New rules open the way to eDiscovery

The day after former Enron Corp. Chief Executive Officer Jeffrey Skilling received 24 years in prison for financial fraud, a group of technology and legal experts met in New York to discuss new requirements for how companies keep track of information that might be needed in court.

On Dec. 1, several amendments to the U.S. Federal Rules of Evidence, which govern how, when and whether evidence can be presented to a jury, will take effect that and have major consequences for companies involved in U.S. court litigation.

According to Nick Croce, president of DOAR Litigation Consulting and one of the experts speaking at Per Se restaurant in Manhattan Tuesday, three major changes that will have the biggest affect on companies and how they discover and manage information within their IT environments, a trend that is labeled "eDiscovery."

For starters, anything that has been stored electronically will now be up for grabs as admissible as evidence, so the more a company has, the more it is responsible for keeping in check, he said. "Documents no longer mean physical paper," Croce said.

The rules also give companies involved in litigation 99 days to meet with the lawyers involved in the case to discuss how electronic evidence will be handled, Croce said. It also mandates that companies have controls and procedures to keep track of information ahead of time so when any case they are involved in reaches the discovery phase, they will be ready.

In a nutshell, if companies don't have proper track of all of the information in various files, e-mail and documents, and that information is required as evidence in a court case, they could face major fines and legal fees to help them find what they need The problem is, many companies aren't even aware of the new eDiscovery requirements, said Debra Logan, vice president of research with Gartner Inc.

She said the majority of companies -- if not all of those she's had contact with -- are unprepared for the regulation changes. This could cost them billions of dollars if they don't get up to speed quickly and they run across a strict or impatient judge, Logan said. "Judges are increasingly disinclined to put up with bad information management," she said.

The new regulations are yet another example of how technology is changing the rules. It's technology that has caused the information glut at companies, and inspired the new regulations with which companies must now become compliant. In turn, it should be technology that fixes it, she said.

"We're drowning in information," she said. While companies are complaining it's "too hard" to keep track of all the information contained in every file -- many of which are redundant or the product of employees who no longer work for the company -- the new regulations really give them no choice.

"Now you need to be proactive in getting this stuff together," Logan said. According to Gartner Inc., in 2007 at least 75 percent of all global companies will be involved in legal or regulation action that requires a systematic approach to legal discovery.

That is where Autonomy Corp., the sponsor of Tuesday's lunchtime discussion, thinks it can help. The Cambridge, U.K., company, known best for its enterprise search products, recently launched a version of its Aungate Electronic Document Discovery product to help companies not only search all of their electronic files but also investigate and manage those files so they can come up with a standard way to keep track of information, said Ian Black, a managing director at Autonomy.

Logan said she expects Autonomy, an early mover in this market, to see a flood of competitors in 2007 as vendors catch on that eDiscovery will be a major pain point for companies. So it seems that once again, technology has created a new market opportunity, and it surely won't be the last time.