels of business that is as significant as any other in human history.3  As a result of the Internet's capability to provide unprecedented opportunities for communication the legal profession, as well as medicine and accounting, is confronting enormous challenges in attempting to influence the way new technology impacts accessibility and delivery of its services.

 Governmental deficit spending, increased unemployment, low consumer confidence and global military activity frame the instability of the current domestic and global economy.  A response by both individuals and corporations, is heightened scrutiny of spending.  Corporations are reviewing business plans and cutting deeper into budgets in an effort to reduce financial risk and minimize the effects of the post 9-11 economy.

Such shifts create exceptional challenges for professional services firms in general and law firms in particular.  Market conditions demand analyses of the methods and practices employed in the provision of legal services.  In fact, many business leaders are beginning to believe that competition for the future will focus on creating and dominating emerging opportunities.4  At the core of this new approach is a belief that knowledge sharing is critical to developing closer and richer client relationships on which sustainable competitive advantage can be based.

Technology-based knowledge sharing represents an efficient means of bolstering client relationships.  While either an Internet or CD-ROM platform could be used to deploy e-Counsel, for reasons of simplicity it will be analyzed as CD-ROM technology.  Firms with superior technology usually have an important competitive advantage insofar as it is utilized to enhance value to clients.5  Most companies sustain innovation by budgeting resources committed to research and development. Without doubt these expenses are for the express purpose of seeking profit. Law firms may generally classify continuing legal education as a form of "research and development" (R&D).  But the concept of self-help legal counsel takes legal R&D to a new level.  e-Counsel, insofar as it involves research and analysis into legal and regulatory issues, could be the beginning of a new way of developing research into business.

 What can law firms do to retain current clients, attract new clients and identify new revenue streams?  There is declining demand for legal services relative to the supply of eager young attorneys seeking both professional experience and a means to pay down staggering student debt.6  This correlates to what, a national periodical reports that, several firms are doing: encouraging new associates to defer start-dates for one year in exchange for $3,000 per month and the promise of guaranteed employment in twelve months.7

 In Competing for the Future, authors Gary Hamel and C.K. Prahalad suggest that only those who can imagine and preemptively create the future will be around to enjoy it.8  Utilization of e-Counsel is one way that law firms, in today's business environment, can create that future.

 In fact, e-Counsel is not a form of new technology; it is merely a means of using existing technology to develop new revenue streams.  That insight should relieve at least some of the anxiety technophobes may have about the concept.
 State bar associations and courts cannot keep up with the regulatory demands of electronic legal services. 9  Thus, firms that are prudent and quick to move on the idea of e-Counsel stand to influence regulation to their advantage.

The healthcare industry is widely regarded as one of the most heavily regulated industries in the U.S. economy.  A brief review indicates that, at the federal level, healthcare providers and payers are subject to regulations and enforcement actions by the Department of Justice, Federal Trade Commission, Internal Revenue Service, Equal Employment Opportunity Commission and the National Labor Relations Board among others. To further complicate matters, States have overlapping and sometimes disjointed statutory schemes for regulating the quality of care, financial stability, employment matters and market forces of the nation's hospitals, health plans and physician groups.

A point of major frustration, and probably the single most contemptuous issue in healthcare, are the governmental directives that require hospitals, health plans and physicians to complete an inordinate amount of paper work for every clinical and business transaction.

 With e-Counsel, some of the regulatory compliance requirements can be more easily resolved.  In many cases it can avoid the need to make an appointment with a lawyer, take time away from the office, fight traffic or pay high legal fees.10   In the same way that TurboTax revolutionized personal income tax preparation, e-Counsel allows healthcare lawyers to better serve their corporate clients by "democratizing the practice of law."11

It is estimated that consumers are likely to spend at least $10 million each year on self-help legal software alone. 12  Because so many people are turning to self help software for legal counsel in domestic issues, the time is right to introduce similar capabilities to corporate America, beginning with the healthcare industry.

 Design Issues

Market receptivity for a knowledge management and transfer tool, such as e-Counsel, depends on product capability, introduction, branding and data regarding the target market.

The purpose of e-Counsel is to help healthcare managers understand the legal and regulatory that arise in connection with their jobs.  This will often enable them to avoid the expense and inconvenience of consulting an attorney.  In essence, e-Counsel will serve as a sort of "in-house e-counsel."  An expected by-product form use of e-Counsel is a more informed and sophisticated client.

CE-ROM and Internet technology offer a multitude of new opportunities to provide legal services to clients.  Former New York Mayor Ed Koch's site, www.thelaw.com, enables users to do basic research, obtain legal forms, or even interact with a live attorney - all for a small price.13  For only $39.95 a "web surfing legal consumer" can receive a written opinion from a licensed attorney at www.legalopinion.com. 14 Each of these sites has its own distinctive appeal for the provision of legal information.

As with any other on-line or CD-ROM product it is the result of product positioning and market research that creates the "look, touch, and feel" most likely to encourage a consumer to buy.

In an effort to maximize utility to the end user, e-Counsel should be used with another software product frequently used by healthcare managers.  Because strategic planning relies heavily upon legal services, it seems prudent to enable an interface between e-Counsel and a planning software product.  This design functionality will allow the user to assess planning matters from a legal perspective and vice-versa.

For instance, this functionality will be beneficial for a hospital or physician group in a state with a certificate-of-need (CON) law.  In a CON state, a party must submit a detailed application to the Division of Facility Services, or comparable agency, to acquire, for instance, magnetic resonance imaging technology (MRI). Typically, applicants turn this process over to a specialized law or consulting firm.  State regulations control the CON process.  e-Counsel can assist a healthcare planner in this endeavor by providing "red flag" alerts when business data, that has been entered into specific fields correlate with a particular legal or regulatory issue.  The process by which this occurs is commonly called decision tree logic.  e-Counsel will pose questions to the user that serve to build a database of operational and market information.  This information represents the user's "organizational profile".  As a user develops his organizational profile, e-Counsel continues along a decision tree asking progressively detailed questions.  Responses are recorded as either yes, no or one of several from a drop down box.  At appropriate points in the process e-Counsel will alert the user to a potential legal or regulatory issue that has been pre-programmed into the software and correlated to data entered in the organizational profile.  If a user chooses to further investigate a "red flag" legal issue, e-Counsel will, among other things, provide the following: (1) a layman's explanation of the issue (2) relevant forms and applications (3) links to web sites of federal and state regulatory agencies, potential business partners, Attorney General opinions and pertinent IRS opinion letters.  Additionally, e-Counsel will continue to raise legal issues as the user presents "what-if" scenarios during the strategic planning process.  If a user is interested in knowing the legal implications of a certain business decision then she would enter data consistent with that strategic alternative and allowing e-Counsel to present the relevant legal and regulatory issues.  Here, "content is king" because the inherent value to a user is the scope and comprehensiveness of the legal information.

Product positioning is important to commercial success because it influences the target market's attitude and perception of the product. Product positioning encompasses marketing, packaging, sales and pricing.  e-Counsel could be well positioned as a value-added service offered to existing and potential clients. e-Counsel should be marketed as a technological tool designed to enable knowledge sharing between "business partners."  The target market for e-Counsel includes healthcare executives concerned with corporate planning, operations, regulatory compliance, finance and even in-house counsel.
Typically, in healthcare organizations that do not have inside counsel, managers defer all legal questions to outside counsel.  Or worse yet, management does not consult counsel when in fact they should.  This scenario gives weight to the phrase "If you think legal advice is expensive--consider the price of running afoul of the law."  Often managers tend to avoid consideration of legal issues out of intimidation or fear of the unknown. e-Counsel seeks to allay many of those fears by demystifying the law.

As with any product or service, sales and packaging are vital elements of product positioning insofar as they influence perceived value by the client.  In order to lend credibility to e-Counsel, a senior attorney with an established health law practice should lead this function.

Conferences for healthcare executives provide an excellent forum to introduce and demonstrate e-Counsel's capability.  Moreover, e-Counsel could be included as part of a "package of services" that include, for instance, fifty hours of legal services with on-site visits and a final legal-review of a business plan for a pre-determined price.
Pricing strategy would likely consider factors such as status as a current or prospective client, the projected impact to billable hours and, of course, production expense and the potential market. A preliminary assessment suggests that the price range for e-Counsel should be between $3,000 and $5,000 per year per license. This estimate is based upon forecasted development expense, monetary benefit to the client and lost billings from the firm.

Based upon the premise that there is a latent market for legal services, a user may not think that she has a legal need but through e-Counsel's red-flag alerts she soon realizes that an issue may be more complicated than originally thought and that a lawyer's expertise is needed. Thus, by making the law more accessible, the market for legal services is expanded.

 Enhancing Client Value

Value is calculated by the equation, value = quality divided by cost. If quality increases or cost decreases then value is enhanced. Quality can be defined as the accuracy of e-Counsel's content and the reliability of the programming and hardware systems running the software. e-Counsel's cost, to the user, may be calculated in a variety of ways.  One method is to charge an annual license fee that will then be credited against fees for legal services rendered to the client by the firm.
Client feedback is vitally important to enhancing value of a product. In fact, the success of a product like e-Counsel relies substantially on development partners and beta testing.  Moreover, any upgrades to be made in the future will likely result from client suggestions.

Obviously, there will be a need to address client questions stemming from the use of e-Counsel. Legal and technical expertise is necessary for this critical function.  Because each contact with a client represents an opportunity for the firm to develop new business this "customer service" function should be tracked and managed closely.

Data security represents another means of enhancing client value.  In using e-Counsel the need to transfer information between a client and the firm may arise.  When this occurs, clients need to know that their sensitive operational, financial and legal information is secure.  Data security is best achieved by establishing an effective firewall within both the client organization and the law firm.  However, when sensitive information is relayed to a recipient, outside the organizational intranet, data encryption, passwords and digital certificates provide varying degrees of security.15

The Illinois State Bar Association issued guidelines for the appropriate use of data security measures.  ISBA Advisory Op. No. 96-10 notes that the method used by a lawyer to communicate legal information should offer reasonable assurance that the communicated information is, and will, remain confidential.16  Thus, data encryption may be required when circumstances suggest a message is likely to be intercepted or when extraordinarily sensitive information is transmitted.

A law firm, willing to invest the time and resources necessary to provide their clients with e-Counsel, must have some assurances that the law will protect against illegal duplication, alteration or usage of the content or name.   Intellectual property law protects name, original content and unique technological methods.  Copyright law protects the original work or authorship represented in the product. Copyright protection only exists under federal law and protects the author's original expression of ideas.  It does not preclude others from reproducing only the ideas expressed in the work. Nor does it does create rights against anyone who independently creates an identical work.17   Trademark protection is available for any word, phrase, logo or symbol used to distinguish a product from others in the marketplace. 18 A utility patent is granted to give an inventor the right to exclude others from making, using or selling products or processes embodying the invention through out the United States for a period of seventeen years.19  Because e-Counsel is a form of publishing it is unlikely that it would qualify for a patent.  However, there are a variety of technologies available to limit access to software to only those computers, which are listed as being used by the licensees and only for a defined period of time (i.e. one year).  In addition, certain content portions can be designated "read only" making it impossible to copy or print.  These measures serve to protect the valuable content owned by the law firm by deterring unlawful copying and use of the name and product.

Unauthorized Practice of Law

The unauthorized practice of law is the most significant legal/ethical issue confronting large-scale marketing of e-Counsel. For instance, if a firm markets e-Counsel outside the jurisdiction of its licensed attorneys, a claim may be brought alleging the unauthorized practice of law in the "foreign jurisdiction."  Moreover, if e-Counsel crosses the line from general information to specific advice a claim could be brought alleging that the software is practicing law without a license.

Practice of Law Defined

The American Bar Association (ABA) regulates the practice of law under the auspices of protection of the interest and welfare of the public.  This is achieved through the Model Rules of Professional Conduct (MRPC).  The MRPC states that " a lawyer shall not (a) practice law in a jurisdiction where doing so violates the regulation of the legal profession in that jurisdiction; or (b) assist a person who is not a member of the bar in the performance of activity that constitutes the unauthorized practice of law."20

In defining the practice of law we need look no further than the considerable volume of case law on the topic.  The New York Court of Appeals held that the practice of law includes the rendering of legal advice.21  Moreover, in New York the practice of law has been found to include the preparation of legal instruments and contracts by which legal rights are secured. 22 In California, the legislature has not adopted an official definition of the "practice of law" but rather has allowed the courts to decide the matter. As a result, the courts established a demarcating line for practicing law in California.  California courts held that the practice of law is " the rendering of legal advice, guidance, or services to a California client, not on general matters, but on matters specific to the jurisdiction." 23  However, in Georgia the legislature considered an amendment to their practice of law statute that reads in pertinent part " a person furnishes legal advice if the person provides legal information to a resident of Georgia about an issue generally covered, at least in part, by state law unless it is clearly stated that the information may not apply to Georgia, and no course of action is recommended other than contacting a Georgia licensed attorney.24 In South Carolina the posting of general legal advice on an electronic bulletin board may be permitted so long as the attorney avoids the "giving of advice or the representation of any particular client."25

State Attempts to Curtail Self-Help Law

No state rules have been promulgated that govern legal communications with respect to current technology.26  Some states have begun to address the problem through ethics opinions. 27  However, varying conclusions have been reached as to whether an attorney-client relationship is developed via self-help legal software.  Texas is leading the way in prosecuting self-help legal publishers for offending the unauthorized practice of law rule.28   In the most relevant case the Unauthorized Practice of Law Committee brought suit against Parsons Technology, Inc.  Parsons Technology makes "Quicken Family Lawyer", a self-help consumer software product offering over 100 legal forms.  Parsons claims that the product is valid in 49 states, including the District of Columbia, and that it is developed and reviewed by expert attorneys. 29 Because the advertisements "created an air of reliability about the documents, which increase the likelihood than an individual user will be misled into relying on them" the district court enjoined Parsons. Upon appeal, the appellate court vacated the lower court decision, showing deference to an emergency amendment to the statute on unauthorized practice of law. The amendment resulted from heavy lobbying by the technology industry. 30

The legal profession is not without its critics when it comes to protecting the legal cartel.  In fact, many observers contend that the unauthorized practice of law weapon is but a means of maintaining a monopoly on the distribution of legal information.  Nolo Press, Inc. publishes "Living Trust Maker", which is a type of self-help legal software that assists users in preparing their own living trust.31  In Texas, the Unauthorized Practice of Law Committee (UPLC) brought suit against Nolo notwithstanding the fact that the software produces an icon directing the user to seek professional advice when the situation goes beyond self-help.32  In that case the UPLC sought the names, addresses and states of licensure of any attorneys who contributed to the development of the product.33 "All states prohibit the unauthorized practice of law but Nolo says Texas is the only one that applies its ban to publishers."34  In fact, the UPLC has been criticized as leading a "naked attempt to shield the state's lawyers--who charge as much as $400 an hour for such fill in the blank legal services as drawing up standard wills or divorce papers--from off the shelf competition.35 "The bar may not get far with such unauthorized practice of law arguments if the product proves popular with users.  After all the primary purpose of regulating the practice of law should be to protect the consumers, not the lawyers." 36

Formation of Attorney-Client Relationship

Claims for unauthorized practice of law and malpractice presuppose the existence of an attorney-client relationship.  A relationship of client and lawyer arises when: (1) a person manifests to a lawyer the person's intent that the lawyer provide legal services for the person; and ... (2) the lawyer fails to manifest lack of consent to do so, and the lawyer knows or reasonably should know that the person reasonably relies on the lawyer to provide the services. 37  The attorney - client relationship serves as the foundation from which all responsibility from the lawyer to the client flows. Thus, it is imperative that the relationship, if any, stemming from the use of e-Counsel be under the express control of the lawyer. After all, the test to determine whether an attorney-client relationship exists is subjective and focuses on the client's belief that the relationship exists. 38

Conflicts of Interest

In providing legal information an attorney has an ethical responsibility to perform conflict checks to avoid taking on the representation of a client whose interests are adverse to another client's interests or the lawyer's personal interests.  If a lawyer is retained over the Internet the lawyer must still obtain sufficient information from the new client to perform a conflict check.  However, a conflict check is only required where a lawyer is engaged in providing individual, specific advice and representation. Thus, where no attorney-client relationship exists or where the communication is limited to general information, the obligation to perform a conflict check is not triggered.

Disclaimers - The Critical Element

A disclaimer is evidence that a lawyer did not manifest the intent to establish an attorney-client relationship as regards a specific communication.  Lawyers are allowed to avoid the creation of an attorney-client relationship by making clear that consent to form a relationship does not exist.  An attorney-client relationship is a prima facie requirement for an unauthorized practice of law claim. Thus, it is imperative for the practitioner to avoid the inadvertent creation of such a relationship by ensuring that conduct is consistent with disclaimer language.  In Parsons, the Texas legislature passed an amendment that provided " practice of law does not include the design, creation, publication, distribution, display, or sale of computer software or similar products if they clearly and conspicuously state that the products are not a substitute for the advice of an attorney."39  However, most every web site and electronic medium that offers legal advice is loaded with disclaimers. The adequacy of the disclaimers in terms of location, content and format may make some disclaimers superior to others.40 Thus, disclaimers may provide protection from claims of unauthorized practice of law and malpractice.

Because of economic shifts, client-driven business terms and a rapid increase in the number of practicing attorneys, law firms must put aside presuppositions of the old competitive world and learn to compete under new rules of engagement.  Fundamental to this new framework, is a decision that firms must make. Firms must decide whether to follow the path of commodotization, which is to compete on price and quality, or differentiation whereby success is derived from offering greater value to the client. Enhanced value increases the potential of premium pricing and long-term relationships.41
Making clients more knowledgeable about the laws that affect their business provides a basis for sustainable, competitive advantage for both the client and the firm. Self-help legal counsel, in the form of a well designed, content-rich, ethically compliant CD-ROM, represents a strategic alternative that should be considered by law firms.  This solution will add value to the operations of healthcare clients as long as (1) proper disclaimers are employed, (2) jurisdictional confines are respected (3) content does not breach the individualized legal advice threshold and (4) the content is useful.

1 Timothy McNeill is a third year law student at the University of Iowa College of Law, where his studies have focused on healthcare and corporate law. With ten years healthcare management experience he is currently leading the development of "e-Counsel". He may be reached at tlmcneill@earthlink.net.
2 Julee C. Fisher, Policing the Self Help Legal Market: Consumer Protection or Protection of the Legal Cartel?, 34 Ind. L. Rev. 121
3  How Should Law Firms Respond to New Forms of Competition?, Stephen P. Gallagher, 72-Jun N.Y. St. B.J. 24
4 Gary Hammel & C.K. Prahalad, Competing for the Future 12 (1994)
5 John W. Schiller, Licensing Intellectual Property: Legal, Business, and Market Dynamics, 5-9 (John Wiley & Sons, Inc.) (1996)
6 Christine Willard, Students Flood Law Schools, The National Jurist, October 2002 at 14 (reporting that law school applications increase 17% while two new law schools open in Florida)
7 Id. at 28
8 See Hammel & Prahalad, supra note iii, at 12
9 Wendy R. Liebowitz, Lawyers, $15.95 a Box, NAT'L L.J., Feb. 22, 1999, at A18
10 See Nye, supra note viii, at 197
11 Richard B. Schmitt, More People Consult the Firm of Cyber, Web & Dot-com, WALL ST. J., Aug. 2, 1999, at B1
12 Greg Miller, A Turf War of Professionals vs. Software, L.A. Times, Oct. 21, 1998, at A1.
13 William R. Friedman, Legal Advice $39.95, 2 NO. 10 Lawyers J.8
14 Id. at 8
15 Brett R. Harris, Esq., Counseling Clients Over the Internet, 705 PLI/Pat 135
16 ISBA Advisory Op. No. 96-10, §1.12
17 See John W. Schiller, supra at 97
18 Black's Law Dictionary 631 (Pocket ed. 1996)
19 See John W. Schiller, supra at 96
20 Model Rules of Prof'l Conduct R. 5.5 (1995)
21 Gemayel v. Seaman, 72 N.Y. 2d 701 (1998)
22 People v. Alfani, 125 N.E. 671, 673 (N.Y. 1919)
23 Birbower v. Superior Court of Santa Clara County, 949 P. 2d 1, 5 (Cal. 1998)
24 O.C.G.A. §15-19-51
25 South Carolina Ethics Advisory Opinion 94-27 (1994).
26 See Fischer, supra note 4, at 129
27 William E. Hornsby, Jr. Technology Collides with Regulations, N.Y.L.J., June 30, 1997 at S4
28 See Fischer supra note vi at 131
29 Id. at 131
30 Id
31 In re Nolo Press, 991 S.W. 2d at 773
32 Id. at 775
33 Janet Elliot, Who Practice the Practice Police?, TEX. LAW. Apr. 6, 1998, at 1
34 Associated Press, Publisher Faces Ire of Texas State Bar over Law-Advices Books (Oct. 19, 1998)
35 John Greenwald, A Legal Press in Texas, TIME, Aug. 3, 1998, at 51
36 BLI IL-CLE 1-1, Richard Warner, Ethical considerations of Practicing Law Online
37 Restatement (Third) of Law Governing Lawyers Sec 26 (Proposed Final Draft No. 1, 1996)
38 Manual on Prof'l Conduct (ABA/BNA) 31:103 (1989)
39 See Fischer supra note vi at 132.
40 Kenneth L. Carson, From the Storefront Clinic to the Web Site: Liability Consideration for Attorneys Who Give Free Advice, 42-Jun B. B.J. 18
41 See Gallagher, supra at note i