Having worked in a law office, I can say confidently that the future of legal AI is human+AI. AI can rapidly spot all the issues, saving expensive lawyers from spending their time wading through the documents. But the human lawyer brings strategy, judgement and face-to-face consultation to the process.
In other words, I don't think lawyers are in danger. But law clerks? Junior staff? The people who are usually forced to do all the grunt work to allow the top lawyers to focus on their strengths? Those jobs are at definitely on the chopping block. There's still an insane amount of rote repetitive work in your standard law firm.
What I've heard (but many years ago) is that the legal profession in general is extremely tech-hostile (some is just cultural, but some is that it gets in the way of billable hours).
I don't know how much of that has changed now, especially with younger lawyers growing up with tech, getting in and wanting to do things a certain way.
This is one of the things where the market will decide. All it takes is one firm to drastically reduce costs while maintaining standards (or possibly improving them?) and the rest will be forced follow suit.
That has not been my experience. The industry is highly competitive. Each matter might be pitched to half a dozen firms. If tech does shave costs, that can be a huge differentiating factor.
For the most part though it doesn’t. There are many clients who won’t pay for first year associates. For those clients, firms don’t roll out legal tech. They do the work and write it off. Even at top wall street firms realization is 80-90% hours billed. Nor do firms trot out legal tech when it comes to contigency or fixed-fee cases, where there are no billable hours. Some major clients these days demand arrangements where they pay a fixed. monthly price. There is no legal tech leveraged in those cases.
For the most part I’ve found software in general these days to be underwhelming. It took me years to find software that I trust enough to keep track of highlighted points in court opinions. (Shout out to the folks who make Citavi.) I remember writing about predictive coding in law school almost ten years ago. I have never used it on a case. Ironically, the only cases where there were enough documents (millions) for predictive coding to make sense also involved so much at stake the client wanted to spare no expense.
The highest value legal tech has been review platforms like Relativity, but they are also crap. Like, loads documents slower than you can read them crap. It’s like technology to help programmers. You still just use Emacs because all this visual IDE shit doesn’t really help.
This looks great for clients, but I think you’re right about law clerks and the like, and the implications are a little sad.
Time was if you wanted to get into law you’d join a firm as a clerk, learn the ropes, study for the bar, then become a lawyer.
The professionalizarion of law has pretty much ended that pipeline, with an expensive and arduous undergrad->law school->lawyer route instead. The replacement of junior staff with AI could effectively kill that route permanently.
My only hope is that legal AI will help bring down cost and increase access to legal aid for poor people in urban and rural communities where there is far too little supply to meet demand when people need legal aid the most.
>The replacement of junior staff with AI could effectively kill that route permanently.
iirc only a handful of states still allow you to take the bar without a law degree (and in practice I have no idea how often that happens, but I bet not much.) It seems like the apprenticeship route was by and large killed off some time ago.
>Time was if you wanted to get into law you’d join a firm as a clerk, learn the ropes, study for the bar, then become a lawyer....The replacement of junior staff with AI could effectively kill that route permanently.
That ship has sailed long long ago...like, 1890 long ago. There are states where you can read law and take the bar exam without a law degree (Virginia, California, Vermont, Washington), or with a partial law degree (New York and Maine), but the number of people who do that each year is minuscule compared to the number of lawyers who graduated from law school (60 to 84,000 in 2013).
>That ship has sailed long long ago...like, 1890 long ago.
In California, at least, that is still the only way become a lawyer without a law degree (called the "Law Office Study Program"). If you forgo law school, you are required to do an apprenticeship in a practicing attorney's office for 4 continuous years (18 hours/week, 48 weeks/year), along with taking various exams and reporting your study progress.
He's not saying it's impossible. He's saying the number of people doing it is so small as to be irrelevant to general arguments. While a much larger percentage (relatively) of people may have used this path ("reading into the law") a hundred years ago, it has largely faded from relevance in modern times.
"saving expensive lawyers from spending their time wading through the documents."
Do lawyers want to lose that much time in billable hours? I'd imagine part of what lawyers like is making lots of money and this will be a limiter.
> Do lawyers want to lose that much time in billable hours?
Their options are to lose that much time in billable hours, or to lose all their billable hours because the client found a law firm that doesn't bill so many hours for grunt work.
I don't see it as all the different than a software developer automating a repetitive build/config task, or a test engineer automating some basic functional tests.
Yes, the lawyer bills by the hour. But, a good lawyer will have enough work either way - so they may as well automate the easy stuff, take a reduced rate for that, and still have a full-plate of interesting work at their full hourly rate.
True. But this will reduce a lot of demand for human legal services, since the few humans left will be more effective per hour. Unfortunately the pipeline to produce senior lawyers is packed as if AI isn’t coming, and for that cohort life is going to suck a bit.
On the other hand, maybe the cost to review an employment agreement will enter into the sub-$100 range. Or to draft an NDA for a startup, etc.
The path from passing the bar to being a successful / well-paid attorney has been extremely difficult for a decade now. AI will simply continue this trend.
If it's so menial and you "don't learn anything", then why not just pay people off of the street to do it?
I think you're heavily discounting the fact that searching through case law is not just "type in words into LexisNexis", but it's searching, parsing and consolidating case law that is relevant for a Partner. You actually read the case law, spend time understanding it, and build a report around it.
If you implemented the same compression algorithm over and over again, each time from scratch, the only skill you'd learn would be how to do it more efficiently. You wouldn't learn anything special, except maybe some nuances of the algorithm you didn't already know.
Yeah it's not a skill that everyone can do, but once trained to do it there's no point only doing that same task over and over because you won't advance your skills in other aspects of the field.
Comparing a simple compression algorithm to extensive law research is extremely disingenuous and shows a lack of awareness of what it takes to actually BE competent as a lawyer.
If you didn't notice, google.com alone brought utter devastation upon junior paralegals almost as soon as it became a thing.
>But the human lawyer brings strategy, judgement and face-to-face consultation to the process.
My observation about all white collar jobs to which epithets "creative" and "strategic" are applicable: they are way way more vulnerable to automation than a "grunt" work.
Look how fast marketing profession turned from creative to number crunching, and the only guys who are left in the field from "the old industry" are from its "grunty" part
> But law clerks? Junior staff? The people who are usually forced to do all the grunt work to allow the top lawyers to focus on their strengths?
The same thing happened in finance, first with Excel and then with quants. Junior staff responsibilities shift to more client-facing work while senior staff are newly enabled to break off and start small firms.
It's strange, excel and greenscreen pricing grids could do 100x-1000x what a traditional pen and paper cash trader could do in the 80s, but trading/technology headcount increased massively since then.
> trading/technology headcount increased massively since then
Lower costs spur demand. Headcount went up a bit, throughput much more massively. If tech makes lawyers more affordable, that would increase the quantity demanded.
Can't AI eventually bring better strategy and judgement ?
The face to face consultation process doesn't require lawyers either, but more of a social worker role who can act as a buffer for some people and the AI ?
Give me the option between lawyers and AI. I'll choose the AI, as I've been burned pretty badly by lawyers before.
The degree's don't cause and effect competence.
Lawyers may have those concepts outside of their legal work, but I've dealt with enough to say its no guarantee a lawyer may care about equity,justice, fairness, etc.
Those lawyers have a different concept of equity, justice, fairness, etc. from yours. It doesn't mean they don't embrace those concepts.
An AI simply doesn't have any of those concepts, and moreover, is incapable of understanding those concepts. We can barely get AI to understand natural language--squishy abstracts like these are several developmental revolutions away.
The labor cost savings aren't going to make it to clients. I've worked in a law office, I know how billing goes. Those extra billable hours will be found elsewhere. I hope I'm wrong, and maybe I'm just cynical, but my opinion of lawyers and the legal profession in general took a hit after 3 years of working in it.
You are right. Price of every item has nothing to do with the cost of making it and everything with how much people agree to pay for it.
Driving down the cost of making a thing doesn't lower the price for everyone, but it widens the market downwards serivicing new el-cheapo customer base.
I just joined a company last year that works in this space almost exactly - due diligence contract review - and we are hearing this pretty constantly from people who evaluate our software. Not only is it much faster, but frequently it finds clauses that they had missed themselves.
It's a pretty exciting time to be working in this space.
You just need collusion between law firms i.e. to write a program, and then agree, that whatever it interprets, is the way it will be semantically enforced in court.
To be clear: the study of law is bullshit; so why not take advantage of it, and simply agree, that computer generated bullshit, is what determines it...
... of course while still retaining high rates and billable hours for "attorney review" (for billable hours/padding).
Agreed! And I'm thinking that some sort of language (or document format with technical markup) is going to become normalized to take advantage of this software, shifting from pure "prose".
I can imagine system with drag and drop sentence fragments and modifiable variables designed for the construction of contracts. When a document is finished, it would produce a summary of the consequences with as few interpretations as possible, possibly with a toggle for Wikipedia-style keyword linking in the result. The document could then be tweaked until the summary exactly matches what both parties want, at which point the document and summary together become the contract. Although, if such a system were to become widely used, I feel like lawyers will still be used to either discover or introduce any other remotely plausible interpretations that exist in the generated contract.
I am a transactional lawyer and I definitely would find value in an application that could issue spot an agreement in seconds. That said, just yesterday I spoke on a panel on the topic of how things can go wrong in a contract. We spent the majority of time talking about the dynamics and challenges that exist outside the agreement in the process of trying to memorialize the parties’ intent in a clear, concise, precise and reasonably complete manner. There are often significant challenges in terms of clearly obtaining the intent and relevant issues from the various stakeholders. And there are dynamics like relative negotiating leverage and psychology or other issues that can drive what the deal will look like regardless of pure legal issues. Also, since one never starts with a blank page, there is the contract template one starts with that must be evaluated against all this – what stays, what goes, what must change and how. Navigating these requires intangible skills, instincts, sensitivity to human dynamics, etc. It’s very much a human endeavor. So a key question is to what extent AI could help with all of these external issues. I have to think that’s much farther down the road. But having help assessing purely legal issues within the document would be a great supplement.
51-156 minutes is crazy to review an NDA. If an NDA is well drafted, I can do it in about 10 minutes. If it's a bit of a mess, maybe 30 min. If it's worse than that, I can assess that in about 5 minutes and propose using a better form.
With an AI, you don't know what it is that the AI doesn't know. A trivial example: Some "nondisclosure" agreements (NDAs) also include invention-assignment agreements [0] and/or non-competition covenants. I'll recognize such provisions if I see one in a putative NDA, but I don't know whether the AI will recognize it. Sure, the AI could provide a list of everything that it does know, but when I review the list, I won't necessarily notice that a missing item is missing.
This is an important point, although I can imagine AI could be trained to spot things that don't belong or are unusual provisions in an NDA. This may be what you're getting at, but it's easy in a contract review to focus on reacting to what's there and it's harder to know what's missing. An NDA is a relatively simple, cookie-cutter types of agreement with widely agreed elements. Other agreements not so much. How would AI figure out what's missing?
That's an important point, but I assume an AI would use some sort of checklist, perhaps seeded by human lawyers, to spot expected-but-missing provisions.
>> It took the lawyers an average of 92 minutes to complete the NDA issue spotting, compared to 26 seconds for the LawGeex AI.
Issue-spotting an NDA is not a typical task for an actual lawyer. It is the sort of thing handled by a legal intern or paralegal... then signed off on by a lawyer. It isn't typical legal work. The results are therefor of limited application in the real world.
Better test: Client asks "Do I need an NDA?" or, conversely, "can I break this NDA I signed last year?". Ask C3PO to handle that question. That is the sort of problem where the real legal expertise happens.
Clicking on the link, I expected to discover a watershed moment akin to AI beating a human at Chess or Go. Alas, since contract review is not an adversarial process, no human lawyers were "beaten". A less click-baity headline would be: AI slightly more efficient at issue-spotting contracts than lawyers.
NDAs tend to be a straightforward type of document with limited scope and a fairly well-known universe of issues. So having a computer program parse the document and itemize issues seems like a good idea.
But what does it mean that the AI “beat” the humans? That the program simply spotted the issues and listed them faster and more completely than the lawyers? Not that impressive a victory. It’s how the issues get resolved that are important.
Did the AI interact with a lawyer on the other side and get issues resolved? Not likely, but the story doesn’t tell us exactly what the test consisted of and how “victory” was determined. (It is possible to download the 40-page report and analyze it, but I am not willing to spend the time to do that, and I bet most commenters, like me, are just responding to the headline take-away.)
While AI can be a great tool, one of the problems with it is that often no one knows how the program makes decisions. Not knowing what you don’t know can present serious blind spots. For example, it may be possible for a counter-party to a transaction who has access to the same AI as you to construct a document with text containing an issue that the AI won’t spot but that the counter-party planted in the document for his or her advantage. If the document is reviewed only by AI (and given a cursory review by a bored low-paid worker who expects AI to catch all the issues), then there is an open back door to your legal castle.
Computers haven’t put accountants out of business, and they won’t put lawyers out of business either. They will make lawyers more efficient, but whether that translates into lower fees remains to be seen.
I have not carefully read the entire NDA, but I offer the following comment.
If a recipient of information protected by an NDA is a legal entity, such as a corporation, Section 4 of your form requires the recipient to enter into a confidentiality written agreement with each employee (and others working for the recipient) who receive information protected by the NDA. This is both too much and too little!
It is too much because it is burdensome on the recipient to require employees to sign a written agreement every time the corporation receives receive information protected by an NDA. There might be 20 employees who need to see the information, and keeping track of who has signed and who hasn’t and making sure that an employee who has signed doesn’t share information with an employee has not yet signed is an administrative burden.
I don’t ask for this provision when representing the disclosing party, and I would resist this when representing the recipient.
In any event, how does the disclosing party police this requirement?
It is too little because the recipient fulfills its obligation by entering into a written agreement with the employee as required by your form of NDA. If there is a written agreement with the employee and the employee improperly discloses the information protected by the NDA, the recipient points to the written agreement and says, “I did what you asked.” So why would the recipient be liable for the wrongful disclosure by its employee?
To whom is the employee liable if the employee improperly discloses the information protected by the NDA? Presumably the disclosing party would want to sue based on the fact that the employee signed a written agreement agreeing to keep the information confidential, but unless the disclosing party is a third-party beneficiary of the recipient’s written agreement with the employee, the disclosing party has no rights under that agreement.
In the absence of an express statement in the NDA that the recipient’s agreement with the employee is intended for the benefit of the disclosing party (i.e., the disclosing party is a third-party beneficiary of the agreement), it is a litigable issue whether the disclosing party a third-party beneficiary. There is nothing in the NDA form that requires the recipient’s agreement with the employee to contain such a clause.
In some situations, both the disclosing party and the recipient might prefer not to identify the source of the information protected by the NDA.
Even assuming that the written agreement with the employee allows the disclosing party to sue the employee for wrongful disclosure based on that agreement, does the employee have adequate resources to pay a judgment?
Instead of requiring such agreements between a recipient and an employee, it might be more effective to state in the NDA that the recipient is required to instruct its employees on the confidential nature of the information, that the recipient is responsible for any disclosure of information by its employees in violation of the NDA, and that the recipient will be liable for any damages resulting therefrom.
Thanks very much for this comment. I'm glad I looked back on my threads page and saw it!
First, I should make clear that I did not set out to write the very best NDA possible. Rather, I set out to write the NDA that I thought companies and their counsel would find the quickest and easiest to approve. In other words, to reflect current practice, which we might both to agree falls well short of optimum.
Alas, my experience from prior projects is that better terms don't provide enough incentive to standardize. Everybody likes their NDA, and the difference between OK and better isn't compelling. But my hope is that if we standardize otherwise, through CT's self-propagating mechanism, that standard can then become a platform for better terms.
Now to your points on employees and confidentiality.
The covenant to sign NDAs with employees is essentially a commitment to best practice. The parties are confirming that NDAs, or more likely CIIAAs, are part of the hiring packets for both sides. Note the exception for professionals under non-contractual confidentiality obligations, like lawyers. That tracks reality, in my experience.
You are correct that absent express language, and without privity, disclosers could end up without direct claims against breaching employees. That's an absolutely fair point, though I'd hasten to add that the company, rather than its employee, is usually the deep pocket, and an injunction to the company is usually what's needed to stop any bleeding.
The terms addressing employer responsibility are in section 4(m) of version 1.1.0:
> (m) Compliance and Oversight.
>
> (i) Receiving Party shall ensure that its Advisers abide by the confidentiality obligations of Receiving Party under this agreement. If Receiving Party is a legal entity, Receiving Party shall also ensure that its Personnel abide by the confidentiality obligations of Receiving Party under this agreement. Breach of Receiving Party obligations by Receiving Party Personnel or Receiving Party Advisers will be deemed breach of this agreement by Receiving Party itself.
>
> (ii) If Receiving Party is a legal entity, Receiving Party shall provide Disclosing Party copies of confidentiality agreements with Personnel who receive Confidential Information on Disclosing Party request.
Again, thank you very much. Writing what you did took time, I know.
If you'd like to discuss further, please do e-mail me. Otherwise, I can't be sure I'll see it. I'd be more than happy to make time for a call, or arrange a meal, coffee, or libations next I'm down to San Jose from Oakland.
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[ 3.1 ms ] story [ 110 ms ] threadThere's probably a plethora of writings showing that using both humans and AI _will_ go wrong.
The question isn't _will_ they go wrong (they will) it's a question of will they do it less.
In other words, I don't think lawyers are in danger. But law clerks? Junior staff? The people who are usually forced to do all the grunt work to allow the top lawyers to focus on their strengths? Those jobs are at definitely on the chopping block. There's still an insane amount of rote repetitive work in your standard law firm.
I don't know how much of that has changed now, especially with younger lawyers growing up with tech, getting in and wanting to do things a certain way.
For the most part though it doesn’t. There are many clients who won’t pay for first year associates. For those clients, firms don’t roll out legal tech. They do the work and write it off. Even at top wall street firms realization is 80-90% hours billed. Nor do firms trot out legal tech when it comes to contigency or fixed-fee cases, where there are no billable hours. Some major clients these days demand arrangements where they pay a fixed. monthly price. There is no legal tech leveraged in those cases.
For the most part I’ve found software in general these days to be underwhelming. It took me years to find software that I trust enough to keep track of highlighted points in court opinions. (Shout out to the folks who make Citavi.) I remember writing about predictive coding in law school almost ten years ago. I have never used it on a case. Ironically, the only cases where there were enough documents (millions) for predictive coding to make sense also involved so much at stake the client wanted to spare no expense.
The highest value legal tech has been review platforms like Relativity, but they are also crap. Like, loads documents slower than you can read them crap. It’s like technology to help programmers. You still just use Emacs because all this visual IDE shit doesn’t really help.
Time was if you wanted to get into law you’d join a firm as a clerk, learn the ropes, study for the bar, then become a lawyer.
The professionalizarion of law has pretty much ended that pipeline, with an expensive and arduous undergrad->law school->lawyer route instead. The replacement of junior staff with AI could effectively kill that route permanently.
My only hope is that legal AI will help bring down cost and increase access to legal aid for poor people in urban and rural communities where there is far too little supply to meet demand when people need legal aid the most.
iirc only a handful of states still allow you to take the bar without a law degree (and in practice I have no idea how often that happens, but I bet not much.) It seems like the apprenticeship route was by and large killed off some time ago.
That ship has sailed long long ago...like, 1890 long ago. There are states where you can read law and take the bar exam without a law degree (Virginia, California, Vermont, Washington), or with a partial law degree (New York and Maine), but the number of people who do that each year is minuscule compared to the number of lawyers who graduated from law school (60 to 84,000 in 2013).
In California, at least, that is still the only way become a lawyer without a law degree (called the "Law Office Study Program"). If you forgo law school, you are required to do an apprenticeship in a practicing attorney's office for 4 continuous years (18 hours/week, 48 weeks/year), along with taking various exams and reporting your study progress.
Details here: https://california.lawi.us/law-office-study-program/
California Bar (Section 4.29): https://www.calbar.ca.gov/Portals/0/documents/rules/Rules_Ti...
See: https://en.wikipedia.org/wiki/Reading_law
Their options are to lose that much time in billable hours, or to lose all their billable hours because the client found a law firm that doesn't bill so many hours for grunt work.
Yes, the lawyer bills by the hour. But, a good lawyer will have enough work either way - so they may as well automate the easy stuff, take a reduced rate for that, and still have a full-plate of interesting work at their full hourly rate.
And all of those top lawyers were once clerks and junior staff, who learned their craft by doing the grunt work.
This is going to be a problem.
Junior lawyers will still have plenty to do.
The path from passing the bar to being a successful / well-paid attorney has been extremely difficult for a decade now. AI will simply continue this trend.
I think you're heavily discounting the fact that searching through case law is not just "type in words into LexisNexis", but it's searching, parsing and consolidating case law that is relevant for a Partner. You actually read the case law, spend time understanding it, and build a report around it.
Yeah it's not a skill that everyone can do, but once trained to do it there's no point only doing that same task over and over because you won't advance your skills in other aspects of the field.
>But the human lawyer brings strategy, judgement and face-to-face consultation to the process.
My observation about all white collar jobs to which epithets "creative" and "strategic" are applicable: they are way way more vulnerable to automation than a "grunt" work.
Look how fast marketing profession turned from creative to number crunching, and the only guys who are left in the field from "the old industry" are from its "grunty" part
The same thing happened in finance, first with Excel and then with quants. Junior staff responsibilities shift to more client-facing work while senior staff are newly enabled to break off and start small firms.
Lower costs spur demand. Headcount went up a bit, throughput much more massively. If tech makes lawyers more affordable, that would increase the quantity demanded.
Give me the option between lawyers and AI. I'll choose the AI, as I've been burned pretty badly by lawyers before. The degree's don't cause and effect competence.
And maybe we don't want some negative human emotions involved anyway like fear. https://reason.com/archives/2016/06/23/confessions-of-an-ex-...
An AI simply doesn't have any of those concepts, and moreover, is incapable of understanding those concepts. We can barely get AI to understand natural language--squishy abstracts like these are several developmental revolutions away.
Driving down the cost of making a thing doesn't lower the price for everyone, but it widens the market downwards serivicing new el-cheapo customer base.
It's a pretty exciting time to be working in this space.
You don't need AI.
You just need collusion between law firms i.e. to write a program, and then agree, that whatever it interprets, is the way it will be semantically enforced in court.
To be clear: the study of law is bullshit; so why not take advantage of it, and simply agree, that computer generated bullshit, is what determines it...
... of course while still retaining high rates and billable hours for "attorney review" (for billable hours/padding).
If no-one is going to look at the actual evidence/agreements/law....
For a good thread on training to be a lawyer through apprenticeship, see this https://news.ycombinator.com/item?id=16255023
[0] Stanford University got trapped by an invention-assignment agreement contained in an "NDA" that one of its researchers signed when he visited someone at Roche — see https://en.wikipedia.org/wiki/Stanford_University_v._Roche_M....
This sounds like the easier work. Capture what you expect and flag every deviation for human review.
That's an important point, but I assume an AI would use some sort of checklist, perhaps seeded by human lawyers, to spot expected-but-missing provisions.
Issue-spotting an NDA is not a typical task for an actual lawyer. It is the sort of thing handled by a legal intern or paralegal... then signed off on by a lawyer. It isn't typical legal work. The results are therefor of limited application in the real world.
Better test: Client asks "Do I need an NDA?" or, conversely, "can I break this NDA I signed last year?". Ask C3PO to handle that question. That is the sort of problem where the real legal expertise happens.
But what does it mean that the AI “beat” the humans? That the program simply spotted the issues and listed them faster and more completely than the lawyers? Not that impressive a victory. It’s how the issues get resolved that are important.
Did the AI interact with a lawyer on the other side and get issues resolved? Not likely, but the story doesn’t tell us exactly what the test consisted of and how “victory” was determined. (It is possible to download the 40-page report and analyze it, but I am not willing to spend the time to do that, and I bet most commenters, like me, are just responding to the headline take-away.)
While AI can be a great tool, one of the problems with it is that often no one knows how the program makes decisions. Not knowing what you don’t know can present serious blind spots. For example, it may be possible for a counter-party to a transaction who has access to the same AI as you to construct a document with text containing an issue that the AI won’t spot but that the counter-party planted in the document for his or her advantage. If the document is reviewed only by AI (and given a cursory review by a bored low-paid worker who expects AI to catch all the issues), then there is an open back door to your legal castle.
Computers haven’t put accountants out of business, and they won’t put lawyers out of business either. They will make lawyers more efficient, but whether that translates into lower fees remains to be seen.
If a recipient of information protected by an NDA is a legal entity, such as a corporation, Section 4 of your form requires the recipient to enter into a confidentiality written agreement with each employee (and others working for the recipient) who receive information protected by the NDA. This is both too much and too little!
It is too much because it is burdensome on the recipient to require employees to sign a written agreement every time the corporation receives receive information protected by an NDA. There might be 20 employees who need to see the information, and keeping track of who has signed and who hasn’t and making sure that an employee who has signed doesn’t share information with an employee has not yet signed is an administrative burden.
I don’t ask for this provision when representing the disclosing party, and I would resist this when representing the recipient.
In any event, how does the disclosing party police this requirement?
It is too little because the recipient fulfills its obligation by entering into a written agreement with the employee as required by your form of NDA. If there is a written agreement with the employee and the employee improperly discloses the information protected by the NDA, the recipient points to the written agreement and says, “I did what you asked.” So why would the recipient be liable for the wrongful disclosure by its employee?
To whom is the employee liable if the employee improperly discloses the information protected by the NDA? Presumably the disclosing party would want to sue based on the fact that the employee signed a written agreement agreeing to keep the information confidential, but unless the disclosing party is a third-party beneficiary of the recipient’s written agreement with the employee, the disclosing party has no rights under that agreement.
In the absence of an express statement in the NDA that the recipient’s agreement with the employee is intended for the benefit of the disclosing party (i.e., the disclosing party is a third-party beneficiary of the agreement), it is a litigable issue whether the disclosing party a third-party beneficiary. There is nothing in the NDA form that requires the recipient’s agreement with the employee to contain such a clause.
In some situations, both the disclosing party and the recipient might prefer not to identify the source of the information protected by the NDA.
Even assuming that the written agreement with the employee allows the disclosing party to sue the employee for wrongful disclosure based on that agreement, does the employee have adequate resources to pay a judgment?
Instead of requiring such agreements between a recipient and an employee, it might be more effective to state in the NDA that the recipient is required to instruct its employees on the confidential nature of the information, that the recipient is responsible for any disclosure of information by its employees in violation of the NDA, and that the recipient will be liable for any damages resulting therefrom.
First, I should make clear that I did not set out to write the very best NDA possible. Rather, I set out to write the NDA that I thought companies and their counsel would find the quickest and easiest to approve. In other words, to reflect current practice, which we might both to agree falls well short of optimum.
Alas, my experience from prior projects is that better terms don't provide enough incentive to standardize. Everybody likes their NDA, and the difference between OK and better isn't compelling. But my hope is that if we standardize otherwise, through CT's self-propagating mechanism, that standard can then become a platform for better terms.
Now to your points on employees and confidentiality.
The covenant to sign NDAs with employees is essentially a commitment to best practice. The parties are confirming that NDAs, or more likely CIIAAs, are part of the hiring packets for both sides. Note the exception for professionals under non-contractual confidentiality obligations, like lawyers. That tracks reality, in my experience.
You are correct that absent express language, and without privity, disclosers could end up without direct claims against breaching employees. That's an absolutely fair point, though I'd hasten to add that the company, rather than its employee, is usually the deep pocket, and an injunction to the company is usually what's needed to stop any bleeding.
The terms addressing employer responsibility are in section 4(m) of version 1.1.0:
> (m) Compliance and Oversight. > > (i) Receiving Party shall ensure that its Advisers abide by the confidentiality obligations of Receiving Party under this agreement. If Receiving Party is a legal entity, Receiving Party shall also ensure that its Personnel abide by the confidentiality obligations of Receiving Party under this agreement. Breach of Receiving Party obligations by Receiving Party Personnel or Receiving Party Advisers will be deemed breach of this agreement by Receiving Party itself. > > (ii) If Receiving Party is a legal entity, Receiving Party shall provide Disclosing Party copies of confidentiality agreements with Personnel who receive Confidential Information on Disclosing Party request.
Again, thank you very much. Writing what you did took time, I know.
If you'd like to discuss further, please do e-mail me. Otherwise, I can't be sure I'll see it. I'd be more than happy to make time for a call, or arrange a meal, coffee, or libations next I'm down to San Jose from Oakland.