Disruptive Innovation in Legal Services

Volume 1 • Issue 2 • January 2015
Cover
Main Article Image

The Pragmatic Innovator

The Innovative Practice:
Building systems thinking into law with Legal OnRamp

Sometimes it’s not where you’ve been, but what you learn along the way.

The pioneering Silicon Valley–based Legal OnRamp, founded in 2007 by Paul Lippe (HLS 1984), began life as a secure professional-networking platform for lawyers. In a growing field of contenders, the company is generally regarded as one of the first to combine technology and law.

It amassed more than 11,000 users from in-house teams and law firms around the world, but stopped short of establishing what Lippe calls “a LinkedIn-level” business model.

Lippe, never one to stand still, soon saw an opportunity. To use the language of startups, he “pivoted,” taking the lessons learned in ”ramping up” the venture to turn in a new direction.

In 2010, Lippe worked with tech giant Cisco Systems to upgrade the original collaboration platform into a highly secure document management system. Called OnRamp Exchange, or ORX, the software allows lawyers to both store and communicate about legal documents and collaborate with large teams.

ORX is “an evolution,” as Lippe describes it. “The original community model was based on a notion of general-purpose collaboration. But we found we were answering random questions,” he says, rather than creating a structured system. Now, it combines the best of both worlds, as a legal data storehouse with built-in communication tools—one that allows Cisco’s in-house legal team to work effectively on thousands of transactional documents per year from locations across the globe. Legal OnRamp also uses it to connect its own lawyers, in addition to licensing the software on a subscription basis to Cisco.

Developing the tool required a sophisticated understanding of software systems and legal requirements that is still unusual among in-house departments and law firms. Says Mark Chandler, Cisco’s general counsel and senior vice president: “They’re a pretty unique combination of deep understanding of the challenges that in-house legal departments face, combined with the ability to turn that into a very easy-to-use, easy-to-adopt tool.”

Start from the end, not the beginning

Soon, Lippe’s background led him to think bigger. The company has moved from its work with Cisco to providing ORX-led solutions to intricate legal problems such as adapting to new accounting standards, streamlining mergers and acquisition integration, and regulatory compliance. “We look for the most complex problems,” Lippe says, “because those are the places where we can differentiate ourselves.”

Lippe argues that systems thinking—combining law, technology, and processes—is the only way to handle the massive legal complexity wrought by globalization.

As the former general counsel of a Silicon Valley software firm (the company creates the software Intel uses to design microprocessors), he’s uniquely positioned to combine technology and the law and develop systems that can deal with such complexity. “It’s not even necessarily that you know how to code,” he says. “But you’re thinking about problems differently. You’re thinking about mapping and relationships. You’re not thinking so much from a reasoning standpoint, the way lawyers do, [but] in terms of outcomes and metrics.”

Law firms, he says, focus on legal reasoning, and less on end results—which can get them lost along the way. “You kind of have to start from the other end, which is—what are you trying to accomplish? How do you get there? And if you do that, you get yourself into more of a systems or design orientation.”

As a result, Legal OnRamp is an unusual combination of innovation and pragmatism. But whatever you do, don’t call them disruptors. “Disruption fits the mini-mill model,” Lippe says, “where you have a stable market and somebody comes along with something cheaper, right?”

Legal OnRamp’s Paul Lippe says, ‘We look for the most complex problems, because those are the places where we can differentiate ourselves.’

“We think the existing market hasn’t really been serving complexity well, and generally speaking the world of clients has moved much more quickly than the world of lawyers. So it’s more about catching up to the complexity of the world.”

Cisco’s Chandler agrees. “What Paul Lippe is trying to do,” Chandler says, “is simply find the best way to get the work done. The psychoanalysis that is implicit in wanting to be a disruptor isn’t as interesting to me as the process of finding the best way to get things done.”

Systems thinking and financial regulation

Now, Legal OnRamp is helping a major global bank perform the “stress testing” required by the Dodd–Frank Wall Street Reform and Consumer Protection Act, passed in the wake of the 2008 financial crisis. The legislation aims to prevent too-big-to-fail institutions by forcing banks to create “living wills” to ensure that losses in one place don’t cascade across the entire bank.

Such plans can be staggeringly complex. For Legal OnRamp’s bank client alone, Lippe says, the project comprises “a million pieces of paper”—which aren’t even paper anymore, but image files spread around the world.

“A bank might have 10,000 supplier contracts in a very complex hierarchy,” Lippe says. And all of those contracts—with everything from ATM suppliers to phone companies, in every country in which it operates—would require restructuring under insolvency.

Systems thinking is the only way to tackle the project, Lippe asserts. “The organizing idea of law is still all matters go to court. … But that’s not how the world works. If I’m a bank with 10,000 contracts, I literally might litigate one contract out of 10,000. Some banks don’t know where the contracts are physically, let alone have a comprehensive understanding of what they say … because we lack a systems orientation in law.”

It seems a Herculean effort. In order to avoid the kind of domino effect that nearly brought down the world economy following the 2008 Lehman Brothers collapse, Dodd-Frank is forcing global companies to confront their own unwieldy size. Indeed, Lippe has staffed up, partnering with more than a dozen law schools to hire 50 recent law school graduates to review the bank’s contracts. “The notion that you can deal with these things discretely,” Lippe says, “leads to systemic failure.”

It may be precisely the role of lawyers to guide the architecture of systems that will prevent similar future crises, says Barney Frank, a retired congressman from Massachusetts, in an interview with The Practice.

Dodd-Frank was written with intentionally broad strokes, explains Frank, a lead author of the legislation. “You’ve got to have some flexibility,” he insists, noting that similarly sweeping legislation, such as that crafted under the New Deal in the 1930s, has often set out a general aim and left the “blanks” to be filled in. “The more precise you are in the statute, the harder it is to adapt as you learn more and as things change.”

That means there’s a lot for banks to figure out—and, in the absence of detailed government guidance, they’re floundering. Frank has heard from a number of banks who complain they are being badly advised. Lawyers can help clients understand compliance requirements, but they should follow the spirit of the law rather than “overrestrict or overprescribe,” Frank suggests. “A good, objective operation can avoid that, too, and say no, you can do this.”

The systems thinking Legal OnRamp practices strikes the right balance, he says. “They are … encouraging a post-adversarial approach here, which I think is very important.

“They have an appropriate message, which is look—it’s now in everybody’s interest to accept the fact that this is here, and to figure out how, one, to comply with it, and, two, in the course of doing that, make some recommendations about some changes that will make it work better.”

Frank suggests lawyers can help clients understand compliance requirements, but they should follow the spirit of the law rather than ‘overrestrict or overprescribe. A good, objective operation can avoid that.’

Elementary, my dear Watson

If you’re working with big problems—and you’re Lippe—you look for ways to further manage complexity. So when he heard about IBM’s Watson at the Center on the Legal Profession’s conference on disruptive innovation in the spring of 2014, Lippe immediately saw its potential. “We’ve been thinking about Watson-like capabilities for a while. But we were pleasantly surprised at the ecosystem they’ve developed.”

In the fall of 2014, Legal OnRamp became Watson’s first U.S. ecosystem partner in the legal field. (The firm Latham & Watkins also recently signed on.) The company has begun to integrate Watson and other machine learning with its current projects.

In a demonstration, Lippe and his team showed what an “intelligent” Legal OnRamp system can do. After “feeding” Watson a particular set of contracts—essentially training it—Watson suggests to reviewers actions to be taken on each contract and estimates its own confidence in its answers and suggestions.

According to Lippe, the combination allows for a dramatically improved speed and accuracy, “especially as you start to see repetitive syntax across thousands of contracts.” At the same time, it’s not a complete solution, he acknowledges. “Machine learning is not a substitute for humans. It’s a tool to augment skilled humans.”

Next up for Legal OnRamp? Lippe hopes to ”map the contract genome,” allowing companies to work together more effectively by making contract information transparent to different stakeholders across an organization. “Once we’ve mapped 1,000 contracts for a company,” he says, “technology should be able to handle most of the next 19,000.”

In the meantime, systems thinking continues. In August 2014, federal regulators rejected most major banks’ first wave of living will bankruptcy plans—except, Lippe notes, Legal OnRamp’s current bank client. “What we can say with some pride is that our customer has had good response to their resolution plans.”

1 2 3 Single Page

Disruptive Innovation in Legal Services Volume 1 • Issue 2 • January 2015

Cover