Legal Forms for the Price of a Song on iTunes?*

Legal forms, without the legal advice or assistance of a lawyer, continue to decline in value. As a pure digital product, a legal form follows the price curve of other digital goods eventually approaching zero.  Several new start-ups in the legal industry will accelerate this trend.

Docracy is a new legal document start-up, founded by Matt Hall and John Watkinson, that grew out of a TechCrunch Disrupt Hackathon in New York City. The idea is to provide a free depository of legal documents that meets the needs of small business and start-ups which are crowd sourced by individuals who register for the site. The concept is to provide an open source site for legal documents in the same way that GitHub is an open source site for code. The company is venture funded First Round Capital, Vaizra Seed Fund, Quotidian Ventures and Rick Webb by a group of investors who see opportunity in disrupting the legal profession. The documents are largely flat forms (MS Word or Adobe .PDF File format), with quality control provided by the "community." It's not clear yet what the business model for this site will be. Online signing of legal documents is coming.

A second legal document start-up has emerged out of the New York City start-up web scene called Paperlex  .  Paperlex is also targeting the small business market. This site will contain standardized legal documents that can be modified within the web browser. A user will be able to store all of their documents online in their own private and secure web space, will be able to collaborate with third parties, and will have the capacity to execute/sign documents online.

Rather than crowd sourcing the legal form content, Paperlex will provide their own libraries of standard forms. Alison Anthoine, Esq., the CEO and Founder, hopes to provide an accessible legal document portal that small business can easily use with their customers and other parties at a cost that is much less that the cost of a custom document crafted by an attorney. The business model for Paperlex is a Saas subscription service provided for a low monthly fee.

DocStoc is another document repository that includes not only collections of legal documents, but collections of documents in other categories as well, such as human resource, travel, and personal finance documents. Documents are for free or can be purchased. The site is also built on crowd sourcing principles. Users can contribute documents and sell them through the site, with DocStoc taking a cut. Most documents are not automated and are provided in either MS Word or Adobe .PDF file format. However, a new feature called "custom documents" enables the user to answer an online questionnaire which generates a more customized document. The user can view the assembled document before making a decision to purchase a monthly subscription.Monthly subscriptions range from $9.95 a month to $39.95. The site claims to have 20,000,000 users.

Docstoc, Inc., was founded by Jason Nazar (bio) and Alon Shwartz (bio). The company was selected in September of 2007 to debut its product at the prestigious TechCrunch40 Conference. The platform was subsequently launched to the public in October 2007.

Docstoc is a venture backed company (Rustic Canyon) and received funding from the co-founders/investors in MySpace, LowerMyBills, Mp3.com, PriceGrabber and Baidu.

WhichDraft.com , founded by Jason and Geoff Anderman, brothers, and both attorneys, offers free contracts that can be assembled within the web browser. Legal documents can be easily shared with third parties, and you can build your  own Question and Answer templates. A nice feature enables a user the compare any two versions to see new and deleted text in the fee legal form. 

By A Legal Forms PLan frm MyLawyer.comMyLawyer.com, our  own consumer legal document portal, also offers legal document plans that are libraries of automated legal documents that when purchased in a bundle are less than the cost of a song on iTunes*.

 

 

In the nonprofit sector, LawHelp Interactive, a unit of LawHelp.org,with funding from the Legal Services Corporation, [ See Technology Initiative Grants ] has been working with a legal aid agencies nationwide to help the automate legal forms and publish them to state-wide legal form web sites which are available to any one within the state. The program is not limited to low income people. Hundreds of thousands of free legal forms are now created annually in more than 34 states. LSC has invested millions of dollars in the development of interactive legal form sites over the past 9 years.

Courts have also jumped into the free legal forms distribution game in response to the hoards of pro-se filers looking for free legal help. See for example: Online Court Assistance Program in Utah and Maryland Family Law Forms .

These free legal form web sites raise some interesting questions about the future role of the attorney and the changing nature of law practice.  What role will the lawyer play in this changing environment?  What is the impact of these relatively new sources of free or low cost legal forms on law practice, particularly the practice of solo and small law firms? Our own research provides support for the fact that solos and small law firms will continue to loose market share to these new providers.

"Unbundling" legal services by providing legal advice and legal document review for legal forms that clients secure from another source, may be a way of expanding access to the legal system, but it is also disruptive of law firm business models,  just like iTunes* was disruptive of the bundled album approach of the music industry. Value is shifting from the lawyer to the consumer and non-lawyer providers of legal forms. I can hear the sucking sound as law firm business models collapse.

Some questions to think about:

  • What risk do consumers and small business assume when they use a legal form without the advice or review of an attorney? The answer depends on the type of form, its complexity and the complexity of the transaction. If a user represents themselves in their own relatively simple name change, and their name gets changed by the court successfully,  then one can assume that self-representation worked.
     
  • But what about a Shareholder's Agreement, where terms have to be negotiated, and the standard document doesn't include the particular language required by the parties to reflect their intent? Should the parties now draft their own language? Should the parties simply ignore the need to include special language that reflects their intent hoping that there will be no situation in the future that will create a conflict between the shareholders because of a failure to include the language?
     
  • Who should negotiate the terms of the Agreement? The lawyer or the principal? Who would do the better job? How much shuld be charged for a successful negotiation?
     
  • How should the lawyer price services, when the client comes to the lawyer with their own standardized form and asks the lawyer to review it?
     
  • Will the lawyer refuse to serve the client, unless the client uses the lawyer's form or document?
     
  • How important is the insurance that a lawyer provides that the document or form is valid for the purpose intended, accurate, and reflects the intent of the parties?
     
  • Lets assume that the 85% of the legal form content in many categories of documents is identical. [ This is what Kingsley Martin from KIIAC has concluded and he should know ! ] But 15% consisted of critical variable language not susceptible to easy document automation. Should the attorney charge on a fixed price for the entire project as if she drafted the entire agreement, although she only worked on several paragraphs? If the agreement fails because the variable paragraphs are incorrect for the particular case, why shouldn't the attorney charge as if she he worked on the entire agreement?

If you have thought about these questions, and have some ideas on the impact of free legal forms on the legal industry, please share them here.

Document Automation as  DisruptuveTechnology

 

*iTunes is a trademark of Apple, Inc.

 

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Comments (7) Read through and enter the discussion with the form at the end
Michael E. Gruen - January 16, 2012 3:59 PM

Thanks for the mention, Richard!

A minor point of clarification: While Paperlex provides templates for our customers use, many customers opt to upload their own contracts and templates rather than use ours. Paperlex helps primarily with the management of a contract through its lifecycle:

- template-to-contract creation
- versioning
- execution
- reporting and search

We do not sell contracts.

Great summary of the market! I'm excited to see the energy focused on reducing legal document inefficiencies.

BeiBei Que - January 16, 2012 4:07 PM

What is needed to support the legal forms movement is an index or score that demonstrates "need for customization". For example, Articles of Incorporation would have a score of 1, which stands for minimal need for customization. Shareholder Agreement, on the other hand, would receive a 10, which represents high risk and high need for customization. After taking this score into consideration, the consumer can better assess which forms to DIY and which ones to take to a lawyer.

Andrew Rogers - January 16, 2012 6:07 PM

Very timely. I had a client just yesterday whose partner was stealing clients from the business. Unfortunately they had modified the expulsion and break-up rules so badly that none of them worked.

Both partners held MBA's. The precedent they had downloaded came from another jurisdiction, but should have been able to be adapted.

Who is going to test that the final products actually work before they get to crunch time?

Boyd Butler - January 17, 2012 6:17 AM

Is a standard document which may be found to be wanting, better than no document at all? I think this is the market these new online documents will address.

It seems to me that low or no cost forms adapted/reviewed by qualified and quality lawyers is the service to go for and fast.

Get clients in for a penny and upsell them for a pound is a smart strategy.

Backsource the penny work and automate the upsell.

Pam - January 17, 2012 9:08 AM

It's wonderful that you included the nonprofit sector. While LawHelp Interactive is used by individuals (primarily low-income), it's also leveraged by legal aid and pro bono attorneys hoping to increase efficiency and thus aid more clients. I did want to point out that LawHelp Interactive is a project of Pro Bono Net, which also developed and manages LawHelp.org.

Ken Adams - January 17, 2012 10:29 AM

Richard: This post assumes that legal forms are a commodity. They most certainly aren’t.

Even that most rudimentary of contracts, the confidentiality agreement, raises very subtle issues and can be adjusted innumerable ways to reflect different circumstances. Furthermore, the language used can fall anywhere along a spectrum from incoherence to rigorous clarity.

So if anyone offering contracts online wants to attract sophisticated users as opposed to ill-informed consumers, they’d have to offer the following: (1) technology that allows for a decent amount of customization; (2) content that provides a decent amount of customization; (3) substance that addresses the issues comprehensively; (4) guidance as to choices offered; (5) language that complies with a rigorous set of standards; and (6) credentials suggesting that it would be reasonable for users to take the leap of faith required to use their service.

There’s plenty of dubious stuff out there. Take, for example, Rocket Lawyer’s confidentiality agreement, which I reviewed in this blog post. Or DLA Piper’s “Document Factory,” which I reviewed in this blog post. And in 2007 I wrote about docstoc in this blog post.

I haven’t written about any of the other services you mention. I might if any of them attracts sufficient attention. To do so, I think they'd have to come closer to meeting the criteria outlined above.

I like to think that my own venture, Koncision Contract Automation, is the only one that comes close. But putting together Koncision product (currently just a confidentiality-agreement template) involves too much effort, in terms of developing the technology and formulating the content, for us to be able to offer it for a song (other than when running various promotions). If people want this sort of quality, it comes at a price. And although that price is a bargain, it’s not nothing.

I have no idea which services, if any, will attract sophisticated users. But one shouldn't have any illusions as to what's currently out there.

Ken

Andrew Mitton - January 17, 2012 4:23 PM

I can see why these services are sprouting all over the internet. The traditional law firm running on the billable hour is too expensive for the typical small business owner. They're too expensive because they are inefficient when it comes to contract drafting. And worse yet, a contract from a traditional law firm is not that much better than what you get from these online services.

But these new online services don't solve this problem. A small business owner has no idea if they have the right contract. When he or she signs the contract, they don't have any idea whether the contract meets their needs. I've had a number of clients who have used LegalZoom and told me that they get their documents and wonder whether it's right. These services are like a coach who provides its players with an offense that gets them to the 20 yard line and then says, "you're on your own from here."

That's where I think the sweet spot is: creating a web application that allows a small business owner to do most of the work on his or her own, then providing legal advice and coaching with the form. In other words, the system gets the client to the 20 yard line and the lawyer gets the client into the endzone.

Koncision is probably the best yet for this. The only drawback to Koncision is that it only has one document. I think these sorts of services need to provide a whole package of forms, questionnaires, and checklists in a web application. For example, in a purchase and sale the system includes confidentiality agreements, due diligence checklists, purchase and sale agreements, a letter of intent, non-compete agreements, financing documents for owner-financed transactions, and all the other documents needed in a typical transaction. Of course, all of this comes with an experienced attorney to coach the transaction.

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