Law firms are collecting hundreds of thousands of dollars in subscription fees from clients who use their question-and-answer advisory services based on the Web. These online "expert systems" are working right now, from local legal aid societies all the way up to international mega law firms.

"Just two years ago, this topic seemed like science fiction to most firms, but now many firms are seriously considering it," said Kevin Mulcahy, Director of Jnana Technologies in New York. "People who can sell their expertise have a great opportunity but most law firms don't realize it yet. If expertise can be doled out in a telephone conversation, it can be doled out in a web application."

Mulcahy spoke at a program on Web-based expert systems at the recent Association of Legal Administrators conference in Baltimore.

The added bonus of these expert systems is that they are a new revenue source that is not tied to billable hours. Once the investment in the online system has been made, clients can be charged a subscription fee to use it. Lawyers are freed up to work on higher-value projects, or get off the treadmill of working 2,200 to 2,400 hours per year.

The systems cost about as much as a year's salary for a first-year associate to set up.

The Linklaters law firm in London charges clients $240,000 for an annual subscription to its Blue Flag expert system, plus $60,000 in yearly maintenance for an unlimited number of users (according to the June 2001 issue of AmLaw Tech magazine). At least 20 investment banks use Blue Flag to get answers about cross-border transactions, such as syndicated loans, in 31 different countries. The firm will stand behind the answers just as it would any legal document it produces.

Davis Polk & Wardwell of New York operates its Collateral Risk Advisor to provide online legal guidance to major investment banks, including Goldman Sachs, on securities law issues.

"Online advisory systems provide more than just access to legal information. They can go one better and give clients the answers to legal questions," Mulcahy said. His company, Jnana, provides the software platform to create online advice systems.

The typical expert system is a question-and-answer session. Users go to a web site, where the expert system prompts them to explain their question. The questions vary according to the answers and facts that the users give in response. The session concludes when the user reaches the web page with the answer; a copy is typically emailed as a report to a lawyer in the firm.

A pathway to clients

"Now that corporate America has become wired, law firms have a pathway to all the employees of their clients and prospective clients," Mulcahy said.

Expert systems come in three flavors:

• Internal. The system operates on an Intranet to provide expertise and answer routine legal questions among a firm's employees. General Electric has a system for its engineers called the Virtual Patent Advisor, which is designed to help GE avoid costly patent infringements.
• Private, for clients: The system operates on an extranet. Clients pay a fee and get a username and password to log on to the system.
• Public, on a Web site: The public can visit a web site to get answers about their legal rights or complete an intake form. For example, the U.S. Department of Labor operates its Elaws Advisors site, which emulates a counseling session with a live expert on the Fair Labor Standards Act and the Family And Medical Leave Act.

Bay Area Legal Aid in San Francisco uses an expert system as an intake form. When a pro bono client calls, a Legal Aid interviewer uses the system to fill in the caller's name, a brief summary of their claim and their contact information. "The system prints out a report for the lawyer listing the caller's ID, the problem in the caller's own words, the potential defendant, the caller's desired outcome, the protected class they belong to and the evidence in favor of the caller," Mulcahy said. "This can be emailed to a lawyer who will be asked to handle the case."

Profits in expert systems

The profits, however, are found in the private client expert systems.

Blake Dawson Waldron, a large international law firm in Australia, operates its Advertising Copy Compliance Advisor to give legal guidance to brand managers at a client corporation. The managers have recurring legal questions about promotions, advertising, packaging and sweepstakes. The lawyers were not always available immediately, so the law firm created the system on the Web that is running all day, every day.

The managers visit a web site and are asked a series of questions like "does your copy make an environmental claim?" or "does your copy offer gifts of prizes?" Once they have entered enough information, they will get a binding answer. "They can be required by the company to follow the advice," Mulcahy said. "They have to do what the machine tells them."

The London law firm Clifford Chance runs an online service called NextLaw, which gives practical legal advice in many jurisdictions on setting up an e-commerce venture. Topics include online contract formation, electronic signatures, encryption, data protection and bank secrecy for 36 jurisdictions. The firm charges $3,000 per topic per jurisdiction per year for unlimited users.

The Big 5 accounting firm Ernst & Young operates an online business advisor called "Ernie." Subscribers pay $5,000 per year to log on to the system for answers to questions about tax, technology and business matters.

Cost to set up

The first law firms to create expert systems had to invest a fortune. According to AmLaw Tech magazine, Allen & Overy in London spent $15 million over two years to develop their advisory system, Newchange, along with related documents, online deal rooms and extranets. The decision trees of Linklaters' Blue Flag system has 2,500 variables and took two years to figure out.

Now that expert system "authoring" software is available, Mulcahy said expert systems can be built by ordinary firms for a reasonable investment of money and time. Jnana's authoring software costs $150,000, "about as much as a first year associate." Of course, firms must still account for the lawyer time devising the questions and answers.

"Once you have the software, you can build as many expert systems as you want," Mulcahy said. "You can create it on a PC and put it on one of your existing Internet servers." Jnana makes the software used by GE, Davis Polk and Blake Dawson for their expert systems.

Mulcahy said that expert systems lend themselves to legal questions about human resources -- like discrimination claims and employee benefits -- and environmental regulation -- like water and air pollution, noise control and natural resource extraction.

"The question is not whether computers can replace lawyers," Mulcahy said. "The question is how will lawyers use the Web to optimize the way they sell their knowledge and expertise."

Mr. Bodine is a marketing consultant based in Chicago. He operates the LawMarketing Portal web site, at www.LawMarketing.com, and is Editor of LegalBiz Online, an electronic magazine.

This article is reprinted with permission from the LawMarketing Portal, www.LawMarketing.com. (c) 2001 Law Firm Marketing Institute, all rights reserved.