Be a smarter legal leader

What happens when AI successfully passes the bar exam? What does that mean for the legal field, and how does it redefine what a human lawyer does—if at all? These are no longer hypothetical questions, as GPT-4, the latest release of OpenAI's large language model AI, passed a simulated bar exam in the 90th percentile. Researchers had tested an earlier version of GPT (version 3.5) "in late 2022, finding it could not pass any portion of the [Uniform Bar Exam]," a statement from OpenAI reads. "Their forthcoming paper shows that GPT-4, however, passed the multiple-choice portion and both components of the written portion, exceeding not only all prior large language models’ scores, but also the average score of real-life bar exam test takers." So, here we are. Not 3 months later, a computer code is upending the legal profession. Or is it? According to AboveTheLaw, legal tech firm Casetext has released an AI-powered legal assistant called CoCounsel. But CoCounsel is "not about replacing the human that makes the decision, it’s about replacing the write-off hours sending a junior off to slap together drafts." But you still need a human lawyer somewhere in the system, Michael Bommarito, one of the researchers who tasked GPT-4 with the UBE, wrote in a LinkedIn post. He continued: "You can't just send confidential docs straight to ChatGPT. But the future ain't gonna' look like the past.If you have an existing diligence or compliance process today, accelerate it. If you don't have a process or tools yet, it's an incredible moment in time to start 'blank slate.' Either way, regardless of whether you're buy-side, sell-side, compliance, or counsel, it's clear that the world will be changing."

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The Verdict

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No one can say what the future of AI will be, or how it will change the legal profession. What we can say is that it will. Fundamentally. But whatever those changes bring, its safe to assume that the interpersonal skills of an attorney will always be in demand.

This is a tale of two suits. For crypto critics gouging on schadenfreude, it was the best of times. For crypto titans and the industry as a whole, it was the worst of times. This week, the Commodity Futures Trading Commission sued crypto exchange Binance for having an “ineffective compliance program” and "knowingly" breaking the law. According to The Verge, "the CTFC also charges Samuel Lim, Binance’s former chief of compliance, for allegedly 'aiding and abetting Binance’s violations through intentional conduct that undermined Binance’s compliance program.'" The CTFC alleges Binance executives “failed to properly supervise Binance’s activities” and “actively facilitated violations of U.S. law." Meanwhile, the Securities and Exchange Commission has issued a Wells notice to Coinbase (also a crypto exchange) alerting them that the SEC had discovered potential violations of securities laws following an investigation that began last summer. 

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• Binance CEO Changpeng "CZ" Zhao responded to the CTFC suit in a blog post, stating that “the complaint appears to contain an incomplete recitation of facts, and we do not agree with the characterization of many of the issues alleged in the complaint.” 
• Coinbase also responded to the Wells notice in a regulatory filing, stating "based on discussions with the Staff, the Company believes these potential enforcement actions would relate to aspects of the Company’s spot market, staking service Coinbase Earn, Coinbase Prime and Coinbase Wallet… The potential civil action may seek injunctive relief, disgorgement, and civil penalties.”

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The Verdict

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It remains to be seen if federal regulators catch up with the industry in time to curb its excesses, but with no sign of regulation on the horizon (let alone politicians who even understand what crypto is), consumers will continue to operate in this market without protection.

Twitter was back in court this month, and not for the most obvious of reasons. Last week, the beleaguered social media platform subpoenaed Github over the leak of part of its source code onto the site. "The purpose for which Twitter's DMCA subpoena is sought is to obtain the identity of an alleged infringer or infringers, and such information will only be used for the purpose of protecting Twitter's rights," the court filing reads. Github took down the source code that day. According to the New York Times, "it was unclear how long the leaked code had been online, but it appeared to have been public for at least several months." Moreover, it is unclear whether the leak led to CEO and owner Elon Musk's announcement that all source code used to recommend tweets will be made public at the end of the month. 

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• The code was posted by an account named FreeSpeechEnthusiast, reports CNN.
• The leak is "concerning" as “it does make it a little bit easier and speedier to probe for vulnerabilities,” and potentially hack data, Brett Callow, a cybersecurity expert, told the Times. He added that “one of the best ways to mitigate insider risk is to keep your employees happy and that certainly hasn’t been the case at Twitter.” 
• Musk also announced that Twitter, which he bought last year for $44 billion, was now worth about $20 billion by his estimations. The company has faced steep layoffs in recent months and public criticism. 

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Secret List

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A recently released report by Platformer found that Elon Musk and 35 other "VIP" accounts have monitored and given increased visibility by Twitter. The list includes President Joe Biden, conservative commentator Ben Shapiro, and NBA star LeBron James. Just last week, actor William Shatner tweeted calling out the company's paid verification scheme as being akin to the Columbia Records-Tape Club scheme. "It’s more about treating everyone equally," Musk responded. "There shouldn’t be a different standard for celebrities imo."

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The Verdict

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The question here is did the leak spur Twitter (re: Musk) to release the recommendations algo to the world, or was the leaker's goal something else? Regardless, the bird app has been plagued by confusion, scandal, and seeming chaos since Musk set his sights on it. Will the continue until the company collapses, or can things turn around?

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Panel Speakers Info & Links:

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Johanna Carlsson (Head of Legal at Klarna)

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Graeme Barron (VP, Head of Legal at GWI)

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Natalie Salunke (General Counsel at Zilch)

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How do you go about retaining legal talent in this current market?

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Natalie Salunke: This might be controversial, but I don't believe we should be obsessed with retaining talent solely for the sake of retention. While it's important to keep the best talent, sometimes the best talent is also the most ambitious and may need opportunities for growth that your organization can't provide. Therefore, the key is to create an environment in which they can thrive while they're with you, and hopefully they'll stay because it's a great environment.

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I believe that it has become more common for people to change roles every couple of years. Therefore, we should view having someone for a couple of years as a success. We should be comfortable with the fact that people want to change rather than trying to keep them for as long as possible. In some cases, keeping people for too long may not be the best thing for the team. A fresh injection of talent can be quite beneficial.

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Transparency is Key

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As a leader and coach, it is crucial to know your team members as individuals, including their motivations, career goals, and how you can help them achieve success. By facilitating honest conversations, you can determine if a team member is committed for the long haul. Transparency is key: they should be open about what they want, and you should be transparent about what you can provide. If you see a gap on the horizon, you may need to acknowledge that the person could outgrow the organization. The goal is to maximize the value of each team member while they are with the organization.

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In addition, helping team members achieve their goals can contribute to your legacy. When people move to different places, your reputation can still live on through the impact you had on their success. However, there is currently an issue with the expensive talent market, particularly in the UK. Junior lawyers are expecting salaries that match those of more experienced lawyers, but this bubble must burst at some point. It is important to focus on the positives of your ecosystem and to try to align people's desires and abilities with the team. There are more business opportunities available now, and it may be possible to move into different lateral roles that are not necessarily law-related. While it may not be for everybody, it is worth considering how you can sell what your organization has to offer.

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Johanna Carlsson: People move more quickly now than ever before. When it's time to leave, it's up to them to decide, and there should be no hard feelings about that. However, it's important to ensure that those who remain with the organization feel connected and integrated into the business so that they can contribute as well as possible.

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Company Culture

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When I joined Klarna, I found that we were having too many meetings. We would spend a lot of time discussing business planning and personal matters, and I felt it was a waste of time. However, over time, and especially when Covid hit, I realized that our meeting culture was crucial. It helped us build relationships and stay connected, even when we had to meet virtually.

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It's important to give people the opportunity to develop in their professional roles, whether they are lawyers or not. Otherwise, they may leave for a more exciting opportunity elsewhere.

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However, a paycheck should not be the only decisive factor in staying with an organization. There should be other reasons to stay. For me, it's the opportunity to develop relationships with great people every day. We also have team building activities such as puzzles and online games, allowing us to have fun with colleagues even if they are located in various offices or remote home offices. This helps to increase efficiency and allows us to reach out to those we have worked with before for professional advice. Building a strong culture is also important for speeding up communication around work topics.

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Let Go Of Things Beyond Your Control

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Graeme Barron: It's important to avoid getting too hung up on things beyond your control. While there will always be roles that pay big bucks, often salaries are determined by bandings within the organization or external factors. So, if someone has an offer of £250,000 to become a privacy lawyer, that's great, but it's important to be transparent about other opportunities available.

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Instead, focus on creating an environment that's enjoyable to work in and helps individuals grow as lawyers. Offer high-quality work and tailor it to the way your lawyers want to develop. Don't worry about competing with other offerings in the industry. Be open with your team and expect that they will move on to develop new skills.

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Create an environment where they can enjoy their work and do a good job, and if they choose to move on, bring in new energy to the team. Don't get too worried about things beyond your control.

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Rate Hikes & Intended Consequences

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On Friday, the second largest bank failure in US history (the collapse of Silicon Valley Bank) jolted global markets, economists, and investors alike. Then, on Sunday, the third largest bank failure in US history, Signature Bank, followed suit. The panic caused by SVB's sudden collapse had triggered a similar run on Signature, whose primary customer base is law firms and real estate firms in the New York area, but was also extremely friendly to cryptocurrencies (hello, Silvergate). By Monday morning, President Joe Biden, Treasury Secretary Janet Yellen, and even foreign officials in the UK and EU, raced to assure markets and the general public that the banking system was solid. Fears of mass contagion were unwarranted.

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"The American banking system is really safe and well-capitalized. It's resilient," Yellen told CBS's Face The Nation. "In the aftermath of the 2008 financial crisis, new controls were put in place, better capital and liquidity supervision, and it was tested during the early days of the pandemic and proved its resilience. So Americans can have confidence in the safety and soundness of our banking system."

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Everything Is Different Now

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So, what exactly happened?

It could take years to fully understand the minutiae of what happened and answer that question. But it appears that 3 major factors collided with perfect (imperfect?) timing.

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First: Deregulation.

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As the New York Times details, Barney Frank, former Congressman and namesake of the 2010 Dodd-Frank banking reform act, began lobbying in 2013 to reform his own landmark legislation. He wanted to "tweak" the regulations stating "that any bank with more than $50 billion in assets should face especially intensive federal supervision," and increase that threshold to $250 billion—which would then exclude all but the largest US banks. Silicon Valley Bank would be a beneficiary of this new deregulation, as would Signature Bank, for whom Frank sat on the board of directors. In 2018, with Donald Trump in the presidency and Republicans controlling both houses of Congress, and citing the belief that midsized/regional banks were not key to the financial system, this deregulation went into effect and negated certain capital requirements, stress tests, and living wills for these institutions.

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Second, Rate Increases.

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Without strict regulations on what regional banks could do with deposits and how leveraged they could be, Silicon Valley Bank began placing nearly all of its deposits into long-term treasury bonds. The tech industry’s boom times of 2020 and 2021 meant the bank's vaults were nearly doubling with deposits and management wanted to turn that into profits. Of course, the boom times went bust in 2022, and downsizing start-ups began withdrawing money from their accounts. To cover this, SVB was forced to sell bonds it had bought in the previous year. The problem was that rates had increased dramatically since 2021, so selling these low-yield bonds were less attractive and thus worth less. In turn, SVB was losing money in these sales just to cover deposits. And word began to spread.

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Third, Speed.

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Late on Wednesday last week, SVB revealed that it had lost $2bn from selling its entire $21bn treasuries portfolio over a single day. This news worried VCs and others around Silicon Valley. Some large VCs, including Peter Thiel, started telling the start-ups they invested in to pull all their money out of their SVB accounts. This quickly accelerated throughout the day on Thursday causing a bank run that collapsed SVB not 48 hours after fault lines began to appear. It was so fast, in fact, that House Financial Services Chair Patrick McHenry described it as "the first Twitter-fueled bank run" in history. Not only does Twitter and group chats spread information far and wide instantly (where, in the past, news of a teetering bank would take time to disseminate), but the adoption of mobile banking means that depositors no longer need to stand in line at a physical branch location to pull their money out, but can move millions of dollars instantly on their phones. What a world!

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So, now what?

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Silicon Valley and Signature banks were both FDIC insured institutions, meaning that deposits were insured by the federal government up to $250,000. However, as Time magazine notes, over 85% of SVB's deposits were non-insured. "Many Silicon Valley startups had millions, or even hundreds of millions of dollars deposited at the bank—money they used to run their companies and pay employees," Time continues.

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OK. But after the FDIC took over SVB on Friday and froze withdrawals, some $175 billion in deposits were in limbo. What would be returned? What would be lost? How many companies would fail as a result of not being able to pay their bills? Or, at the very least, how many employees across Silicon Valley would not get paid because start-ups who banked as SVB couldn't make payroll by that Monday?

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These questions raised fear among depositors at Signature Bank and various regional banks. With the swift collapse of SVB and the cratering of stock prices for First Republic and others, people and companies wanted their cash out and safe. In other words, even the appearance of instability was causing very real instability. So, in an unprecedented move, the FDIC decided to guarantee all deposits at SVB and Signature—even those above $250,000. Just don't call it a bailout.

“This is an important point: No losses will be borne by the taxpayers,” President Biden told the American public in a press conference Monday morning, reports the New York Times. “Let me repeat that: No losses will be borne by the taxpayers.”

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Then what is it? "Mr. Biden noted that the cost [of the insurance] will be financed by fees paid by other banks into the Federal Deposit Insurance Corporation, or F.D.I.C.," the Times continued. "What he did not mention was that a separate loan program that the Federal Reserve has opened to help keep money flowing through the banking system will be backed by taxpayer money."

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The failed banks themselves were not bailed, but the depositors were. Even if those depositors are (or are backed by) billionaire VCs. The move then raises the question of moral hazard, and what sort of precedent has just been set: the worry, as Mohamed El Erian told Fox Business News, is that the genie may never be able to be put back into the bottle. "Politically, it's going to be impossible not to extend this same full, unlimited deposit guarantee to all banks. "Once you do it for one bank, it's hard not to do it for another. Are you going to say that this bank was special because of Tech? That has all sorts of political issues with it."

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By Tuesday, the stock market had stabilized, and money was flowing again for start-ups in Silicon Valley to pay their bills. But now what? Did 2008 prove that major banks are too big to fail, and this weekend teach us that regional banks are….too small to fail? Have we basically proven that banks have no risk of failure, only of success? And how many other banks are teetering on the edge of collapse?

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As for Signature Bank and Silvergate Capital, "these were the two most bitcoin-friendly banks, supporting the lion’s share of fiat settlement for bitcoin trades between trading counterparties in the U.S.," Mike Brock, CEO of TBD at Block, told CNBC. Liquidity in the crypto world is basically dried up, raising concern that large investment funds or other banks with exposure to the sector will collapse in time. If and how the government will step in remains unclear.

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Matt Margolis: We are witnessing a surge in legal technology. When I was in private practice, the only significant innovation in the market was e-discovery.

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CLM Products

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Nowadays, we are seeing Contract Lifecycle Management (CLM) products that make things much easier. These products also have an AI component that identifies helpful key provisions or provisions that have been utilized in the past.

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They can also identify termination dates, which would normally take time and effort to find, and build a client. If I'm in-house, it would take time to build a "no client." We are definitely seeing growth in this area and more adoption of these tools. Over the next few years, we will see more and more automation and better tools that make our lives much easier.

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Charlotte Smith: Exactly. One of the incredible things about technology is that teams will need to go through the process of change more frequently. Therefore, having a strong change management strategy and process is incredibly important.

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Matt Margolis: Oh, absolutely. I recall receiving an e-discovery tool, I believe it was Relativity or something similar. I remember everyone accessing the e-discovery page, and it was extremely difficult because there was no strategy in place. We were all just trying to figure it out on our own, which ultimately led to a failed implementation.

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Why Are Teams Investing In Legal Tech?

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Marie Widmer: One of the biggest drivers is the pressure on legal teams to do more with less. In corporate environments, they are often viewed as a cost center, resulting in lower budgets and reduced headcount. This necessitates a redefinition of the term "scrappy" to deliver high-quality service with limited resources.

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Additionally, whether working in a law firm or an in-house team, customers and stakeholders increasingly expect efficiency and convenience. In today's world, where you can order groceries and rent a car on your iPhone, we have come to expect everything on demand, including professional services. Legal teams must adapt quickly to changing customer expectations and demands.

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Increasing Demands & Adaptation

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Matt Margolis: We are seeing an increasing demand for readily available information, particularly in legal departments. For instance, you may receive an email or a Slack message requesting immediate answers or statistics. Specifically, I've noticed a trend where people want to know the amount spent on X, Y, and Z deals by outside counsel. This demand for quick information is not going away anytime soon.

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Marie Widmer: It's a lot to take in, especially considering the previous state of the industry where lawyers weren't often questioned or required to provide details about their work behind the scenes.

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This cultural shift, along with increasing compliance and regulatory complexities, has had a significant impact on the legal profession. For example, privacy concerns have become a major issue and have required us to adapt, particularly with audits and mergers and acquisitions.

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In addition, there is pressure to scale quickly and increase revenue when working in-house at a company. This type of pressure is not typically experienced outside of a corporate environment and requires a different approach to work.

Overall, these changes require lawyers to work in new ways and adapt to the evolving industry.

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Last year, Kristina Kashtanova submitted her comic book Zarya of the Dawn to the US Copyright Office and was granted copyright protection. However, in a letter Kashtanova received earlier this month, the protection was partially revoked. "[T]he images in the Work that were generated by the Midjourney technology are not the product of human authorship," the Office stated in the letter. "Because the current registration for the Work does not disclaim its Midjourney-generated content, we intend to cancel the original certificate issued to Ms. Kashtanova and issue a new one covering only the expressive material that she created."

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• "There are a number of errors with the Office’s arguments, some legal and some factual," Van Lindberg, Kashtanova's attorney wrote in an extensive blog post. "However, they all seem to stem from a core factual misunderstanding of the role that randomness plays in Midjourney’s image generation.”

• "It is fundamental to understand that the output of a Generative AI model depends directly on the creative input of the artist and is not random," Kashtanova wrote herself in an Instagram post.

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Legal Precedence

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As Reason.com notes, a 1997 decision by the 9th Circuit Court of Appeals in the case of Urantia Foundation v. Maaherra ruled that "some element of human creativity must have occurred in order for" something to be copyrightable. Yet, according to Ars Technica, Michael Noll of Bell Labs was able to copyright an AI-generated image of his in 1965 "on the premise that the machine created the image using an algorithm that Noll wrote." To bring it to the modern-day, however, Ars Technica adds that Getty Images does not allow AI-generated images on its site "over unresolved issues about copyright and ethics issues."

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The Verdict

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Week after week, I write about AI and copyright for this newsletter and I’m beginning to understand that technology has rapidly outpaced our laws. So will AI-generated art be viewed as an artist’s tool (like a paintbrush or camera) in the years to come, or a whole separate category of IP? This is the central question we face today.

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It feels like only last week we were hearing about ChatGPT for the first time. Suddenly, Silicon Valley giants are in a battle for survival to win AI dominance. The speed of technology today, I guess. And when it comes to the speed of legislating, California tends to move faster than the federal government (or other states, for that matter). So, it should come as no surprise that California state legislators have begun looking at AI and its role in both digital privacy matters and hiring practices, reports Bloomberg Law.

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• AI has "got the great ability to make decisions based on data that it has, but nobody knows what’s in that black box. We need to have our eyes wide open about the power of this, and make sure that it’s here to help people and not inadvertently injure consumers," State Senator Bill Dodd said regarding his bill (SB313), which would create a state agency to oversee AI.

• State Assemblywoman Rebecca Bauer-Kahan has introduced her own bill (AB331) that would regulate how the state's government uses AI.

• “There’s a focus on accountability; of those who are developing the algorithms …California is trying to find a path to merge accountability with employers and by focusing in on assessing the actual algorithm that you use,” Gary Friedman, a senior partner at Weil, Gotshal & Manges, told Bloomberg about the various bills.

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Snap Judgement

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Social media company Snap Inc announced this week that it will be integrating ChatGPT into its Snapchat platform. “The big idea is that in addition to talking to our friends and family every day, we’re going to talk to AI every day,” CEO Evan Spiegel told The Verge. “And this is something we’re well positioned to do as a messaging service.”

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However, the company also cautioned soon-to-be users that "All conversations with My AI will be stored and may be reviewed to improve the product experience. Please do not share any secrets with My AI and do not rely on it for advice," according to a press release. Snap further cautioned that "While My AI is designed to avoid biased, incorrect, harmful, or misleading information, mistakes may occur."

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The Verdict

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As AI becomes evermore integrated into our lives, its clear that strict regulation will need to stay on top of the technology and protect potential data leaks and other concerns. Are state politicians up to the task of properly designing legislation? Will see.

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The streaming wars are heating up—and they might end up killing Kenny (sorry, we had to). Warner Brothers Discovery, the newly formed media behemoth that was spun off from AT&T, is suing Paramount Global (previously known as CBS Viacom) over South Park streaming rights. According to CNBC, Warner paid $500 million in 2019 for the rights to license the long-running show and stream in on HBOMax.

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During the bidding process, Paramount requested to share rights to the show so that Paramount could also stream South Park on its platform. WBD says it rejected the proposal, and then alleges Paramount withheld special content as a result. As Variety notes, WBD accuses Paramount of engaging in "'verbal trickery' and 'grammatical sleight-of-hand,' characterizing the new content as 'movies,' 'films' or 'events' — but not 'episodes' — to avoid its obligations under the 2019 agreement."

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• Paramount wrote in a statement: “We believe these claims are without merit and look forward to demonstrating so through the legal process… We also note that Paramount continues to adhere to the parties’ contract by delivering new South Park episodes to HBO Max, despite the fact that Warner Bros. Discovery has failed and refused to pay license fees that it owes to Paramount for episodes that have already been delivered, and which HBO Max continues to stream.”

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• WBD responded in a statement that "Paramount and South Park Digital Studios embarked on a multi-year scheme of unfair trade practices and deception, flagrantly and repeatedly breaching our contract, which clearly gave HBO Max exclusive streaming rights to the existing library and new content from the popular animated comedy South Park.”

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Ctrl+Library+Delete

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Studios and streamers can withhold content from audiences, not just from each other. As The Hollywood Reporter says, streamers are pulling old TV series and films from their libraries (and even canning finished films!) to save money. "Entertainment companies have been forced to contend with consolidation, inflation, a possible recession and a constant chase for subscribers," The Hollywood Reporter continues. Streamers can "save money from not having to pay residuals to certain profit participants and talent associated with the shows if the shows were not exhibited on the streaming service,” entertainment journalist Matt Belloni recently told Marketplace.

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The Verdict

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Even streamers are penny-pinching these days. But as platforms compete for content and shuffle their libraries, it’ll set up some interesting future scenarios in which potential mergers and/or consolidation makes bedfellows of current litigants.

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Melissa La Forest: How did you decide to make your first legal hire and what prompted you to make that hire?

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Natalie Salunke: When considering the first legal hire, it depends on the organization's culture and lifecycle. The key factor for me is how to initiate a conversation about negotiating headcount and budget. In some roles, I've negotiated this before starting as the head of legal or general counsel, making sure I have access to those resources. Some of those resources include team and headcount.

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Hiring Process

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I tend to hire on the more junior end, especially when working for a scale-up startup with a small legal team. This is because the business is still getting used to the concept of having a legal team.

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Employers often think they've invested a lot of money in hiring senior lawyers, especially if the head of legal or general counsel is involved. Therefore, it's important to gather data points to support the team's value and the importance of the first legal hire. If you haven't had the opportunity to create this narrative before joining the company, it's especially crucial.

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If you're unable to find paralegal or trainee level roles for support with administrative and junior legal work, consider running an internship program. This is an interesting way to attract talent while also giving back to the legal community.

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Benefits of Hiring an Intern

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The idea is to hire several interns, such as law graduates or students, to assist with tasks like data mapping and other junior-level work.

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This approach creates a talent pool that can be used for permanent hires in the future. By testing out the interns, the company can identify strong candidates for future positions. Additionally, having junior-level staff can bring a fresh perspective to the data mapping process, which might not be considered by more senior lawyers.

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The Blueprint

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Natalie: I've carried around a blueprint for over 10 years now. There is a buoyant market for people wanting experience, which is often required to get a training contract or further opportunities.

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High-quality candidates are plentiful, and there are free tools available, such as LinkedIn, Milk Ground, and university sites, to advertise internship positions. In my last role, we received 250 applicants over the weekend after posting our ads. The challenge is not finding interesting talent, but rather managing the overwhelming demand and not being able to provide everyone with an opportunity.

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Value Adaptability

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Johanna: When I joined Klarna, the organization already had about 30 people. Since then, we've grown to around 130 people due to the addition of new business units, product launches, and entry into new markets. As our team has expanded, we've focused less on hiring senior people who can work independently and more on hiring individuals with personalities that appreciate change and backgrounds in companies that value adaptability.

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Our team is now more distributed, which brings value and helps people grow. Senior team members can develop their leadership skills and assist junior talent, while also being relieved of administrative and repetitive tasks.

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Instead of solely focusing on experience, we now prioritize personality and background when hiring new talent. It's important to find individuals who appreciate change and are adaptive in agile environments, which is something that most people claim to be these days.

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Marie Widmer: Buying legal technology is all about mastering the RFP. When purchasing legal tech, you should also be planning for change management. Knowing how to gain user adoption and prove the ROI is crucial. It's not just about getting buy-in, purchasing the tool, and figuring it out afterwards. You need to have all three issues solved in the beginning.

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Understanding the RFP is really broken down into three categories:

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1. Why do you need to buy tech?

Many people rush to buy technology because they feel pressured by the fear of missing out. However, it's important to ask yourself whether you actually need to make that purchase or if there is a manual process that could accomplish the same task. Consider cleaning up your current system before making a decision to buy new technology.

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2. What is the cost of buying tech?

When I refer to "cost", I am not only referring to the dollar amount specified in the contract. I am also referring to the impact on the timeline and resources, and the burden it will place on stakeholders. For example, will you need to utilize engineering resources within your company? Will you need additional headcount to assist with tool intake, such as CLM? Additionally, who will be responsible for building your repository?

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3. Do you have time to put in the manual hours?

There are many layers to consider when it comes to the cost of implementing technology. You must also evaluate what you expect to achieve from implementing technology. Is the return on investment (ROI) worth the expense at this time?

Perhaps your company is at a stage where you are too small to make this decision. Alternatively, maybe your team is too new and fragile, or you do not have the budget or headcount to withstand the burden of implementing technology.

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Charlotte Smith: To add a personal touch, it's important to ask your users what will help them and what their learning experiences are like. Getting to know your users is crucial.

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Marie Widmer: I made the mistake early in my legal ops career of rolling out a solution based on what I thought people wanted and what I thought my team would benefit from. However, I soon realized that they didn't want the same things.

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It's a difficult lesson to learn, but it's one you must consider. Are you actually providing a benefit to your users, or are you just focused on your own interests?

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What to Do After Buying a Legal Tech Tool

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1. Acknowledge and Validate Customer Experiences

I've been in situations where I kept lying to myself, thinking things would keep working out. However, I eventually had to face the truth and acknowledge the problem at hand. For example, when no one else wanted to use or buy the product and it wasn't helpful to anyone, I had to validate my own experiences and frustrations. It's important to acknowledge these situations and not necessarily see them as failures, but rather as misaligned intentions.

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2. Reinvest In Your Foundation

When considering reinvesting in your foundation, it's important to go back to square one and evaluate whether you need to address any gaps in your current infrastructure. For example, suppose you're working on a small startup at Dopper Labs and you're using a disorganized Google Drive for storing and negotiating documents.

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If you have no formal ticketing or intake methodology in place, except for perhaps a rough ticketing tool, it may be tempting to launch directly into a Contract Lifecycle Management (CLM) system with a lean team. However, in hindsight, it may have been more beneficial to first address some of the manual foundation issues, which would have resulted in fewer change management issues in the long run.

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3. Build Your Best Path Forward

So, start again from the beginning and think about the baby steps you can take. This will reveal to you why the end state didn't work as it should have.

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While disgraced crypto mogul Sam Bankman-Fried stays under house arrest at his parents' home in Palo Alto, he still seems to be meddling with bankruptcy proceedings in New York. Federal District Court Judge Lewis A. Kaplan has ordered that SBF "create a plan with prosecutors that would ensure Mr. Bankman-Fried did not delete text messages he sent while awaiting trial on charges that he orchestrated the theft of billions of dollars in customer deposits," reports the New York Times.

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In other words, Judge Kaplan believes the notorious founder of FTX has been communicating with the company's general counsel, Ryne Miller, and other former FTX employees via messaging apps like Signal, which automatically deletes the texts. "I read all the spy novels," Judge Kaplan said, referring to methods of hiding communications. Even worrying that SBF could write encrypted handwritten letters.

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• "Today, it came to the Government’s attention—based on data obtained through the use of a pen register on the defendant’s gmail account—that the defendant used a VPN or 'Virtual Private Network' to access the internet on January 29, 2023, and February 12, 2023. After learning this, the Government promptly informed defense counsel and raised concerns about the defendant’s use of a VPN," the US Attorney's office wrote to the court on February 13.

• The issue of using encrypted and/or disappearing messaging apps to skirt communications rules (and destroy evidence) has come up before with major Wall Street firms using WhatsApp and Signal, raising concern from the SEC and DOJ.

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Bill Pay

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It was an expensive November for beleaguered crypto firm FTX, says Coinbase, which reported that Sullivan & Cromwell billed $9.5 million for 6,500 hours across 151 staff over the period November 12 through 30, 2022. But Sullivan & Cromwell says it charged a discount for senior staff, and is only seeking 80% of the total bill (or $7.5 million).

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The Verdict

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Every new story about SBF and how he’s handling FTX’s collapse is more outrageous than the last. If your strategy is to appear as though you didn’t know what was going on behind the scenes of your own company, then maybe don’t use Signal and VPNs to communicate with your general counsel or reach out to witnesses in your case. Not the best look.

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When you think of Andy Warhol's famed Campbell's soup cans, do you think of great art or of IP theft? The same question is now being asked of NFTs, specifically in the case of legendary Parisian fashion house Hermes claiming the artist/NFT-maker Mason Rothschild stole its Birkin Bag IP to produce 100 "Metabirkins".

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As Vogue Business writes, Hermes alleges that the Metabirkins are not artistic commentary but trademark dilution and "cybersquatting (the practice of using a name in bad faith with the intent of making a profit)"—allegations a jury agreed with earlier this month and awarded Hermes $133,000 for. But Rothschild and his legal team have scoffed at the verdict—the first suit brought against an NFT-maker for this kind of IP infringement—and is appealing.

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• Blake Gopnik, an art critic for the New York Times and New Yorker, who is part of Rothschild's legal team, told Marketplace: "It seems pretty clear to me that these things are right smack in the middle of the Warholian tradition in art. They’re commenting on the world of commodities. That’s what artists have been doing at least since Andy Warhol in the early 1960s. It’s obvious to me. If he’d wanted to really confuse buyers, he wouldn’t have covered his Birkin bags and fake fur. He wanted to make them as JPEGs anyways, right? These aren’t bags, these are pictures of bags. And artists make pictures of things."

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• “Today's verdict for Hermès is a landmark victory. It signals that the NFT market is not a legal free-for-all — simply waving the flag of fair use will not automatically exempt you from liability for using someone else’s IP. …Fashion brands have already been learning from this case how to protect their IP in this space even more effectively. Even before the verdict, it highlighted the value in seizing the first-mover advantage. In the IP metaverse, everything is evidence.” Jeff Trexler, associate director of Fordham University's Fashion Law Institute, told Vogue Business.

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The Rogers Test

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In 1988, actress Ginger Rogers sued producer Alberto Grimaldi for using her name and likeness in a film and violating her trademark rights, right to publicity, and for "false light" defamation. The US Second Circuit Court of Appeals ultimately sided with Rogers, and created the "Rogers Test" which states that a trademark holds if it has no underlying relevance to the artistic work, or if that work explicitly misleads about the source. This test was the central argument of the Hermes-Rothschild case, notes Vogue Business.

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The Verdict

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Clearly, it’s difficult to define what is and what isn’t art. Especially since everyone has their own ideas. To that end, whomever ultimately prevails in this case, it may not set such a firm precedent.

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As Big Oil is coming off one of its most profitable years in history, it still faces the existential crisis of Climate Change. To this end, environmental law firm ClientEarth is suing 11 of Shell's directors, personally, for "mismanaging climate risk, breaching company law by failing to implement an energy transition strategy that aligns with the landmark 2015 Paris Agreement," says NBC News. The suit is the first of its kind, and ups the ante for Big Oil and its boards of directors who may now be personally at risk if they fail to act on climate change.

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• “The shift to a low-carbon economy is not just inevitable, it’s already happening," Paul Benson, a senior attorney with ClientEarth, stated. "Yet the Board is persisting with a transition strategy that is fundamentally flawed, leaving the company seriously exposed to the risks that climate change poses to Shell’s future success — despite the Board’s legal duty to manage those risks."

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• A Shell spokesperson released a statement opposing the claim, noting " “Our directors have complied with their legal duties and have, at all times, acted in the best interests of the company. […]ClientEarth’s attempt, by means of a derivative claim, to overturn the board’s policy as approved by our shareholders has no merit. We will oppose their application to obtain the court’s permission to pursue this claim."

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A Record Year

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While 2022 was a banner year for Shell, Exxon, BP, and the other Big Oil players, it was also one of the hottest years on record. So how do you get some of the most profitable companies on Earth to stop profiting off, well, the destruction of the earth? “There has really only ever been one way to get the world off oil and gas and that is not to expect the companies who benefit most from that industry to lead the way,” Adrienne Buller, research director at the UK think tank Common Wealth, told the Financial Times. “These companies are set up to maximize returns to their shareholders and they’re doing exactly that.”

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The Verdict

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While Shell has plans to be carbon neutral by 2050, ClientEarth and other environmental groups clearly think Earth’s habitability may be permanently ruined by then unless things change. So, the question is, who will push Shell (and others in Big Oil) towards change? Seems like it may have to be external forces.

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While litigation is likely not the first thing that comes to mind when you think about a corporate in-house legal role, it's incredibly common. Depending on the industry, size, and market your company operates within, you may frequently see demand letters and other legal requests come across your desk. So what do you do?

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Let's start with what a demand letter is. Simply put, demand letter is a letter sent by a potential claimant or plaintiff demanding either some form of compensation or action. Effectively, the precursor to a lawsuit.

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Demand's come in all shapes and sizes. Some provide incredibly detailed information about the purported claim or action (with included exhibits and supporting documentation). Others are much more bare bone. Regardless, the first move should be to evaluate the information provided.

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Whether you think the claim is credible or not, if there is a policy of insurance that could provide coverage, it is probably wise to at least consider sending the demand to the appropriate carrier.

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If insurance coverage is not potentially available, the next step would be to determine whether to retain outside counsel or handle the matter internally. In either scenario, next steps would be to contact the relevant business units and employees involved with the subject matter of the demand. While engaging in this fact finding activity, you should likely compile any documents that relates to the demand and set out a litigation hold to all relevant parties.

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Once a clear pictures has been formed regarding the subject matter of the demand (or within the time limit is specified), a response should likely be sent.

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Stop me if you think that you've heard this one before: In 2021, GitHub and OpenAI (two companies either owned by or largely invested in by Microsoft), launched a coding tool named Copilot. The tool, much like OpenAI's ChatGPT, scraped vast sources of existing code to create its own database which then enabled it to suggest code to programers that it had generated.

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Well, not everyone is happy with this process. In November, a class action lawsuit was filed against Microsoft, Github, and OpenAI alleging “software piracy on an unprecedented scale," notes The Verge. Now, the tech firms are firing back asking for the federal court hearing the case to dismiss it, based on grounds that the piracy claims do not hold up.

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• In Github's dismissal filing, the company claims the suit “fails on two intrinsic defects: lack of injury and lack of an otherwise viable claim." Meanwhile, OpenAI's filing raises a similar argument that the suit relies on “hypothetical events” to “allege a grab bag of claims that fail to plead violations of cognizable legal rights.”

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What Is Scraping?

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OpenAI's tools (including Dall•E and ChatGPT) rely on scraping, which is training its AI on enormous data sets that are publicly available. That is to say, for Dall•E, it is potentially Getty Images, Flickr, and other image sets. Then, from all the data it scraped, the AI can create "new" images/text/code based on the scraped data. But is it copyright infringement?

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This month, notes CNN, Getty Images filed suit against Stability AI (who makes an art generating AI called Stable Diffusion), claiming: "Getty Images believes artificial intelligence has the potential to stimulate creative endeavors. Accordingly, Getty Images provided licenses to leading technology innovators for purposes related to training artificial intelligence systems in a manner that respects personal and intellectual property rights. …Stability AI did not seek any such license from Getty Images and instead, we believe, chose to ignore viable licensing options and long standing legal protections in pursuit of their stand-alone commercial interests.”

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The Verdict

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As we’ve noted before, generative AI is creating a new frontier in IP law by relying so heavily on data scraping to train the technology. That being said, the entrance of large companies like Getty Images to the mix will step up pressure to regulate this new industry.

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The Biden Administration has taken aim at Google's far-reaching online advertising business. In a new antitrust lawsuit the Justice Department and eight states have filed against the tech titan, Google is accused of corrupting "legitimate competition in the ad tech industry by engaging in a systematic campaign to seize control of the wide swath of high-tech tools used by publishers, advertisers, and brokers, to facilitate digital advertising." In doing so, Google is knowingly engaging in anti-competitive behavior and " unlawful means to eliminate or severely diminish" present or future rivals.

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‍In a response to the suit, Dan Taylor, Google's Vice President of Global Ads, wrote that "DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees and make it harder for thousands of small businesses and publishers to grow." He added that "we will vigorously contest attempts to break tools that are working for publishers, advertisers, and people across America."

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Second Pass

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While this is the Biden Administration's first suit against Google, it is the second antitrust case against brought against the tech giant since 2020, reports the New York Times. That suit alleged "Google [had] used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising and general search text advertising — the cornerstones of its empire.”

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The Verdict

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Going after Big Tech seems to be one of the only bipartisan issues left in the country. That being said, for a handful of companies to control so much of our lives and so much of the economy makes it clear that the government had to step in at some point.

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If it struck you a bit odd that one of the largest and most profitable corporations in the world (valued at $400 billion) was suddenly filing for bankruptcy, well, you're not alone. A three-judge panel for the U.S. 3rd Circuit Court of Appeals dismissed Johnson and Johnson's Chapter 11 petition for one of its newly created subsidiaries, LTL Management, arguing the move was done in bad faith.

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The pharmaceutical giant is facing $3.5 billion in verdicts and settlements from 38,000 lawsuits claiming that the company's talc products caused cancer. To shield itself from these costs, J & J used the so-called Texas Two-Step to create a subsidiary that absorbs the litigation and then declares the subsidiary bankrupt. The plan was internally named "Project Plato".

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• According to CNBC, Jon Ruckdeschel, a lawyer for the plaintiffs, applauded the bankruptcy dismissal, saying: "“Bankruptcy courts are for honest companies in financial distress, not billionaire mega-corporations like J&J."
• The Appeals Court's 56-page opinion recognizes that Johnson and Johnson created the subsidiary "solely to access the bankruptcy system and not because it faced financial distress," notes CNBC. Furthermore, the opinion states that “Good intentions - such as to protect the J&J brand or comprehensively resolve litigation - do not suffice alone."

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The Verdict

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The Texas Two-Step is a fairly common legal tool for shouldering large settlements and verdicts—especially in toxic torts. So, for this tool to be shot down by the 3rd Circuit Court is major. Of course, this could still be reversed by the Supreme Court, but companies may think twice before using this tactic again in the future.

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When you’re an in-house attorney, the name of the game is efficiency. To that end, it’s crucial to have a contract playbook in place.

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So, what’s a contract playbook? Simply put, it’s a collection of standardized contract templates, clauses, and negotiation tactics that can be easily accessed and used by the legal team. Instead of starting from scratch, pre-approved templates/provisions and risk thresholds are at your team’s fingertips. This streamlines the contract drafting process and ensures that all contracts are consistent with the company’s standards.

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Let’s talk about this practically. A member of your legal team is negotiating a commercial agreement with vendor or customer. Language relating to indemnification obligations is marked up or deleted. Instead of multiple conversations and time spent trying to figure out what version of this provision works for the company, the contract playbook comes into play. A more neutral provision which has been approved by the company is utilized and the contract is pushed to be executed.

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In the same vein, by having a set of pre-approved negotiation tactics, the legal team can be more strategic in their negotiations and better protect the company’s interests. For example, if the contract playbook includes a tactic for requesting a “most favored nation” clause, counsel will be prepared to advocate for this protection if it is in the company’s best interests.

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Overall, having a contract playbook in a corporate in-house legal department is extremely valuable. It saves time and resources, minimizes risk, and improves the negotiating process.

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A judge is ordering 5 defendants in a class-action lawsuit against Twitter by former employees alleging the company did not follow through with their severance package to be dropped and be taken up in private arbitrage.

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‍As Reuters clarifies, US District Judge James Donato ordered 5 of claimants to drop the suit in favor of private arbitrage, as specified in their employment contracts, but left open whether the entire suit would be dismissed "though, as he noted three other former Twitter employees who alleged they had opted out of the company's arbitration agreement have joined the lawsuit after it was first filed." Twitter did not immediately comment on the ruling, but has noted that it has already filed 500 arbitrage demands, and would likely file hundreds more.

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• Since Elon Musk bought Twitter in late October 2022, Reuters says some 3,700 employees were laid off, and hundreds more have quit or were subsequently fired.

• Twitter also faces separate lawsuits by women and others who claim they were target of layoffs for discriminatory reasons.

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Bill Pay

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In addition to its severance pay discrepancies, Axios reports that Twitter isn't paying other financial obligations, like rents on offices. One theory believes that senior managers tasked with maintaining these landlord contracts have all been fired or quit, leaving the task with junior staff. Beyond rents, as the New York Times notes, "Twitter has also refused to pay a $197,725 bill for private charter flights made the week of Mr. Musk’s takeover."

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The Verdict

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The jury is still out (literally and figuratively) on Musk’s takeover of the legacy social media platform. That being said, from angry creditors to angry ex-employees to news that he’s looking for an heir, things right now are more mess that success. But hey, if you’re a lawyer looking for work, the Twitter orbit seems to be ripe.

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Turns out JP Morgan Chase isn't immune to scams (big banks, they're just like us!). A lawsuit filed in December alleges that the mega-bank was duped by Frank, a college financial aid start-up acquired by the firm in 2021 for $175 million. Accordingly to JP Morgan Chase, Frank fabricated some 4.25 million student accounts to appear larger than it was. “Frank offers a unique opportunity for deeper engagement with students," the financial titan said at the time of the acquisition, notes The Street. "Together, we’ll be able to expand our capabilities for students and their families, helping them financially prepare for college and other major moments in their future."

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Yet, in its December suit, the bank was singing a much different tune, says CBS News: "[T]o cash in, [founder Charlie Javice] decided to lie, including lying about Frank's success, Frank's size and the depth of Frank's market penetration in order to induce [JPMorgan] to purchase Frank for $175 million. As the suit continues, when JPMorgan asked for proof of the 4.25 million accounts, Javice deflected over alleged privacy concerns that actually masked Frank's real size (only about 300,000 accounts). JPMorgan is seeking an unspecified amount in damages.

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• Javice, a UPenn grad, allegedly paid a data science professor $18,000 to fabricate the fake accounts.

• In a 2016 interview with Popsugar, Javice touted Frank's goals as the "Amazon for higher education."

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30 Under 30

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In addition to her pending lawsuit by JPMorgan, Javice has a second unique distinction—she was part of Forbes's 2019 list of 30 under 30. The list has included such notorious luminaries in recent years as Elizabeth Holmes, Sam Bankman-Fried, and Caroline Ellison. As Jezebel jokes, Javice is now "on another, more exclusive list: Forbes Prodigies Who’ve (Allegedly) Committed Fraud Before 35."

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The Verdict

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While we can’t say whether the allegations here are true or not, we can say that if you’re looking to invest in someone who is a Forbes 30 under 30…maybe do double due diligence.

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The Winklevoss twins are back in the news again for something the probably wish didn't happen. Tyler and Cameron Winklevoss, who initially rose to fame after suing Mark Zuckerberg for allegedly stealing their idea when he started Facebook, are now embroiled in a nearly $1 billion mess that includes an investigation by the SEC and mudslinging between the Winklevosses and Barry Silbert's Digital Currency Group.

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The story begins when the Winklevi (thanks, Social Network), created a Bitcoin exchange called Gemini, and then introduced a product called Gemini Earn, which pays interest to customers for their deposits. The SEC took issue with this, and is now charging Gemini with "offering unregistered securities", says the New York Times.

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Gemini was able to offer interest payments because it was using those customer deposits to loan to Digital Currency Group's subsidiary crypto lender Genesis, which in turn allowed Gemini to take advantage of an arbitrage opportunity. However, as Bitcoin has tumbled in value over the last few months, "Genesis later froze withdrawals," continues the Times. "About 340,000 Earn customers are out about $900 million in crypto assets, the SEC said."

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• Barry Silbert, who runs Digital Currency Group, made his name creating SecondMarket, which allowed shareholders of private companies (like a pre-IPO Facebook) to sell their shares.

• “For the past six weeks, we have done everything we can to engage with you in a good faith and collaborative manner in order to reach a consensual resolution for you to pay back the $900 million that you owe, while helping you preserve your business,” Cameron Winklevoss wrote in an open letter to Silbert, reports CNBC.

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Spreading Contagion

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The collapse of FTX and other crypto firms is no doubt at play in this Genesis-Gemini mess. Silbert's Digital Currency Group "took substantial losses in the summer from our bankruptcy" and the collapse of FTX, Zhu Su, co-founder of Three Arrows Capital, tweeted recently. Su claims that FTX repaid DCG a $2.5 billion loan entirely in FTT coin—which, of course, is now worthless. To wit, however, Bitcoin has regained all its losses since the FTX collapse.

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‍The Verdict

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It’s clear that regulation is coming to the crypto market. However, until it does, it seems like contagion from the collapse of FTX will just continue to spread as more investors get hurt, and more companies face SEC investigation.

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Beginning New Year's Day, job postings in California and Washington are now required to include salary ranges in the ad. The move mirrors laws already in place in Colorado and New York City, which require such pay transparency.

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"More and more employers are looking for ways to ease their administrative burden, especially large employers where they also have PR-related concerns, optics-related concerns," Christopher T. Patrick, an employment attorney with Jackson Lewis PC, told Bloomberg Law. "Leaning into transparency can be good for business and reduce the burden related to compliance with a national strategy."

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• According to CalMatters, the law requires" employers with at least 15 workers will have to include pay ranges in job postings. Employees will also be able to ask for the pay range for their own position, and larger companies will have to provide more detailed pay data to California’s Civil Rights Department than previously required."

• For employee rights' groups, the hope is that the sheer size of California's workforce and economy mean this law will affect employers nationwide.

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The Labor Push

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Washington and California's new laws dovetail a year full of unionization efforts and wage increases. As NPR writes, "only about 10% of U.S. workers belong to a union, but 68% of Americans approve of unions, according to Gallup. That's a level of support not seen since 1965." Yet, as the clouds of recession gather on the horizon, many wonder if the labor movement's hard-fought gains over the last year or two will be shed if not outright lost.

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The Verdict

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As workers push to make more gains, the headwinds of a possible recession along with the Fed's own actions may curtail the movement's growing strength.

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The 4 million employees of the US government will no longer be allowed to download TikTok onto a device owned by a federal agency. The new rule is part of the 4100-plus page spending bill signed into law at the end of last month, reports NBC News.

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It’s a new salvo in the US’s fight against the Chinese social media platform, and a proxy for the broader US-China political tensions. But not everyone agrees that banning only TikTok is a logical step if data privacy and national security are the concern. "Unless we’re also [going to] ban Twitter and Facebook and YouTube and Uber and Grubhub, this is pointless," Evan Greer, director of Fight for the Future, told The Guardian. "Yes, it’s possibly a bit easier for the Chinese government to gain access to data through TikTok than other apps, but there’s just so many ways governments can get data from apps."

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• In a statement on the ban, TikTok said: “We’re disappointed that Congress has moved to ban TikTok on government devices — a political gesture that will do nothing to advance national security interests — rather than encouraging the Administration to conclude its national security review.”

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The October Incident

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Late last year, TikTok confirmed to Forbes that it had improperly tracked the locations of 3 of the publication's journalists in October. As a result, a ByteDance (TikTok's parent company) executive was fired and one resigned. The report "gives additional leverage to DOJ to say, ‘Look, the record is not positive,’” Megan Stifel,  a former Department of Justice national security official turned security analyst, told NBC News.

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The Verdict

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As the power of social media apps in Silicon Valley wane, and a fractured global order intensifies, TikTok is a useful boogeyman for more than one group to point at and say "here is the cause of our problems." Will this ban lead to anything more? That is yet to see.

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