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Oregon State Bar Bulletin — AUGUST/SEPTEMBER 2005

Web Wars
Online legal research at the crossroads
By Sarah Kellogg

When Cincinnati trial lawyer Joseph Shea founded his online legal research service, he knew he was "walking in a land of giants." After all, LexisNexis and Thomson West, the two legal publishing powerhouses, were as ubiquitous as Coke and Pepsi, and just as dominant.

It didn’t deter Shea, though. The civil litigator felt compelled to act. Too many times he had found himself at a conference table across from a well-heeled opponent carrying a briefcase crowded with research courtesy of the publishing conglomerates.

Shea decided he wanted to level the playing field for small law firms, giving sole practitioners and two- or three-person shops access to the same types of online legal research used by the large law firms, but at a substantially discounted rate.

To do it, Shea partnered with the Ohio State Bar Association, which committed to financing the Web-based service and created what would become the Casemaker Consortium, an online legal research library that is marketed through state bar associations.

"We try to focus on what most of the lawyers need most of the time. We’re not going to have every single thing," says Shea. "We won’t have all the bells and whistles the other guys have, but we’ll certainly have a horn. We’ve got brakes and an engine, too. You can drive this car, and it’ll do well by you."

For some, Casemaker’s business model shows both vision and audacity, especially since Thomson West and LexisNexis have had a lock on the industry for so long, thanks to their financial heft and the quality of their products and services.

Still, since going live with its online system in Ohio in 1999 and nationally in 2000, Casemaker has seen 19 states join the consortium. Although the company declines to say how many lawyers access the service or at what frequency, the experiment that began in Ohio has successfully spread from the Midwest to New England to the West Coast.

"Every single time somebody else signs on to the consortium, it’s like a snowball rolling downhill," says Denny Ramey, executive director of the Ohio State Bar Association. "People, when they get in it, turn into zealots. They can’t believe it’s this affordable and useful, so they tell their friends who tell their friends at other bars and try to get them to join. It won’t be very long before, if you’re not in it, you’re in the minority."

Whether it was by accident or a conscious choice that the large information services companies didn’t immediately focus on sole practitioners and small law firms as a viable online market, the inaction created a vacuum, and Casemaker and its low-cost or no-cost online peers — FindLaw, Loislaw and VersusLaw — filled it at the time.

Their head start would be short-lived, however. Reeling from a sluggish economy in 2001 and 2002 and having saturated the online market at large law firms, the major research corporations soon turned their attention to the smaller firms. By aggressively redesigning and repackaging their services, they are now reaching out to the more than 500,000 attorneys in small firms nationwide and hoping to collect a substantial piece of the estimated $3 billion in annual sales from the small firm market.

"I do think these smaller companies have a role to play," says David Jastrow, an analyst with Simba Information, a Connecticut-based market forecasting company that studies the publishing industry. "There are certain niche areas of the law that wouldn’t be on the radar screen of a colossal player of the size of Westlaw or LexisNexis, but ultimately there are a finite number of opportunities that can be seized. It really is a war of money and will."

Today Casemaker and the smaller online research companies — the ones that haven’t been purchased by LexisNexis, Thomson West or Wolters Kluwer, the third international player in the business — find themselves in a pitched battle with the mighty giants, and the future of online legal research in the United States remains as ever-changing and unpredictable as the technology that drives it.

The Conversion Process
Money and will can be found in abundance in the legal publishing and information services businesses, but especially money. The industry is so big it attracted international investors that sparked a wave of acquisitions and consolidations in the 1990s. Today the lion’s share of the market is owned by three companies — two of them headquartered in The Netherlands and one in Canada.

More than one-third of the $15.53 billion in the U.S. professional publishing and information market — about $5.57 billion — comes from the legal publishing and information services market, according to Simba. The science and technology market ranks second with 32.3 percent of sales. The remaining third is split evenly between medical and business publication sales.

Worldwide the top legal publishers remain the Thomson Corporation (Westlaw) at $3.14 billion in sales in 2003, Reed Elsevier (LexisNexis) at $2.43 billion and Wolters Kluwer (CCH/Loislaw) at $1.41 billion, Simba’s research shows.

The Bureau of National Affairs, an employee-owned company headquartered in Washington, D.C., ranked a distant fourth with $242.5 million in sales in 2003. Small companies such as VersusLaw and Casemaker declined to report their sales, saying it would give away too much information to their giant competitors.

For the major corporations, books remain their biggest moneymaker, accounting for $2.39 billion of sales, or 42.9 percent, in 2003. They are the go-to research tool for attorneys, librarians and paralegals in the United States, despite the rush to go electronic.

The annual technology survey by the ABA’s Legal Technology Resource Center (LTRC) shows that 75 percent of lawyers use print sources on a regular basis for legal research. Compare that to the 45 percent who say they use free Internet services on a regular basis or the 53 percent who use paid Web services.

"From almost the inception of my career in legal publishing, there’s been a discussion or school of thought that the printed word’s days are numbered," says Forrest Rhoads, a Thomson West vice president who oversees new product development. "Quite frankly, it hasn’t happened yet. I think print will continue to play a fairly significant role in legal research. It isn’t going to be growing as much as the online services, but it will still be there for those attorneys who are more comfortable with books."

Print resources aren’t a crutch for the technologically challenged — those who can’t tell a computer monitor from a television screen. They are fixtures in law school and law firm libraries because they are often the easiest and quickest way to find a particular citation or statute.

Catherine Sanders Reach, LTRC’s associate director, says while Thomson West, LexisNexis and smaller companies are making most of their primary sources available through the Internet, the conversion for secondary sources, such as treatises and periodicals, is moving more slowly.

"Secondary sources seem to be more accepted in print than the electronic format," she says. "It’s difficult to move something as complex as these resources into an online format, especially the big sets that cover areas of law such as securities."

But that doesn’t mean the online market isn’t keeping pace with book publishing or even exceeding it in some cases. Sixty-two percent of legal publishers say they are in the process of converting their libraries from print to digital, according to LTRC’s survey. In the next three years, legal publishers estimate about 43 percent of their print-only titles will be available online.

"The big thing is legal publishers have the opportunity for duality today, whereas you didn’t have the electronic option in the past. A lot of firms are ditching their reporters’ sets all together. The primary legal research materials are more and more accessed via the Internet," says Reach. "As attorneys hit a comfort level with electronic sources and the availability is there, I think we’ll see even more conversion."

The conversion process is already pumping up sales. Simba Information reported that online legal research sales continued their steady growth, inching up 6.4 percent between 2002 and 2003 to $1.52 billion, or 27.3 percent, of the legal information services market.

The U.S. legal information market is projected to grow by 10 percent between 2004 and 2007 to $6.32 billion — much of that growth coming in online publishing, according to Simba.

Sliced and Diced
Legal research’s past and present may be defined by the printed word, but its future will be defined by bits and bytes. There is no way to ignore the pervasiveness and power of the Internet as a searching and processing tool. Technology has made it possible to slice and dice the law in ways not envisioned 30 years ago, or even as recently as 10 years ago. Every single day software engineers are coming up with better ways to search, assemble and dissect case law, statutes and administrative rules.

It seems the only constant in the online research business is change. Barely a week goes by without an announcement of a new product to speed the delivery of research materials. Dozens of Internet newsletters are dedicated to keeping tabs on the changes and making sure clients are well versed on how to implement them.

Ironically, it is the complexity of technology that is driving some of this whirlwind pace. Industry bigwigs are pressuring the software and database inventors to mastermind products that can be, like the bicycle, ridden once and learned for life.

"The large firms have professional law librarians and representatives from vendors to do trainings as often as once a week," says Reach. "Attorneys at large firms can get training at their desks. There’s a reason why you get all that training. The systems are not all that easy.

"For the sole practitioners and small firms, they don’t have the time or inclination to learn how to use the systems. If they can’t figure it out in five minutes, they’re going to go up to the local law library and do their research. Can you blame them? It’s pretty hard to figure out what Boolean searches are when you don’t do them on a daily basis."

Online researching needs to be simple and complex at the same time, like a computer interface that ensures users see an easy-to-comprehend screen with straightforward and logical buttons. Meanwhile, behind the screen is a complex database that knows what you are searching for even if you don’t.

The large companies quickly seized upon the simplicity movement and the opportunity it provides for new profits. Along with designing easy-to-use systems, they are tailoring their services to the needs of niche firms that have special practice areas such as immigration, securities and bankruptcy law.

"The investments we’re making right now in transforming Thomson West from a single big system into a system that attends to specific practice areas have been under way for the last two or three years," says Rhoads. "We want to take on the coloration that is exactly what a practitioner in specific areas needs."

As large corporations moved to take advantage of these opportunities in recent years, smaller companies realized that technological advances were the break they needed to get into a market. In the past, it took a moneyed player with a massive infrastructure to print and distribute massive quantities of books. With the Internet, a smart software engineer and a relatively small investment could get you noticed.

Joe Acton, founder of VersusLaw, a Redmond, Washington-based online service, saw the opportunities as well. An attorney, and former professional hockey player and newspaper publisher, Acton was producing newsletters focusing on professional responsibility and legal malpractice when the World Wide Web took its fledgling steps.

"Joe is an innovator," says Jim Corbett, vice president of business development at VersusLaw. "He recognized early on that the electronic medium was a way to go. Pre-Internet, he took the hard copy of his monthly newsletter and put it on a bulletin board service. He saw that when you have a printed newsletter, you can only put in a reference to a case. When you offer it electronically, you can put the whole case online. That’s what the beginning of online publishing was like, people like Joe realizing this could be something big."

The "bigness" came in the obvious convenience. The Internet made it possible to live in Florida and call up statutes in Texas or court opinions in Montana or administrative rules in Michigan. Up to that point, the large research companies had spent millions in staff time and fees to retrieve paper copies of documents and to create original work, such as citatory services. It was a world the small-fry services couldn’t dream of competing in.

With the changes in technology in the mid- to late 1990s, and the growing prominence of the Web as an information resource, government agencies, state legislatures and congressional offices began using the Internet to post legal, administrative and technical documents, basically throwing open their file cabinets to the general public. Once all that information was available, the challenge became compiling and ordering the documents in a logical and easily accessible format for those lawyers and researchers who didn’t have the time to peruse every government site.

"The Internet guaranteed that you could find things out about government and the courts, and you didn’t have to be a lawyer with a very expensive book in your library to do it," says Thomas Mighell, a Texas attorney who produces an online national newsletter about legal research and publishing. "It was and continues to be the great equalizer."

High Rollers and Hip Tchotchkes
Thomson West and LexisNexis aren’t the highest rollers in the room simply because they know how to put their logos on baseball caps and key chains. Even their competitors will admit that they produce consistently high-quality services that meet the needs and go beyond the expectations of their clients. Research experts say the two companies have mastered the art of customer service as well, using a network of local staffers to cater to the needs of lawyers, law schools and law librarians.

"For in-depth legal research, free Internet sources are not going to be the most efficient way to answer your questions,’’ says Cindy Carlson, electronic resource librarian at Fried Frank Harris Shriver & Jacobson LLP in Washington, D.C. "Lexis and Westlaw are both improving access to statutes and regulations. They’re doing their best to cross-reference. They’re constantly making improvements."

But all that customer service couldn’t hide the fact that the large law firm market had just about reached its saturation point. The top 100 and 500 firms in the nation had committed themselves to one or the other, or both. Law libraries and law schools had made their deals. The low-hanging fruit had been plucked.

Online legal research wasn’t the next new thing anymore. It was what every good lawyer, especially those in the big firms, was doing, and no amount of online gadgets or gizmos was going to reveal an untapped pool of users at the large law firms.

And the new users who were entering the system — new associates — were already the focus of a massive marketing effort by LexisNexis and Thomson West that began in law school. The legal research giants spend millions every year providing free access to their services, countless hours of training and unlimited printing to law school students. Add a hip tchotchke or two, and it might be possible to engender brand loyalty for life.

"It wouldn’t be inaccurate to say they’re very much like drug dealers," says Tanya Thomas, a lawyer and law librarian at Spiegel & McDiarmid. "They get you hooked so you don’t know how to do the research any other way."

What the major research corporations had going for them as the legal publishing market turned lethargic was the knowledge that they had a chance to use their well-respected brand names and the intense loyalty of their customers to their advantage, and so they did as they went searching for new territory.

One of the first places they looked was in their own backyard. After all, they have entrée into thousands of legal offices all over the United States — offices that have many unmet technological needs. With their trusted names, and their research and development staffs working overtime exploring the potential of client development and attorney workflow software, it didn’t take long for them to come up with the next big thing: a software package to streamline the production of documents, the processing of information and the smooth running of law offices. This so-called practice management or knowledge management software allows attorneys to search external and internal data sources and to manage reams of electronic documents.

"Our full realization was that no matter how many databases we build in (Thomson West’s headquarters in) Eagan, Minn., a significant aspect of the intellectual knowledge of the law is not within our building," says Rhoads. "It’s in the law firms and corporations. Our products need to provide law firms with tools to make all of that information accessible and comprehensible."

Acquisitions and mergers in the United States and overseas have opened up new opportunities for the major players as well. Thomson acquired Glasser LegalWorks, which hosts legal education seminars, whereas Wolters Kluwer purchased the German online legal publication Verlag Praktisches.

The major research corporations also realized that there was one untapped law firm market that they needed to look at more closely, a market that had seemed particularly difficult to crack at first because the lawyers there would have less use for their product and even less money to pay for it. The market? Sole practitioners and small firms.

Small for Less
It didn’t take long for the large publishing companies to find out what their smaller rivals had known all along about sole practitioners and small law firms: whatever online research service you sell them needs to be inexpensive and easy to use. Within a short time, they were looking at creating their own low-maintenance online research sites, or buying somebody else’s.

LexisNexis chose to develop its own site. The creation of LexisONE, a down-sized copy of the top-of-the-line model, offers free state and federal case law and U.S. Supreme Court cases. It also offers customers a discounted fee to view the Shepard’s treatment on cases along with free access to Martindale-Hubbell’s Directory of Experts & Services.

"In the small law market, (lawyers) are still not up to the curve on technology adoption," says Ann Fullenkamp, who oversees LexisNexis’s small business operations. "The government sites and free sites . . . really condition the market for Web-based research. My hypothesis is people are getting used to the technology and are more willing to explore and utilize the materials we have online."

Thomson West, the granddaddy in the publishing industry at more than 100 years old, did both. It created its own specially tailored site for small law firms, WestlawPRO, and purchased FindLaw, a well-respected free site that had become a favorite among in-the-know researchers. WestlawPRO offers customized resources at fixed fees for small shops.

Known for its wide range of state and federal resources, and ease of use, FindLaw was the top Web portal for free information. Under Thomson West, FindLaw has kept its own name, and maintained much of its unique online personality.

Wolters Kluwer followed Thomson West’s example and purchased Loislaw, a subscription legal research library containing comprehensive law libraries for all 50 states and the federal jurisdictions, to complement its CCH services. Loislaw was well respected by legal researchers. It wasn’t fancy, but it had a comprehensive library for state and federal jurisdictions along with an easy-to-use search engine, so it didn’t require a master’s degree in computer science to do a search.

For the folks at VersusLaw, the sales of FindLaw and Loislaw and the entrance of LexisONE and WestlawPRO into the market were signs that they had been right in targeting the small law firms. They realized the time for congratulations was short though, as soon the large corporations would be fishing in their end of the pond.

VersusLaw reevaluated its position, beefing up services and reassessing pricing policies. The goal was to provide a solid, reliable product and then make it so cheap the customer couldn’t say no. The lowest level monthly subscription is $11.95, and the highest is $34.95.

"We decided that if we were serious about serving this underserved end of the marketplace, the small firms and single practitioners who can’t afford Lexis or Thomson West, then we would have to reevaluate our pricing program," says Corbett. "We considered being free, but instead we decided to be almost free, so if they get it and don’t use it, they won’t mind too much. The important thing for us all along is to keep our service cheaper than the biggies."

Price Matters
Make no mistake about it: price matters in the legal research wars. It isn’t always the determining factor for small and large law firms as they select their online research service, but it is part of the conversation, and occasionally it can tip the scales from one side to the other. Law firms weren’t immune to the listless economy of the last four years, and neither were their clients. Passing on the costs of pricey online legal research became more difficult recently, and swallowing the costs whole at the law firm seemed even worse.

The American Lawyer survey of librarians at the nation’s largest law firms, released last June, shows that, on average, firms spent $1.6 million, or $2,971 per lawyer, on printed and electronic resources in 2003. That is up from $1.3 million in 2002. In 2003, firms using Westlaw said they spent, on average, $1.2 million, or $2,971 per lawyer, for research, whereas LexisNexis users spent $747,248, or $1,721 per lawyer.

Even the most passionate partisans in the legal research wars believe that the high fees for Westlaw and LexisNexis aren’t sustainable in the long term.

"The biggies who really paved the way for all of us, we’re all in their debt," says Patrick Nester, chief of staff of the State Bar of Texas, which recently signed with Casemaker to provide online research services to its members at about $15 per attorney per year. "But they need to be looking at how the competition can do it so cheaply compared to them. If I were in their shoes, I’d be trying to get my prices down or compete in some other way."

The large research services say they’re doing their best to trim costs. They’re offering a top-notch service while attacking their pricing issues with special daily, weekly and monthly rates or by offering per-document fees.

"What (small law firms) would really like are cheap alternatives," says Fullenkamp. "They have a lot of cost pressures in their businesses because they don’t bill things back to their clients. . . . They don’t like to be surprised in their bills. We work really hard to make that a rare occurrence."

The rare occurrence may be one occurrence too many, says Shea. He points out that it is difficult for the large firms to compete with Casemaker’s shockingly low prices, which are as low as $8 per attorney per year in some states.

"The price is set by the bar association and is dependent on what they want to include in the database," says Shea. "It can be as little or as much as you would like. The bar associations even choose to eat the cost sometimes just to provide a new service to their members."

Critics of Casemaker and the other lower priced services say there is a reason why their subscription rates are so low — the quality of the service. The smaller online libraries aren’t nearly as complete, and the search functions are clunky. For example, they note that researchers cannot hunt across jurisdictions in Casemaker. Instead you must do a search in each of the service’s 20 states, which are part of the library.

"When you look at Casemaker, many of the materials you can find there are free on the Internet," says Fullenkamp. "There are no annotated statutes, no headnotes on their case law. . . . You can’t Shepardize on Casemaker. It just isn’t complete."

To Each Its Own
Complete or not, what the small online services have brought to the battle is a nimbleness that speeds their movements and allows for inventive thinking. Decisions can turn on a dime and with the approval of just a handful of parties because there is no bureaucracy to maneuver or time zones to cross.

Take Casemaker’s decision to market its service through the state bars. The large companies had been cutting deals with the bars for years, offering discounts for members and reduced rates for the bars themselves. But no one until Casemaker showed up on the scene ever offered the bar associations the opportunity to make key decisions and have ownership of the product.

Casemaker allowed individual state bars not only to set the price and select the library’s contents from a cafeteria-style menu of choices (i.e. state court decisions, administrative rules, federal court rules), but also to operate the research engine off their own websites. And the more states that joined the consortium, the deeper and wider the library that was available to every state.

"You can put as little or as much as you want into the state database," says Rod Wegener, chief financial officer for the Oregon State Bar. "The more you put in, the more it’s going to be. When you boil it down, even if it doesn’t have everything that Westlaw has, at $15 it’s almost free to members, and it’s worth it."

Clauses are written into the contracts to ensure that both sides are protected. If the Ohio State Bar Association or Lawriter, LLC, Shea’s company, ever decides to sell the consortium, the state bars get a cut of the profits and they get to keep their state’s electronic library.

Along with Oregon and Ohio, the Casemaker Consortium includes Alabama, Colorado, Connecticut, Georgia, Idaho, Indiana, Maine, Massachusetts, Mississippi, Nebraska, New Hampshire, North Carolina, Rhode Island, South Carolina, Texas, Utah, Vermont, Washington and West Virginia. Michigan’s information is included in the consortium, but the state bar does not belong.

"We went from not knowing whether anybody would want to do it with us to now having 20 states (21 as of this writing) and five other states in various stages of consideration," says Ramey.

If Casemaker’s global rivals are sweating the competition, it isn’t apparent.

"I don’t know that threat is the right word," says Fullenkamp. "It’s probably making me a better business partner for the small law firms. I work harder at being the kind of partner they want to do business with. We seldom lose in a head-to-head when we’re up against Casemaker."

The Golden Goose
Ask a law librarian about the status of legal research in America, and he or she will talk about the value of books, shrinking shelf space, the struggle to keep spending in check and the growing prominence of the World Wide Web. They, more than most, recognize that this is a time of transition in legal research.

The Web’s potential as both a research tool and a 21st-century golden goose have drawn dozens of companies into the fray. The Web is at once frontier town and computer science laboratory, an intoxicating blend of risk and reward for the companies looking to capitalize on its benefits. It is also the engine that will most likely drive the expansion of both sales and profits for legal publishing and information services companies, large and small.

But the benefits don’t accrue to just the small and large research companies battling it out for profits. After all, sole practitioners and small law firms have more choices today than yesterday, as do large law firms; and every improvement in the service, quality and affordability of online research can be a benefit for law firms as well as their clients.

The most valuable byproduct of these legal research wars, say observers, is that access to so much legal knowledge has the potential to improve the quality of every attorney’s work, from the sole practitioner in a one-room office to a partner at the nation’s largest law firm.

"With online tools being so readily available and easy to use, lawyers can have everything at their fingertips today," says Chris Reed, a lawyer and assistant director for information services at the Jacob Burns Law Library at the George Washington University Law School. "The same goes for the court. A judge or justice has clerks who have access to all the same databases, and they can make more informed decisions with that knowledge. I don’t know what the rules of engagement will be in the long term, but I certainly think it’s possible for all this knowledge to improve the quality of our legal system, and we’re all served by that."

ABOUT THE AUTHOR
Sarah Kellogg is a regional reporter for the Newhouse News Service. Her article originally appeared in the February 2005 issue of the Washington Lawyer and is reprinted here with permission the D.C. Bar.

© 2005 Sarah Kellogg

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