Today's General Counsel, June 2023

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ISSUU.COM/TODAYSGC $199 SUBSCRIPTION RATE PER YEAR ISSN: 2326-5000 JUNE 2023 VOLUME 20/NUMBER 4 TODAYSGENERALCOUNSEL.COM Insuring against e-mail scams Keeping settlement discussions confidential Finding efficiencies in your patenting process SOLVING VENUE PROBLEMS
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3 JUNE 2023 TODAYSGENERALCOUNSEL.COM contents JUNE 2023 Volume 20/Number 4 4 Editor’s Desk DATA PRIVACY & CYBERSECURITY 8 Insurance Coverage for E-mail Scams Protection is iffy unless the wording is right. By
LITIGATION 11 Trying a Case In a Judicial Hellhole Shorten your presentation, hire local co-counsel.
14 Remote Employees and Patent Venue Your company’s geographic footprint is key.
11 COLUMN/PRIVILEGE PLACE
Ask the Court If You Want Confidentiality
an agreement from your counter-party.
16
Demand
FEATURE
A Playbook for Cost-Effective Patent Prosecution and Portfolio Management
short-term cost reductions and long term goals.
18
Reconcile

EDITOR’S DESK

In a perfect judicial system the venue wouldn’t matter, but disputes about venue keep cropping up, especially in Texas. David SwetnamBurland’s article in this issue of Today’s General Counsel concerns a Texas judge’s effort to get around a Supreme Court ruling that would end his courtroom’s reign as “the epicenter of U.S. patent litigation.” Robert Kum has some advice on litigating in unfriendly venues, or as he describes them, “judicial hellholes.”

ROI on your patent portfolios is the topic of Edward Steakley and Aroon Karuna’s article Todd Presnell discusses a problem that General Counsel encounter frequently, privilege for settlement discussions, and Peter Selvin provides guidance on coverage grants for email scams. The wording of your insurance policy is key.

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David Swetnam-Burland

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Insurance Coverage for Email Scams

Agenuine looking email is sent to a company’s accounts payable department with instructions from its president to pay money to a certain account. The “To” and “From” headers and the signature block look identical to hundreds of emails previously received by the department from the company’s president. In reliance on the email, money is wired to the designated account. It later turns out the email

was fake and the company’s money was wired to a fraudster’s account.

In another scenario, the company’s accounts payable department receives an email purportedly from a trusted vendor. The email looks genuine, even down to the vendor’s logo. In the email, the vendor states that it has changed its bank account and directs the company to make future payments to its new account. The company wires the money to the

new account and later discovers that the money didn’t go the vendor. It went instead to a fraudster who had impersonated the vendor.

Both of these scenarios fall under the category of “email spoofing”, which refers to a form of cyber attack in which a hacker sends an email that has been manipulated to seem as if it originated from a trusted source. Otherwise known as business email compromise this technique is used

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DATA PRIVACY & CYBERSECURITY

to dupe employees into moving money into a fake account.

According to the FBI, $43 billion in losses were sustained due to business email compromise between 2016 and 2021. This is a growing type of cybercrime that generates billions in losses every year. Companies that have been defrauded by these schemes ought to look at their crime policies, which typically have some or all of the following coverage grants:

Social engineering coverage. Many crime policies cover losses arising from so-called social engineering,

a corporate officer. In this regard, court cases have held that a third party’s entry into and manipulation of a company’s email system, in order to generate a genuine looking email, will be covered under this formulation.

Other policies define computer fraud in broader language. These policies cover losses arising from the use of a computer to fraudulently cause the transfer of funds from the company to a person or entity outside the company. This wording would cover losses arising from the second scenario – i.e., where the company sends funds in reliance on a genuine looking email purportedly from a vendor.

The take-away is very simple. Financial losses arising from this kind of email fraud may in fact be covered under a company’s crime policy, but policy wording is always key. And, given how widespread this kind of email fraud has become, companies ought to make sure that they have the right kind of insurance coverage to protect against these losses.

which means the intentional misleading of someone within the insured company by someone impersonating a vendor or executive at the company. The challenge with this form of coverage is that losses are often subject to a lower limit (a “sublimit”) than the other forms of coverage in a crime policy.

Computer fraud coverage. Particular attention should be paid to how a policy’s computer fraud coverage is defined. Some policies require that there be a “fraudulent entry of data into a computer system and change to data elements or program logic of a computer system.” This requirement may be met for losses arising from the first scenario – i.e., where a subordinate wires money in reliance on an authentic looking email from

Funds transfer coverage. This is a narrower form of coverage. It covers losses from fraudulent instructions that are transmitted in the insured’s name to a financial institution directing that the insured’s funds be transferred to an outside account. Unlike the two scenarios above, this form of coverage typically does not cover transfers initiated by the company’s instructions to a financial institution, even if that instruction was fraudulently procured by a third party.

Forgery coverage. This covers losses arising from the forged signature of an authorized signator on a financial instrument such as checks, drafts and promissory notes. Coverage under the forgery grant for losses arising from the two scenarios above is unlikely, although there is at least one case which has held that a fake instruction from a company’s president, as used in the first scenario, may trigger coverage under this grant.

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Peter Selvin is a partner with the Los Angeles firm of Ervin, Cohen & Jessup. He practices in the areas of commercial litigation and insurance coverage and recovery. pselvin@ecjlaw.com
Companies that have been defrauded by business email compromise ought to look at their crime policies.

Trying a Case In a Judicial Hellhole

For anyone whose practice focuses on mass torts or a national counsel practice, litigating in a judicial hellhole is not uncommon. I finished 2022 with trials and defense victories in Chicago and Los Angeles and not long before that, successfully tried a case in Philadelphia. According to the American Tort Reform Foundation that’s three of the top five current Judicial Hellholes for defendants

(Georgia and New York complete the list).

Being in these venues is not simply a product of bad luck. Plaintiff’s attorneys do a great job spotting trends in terms of increased verdicts, as well as favorable changes in the law. This is why the list rotates. In 2010, the top five were South Florida; West Virginia; Cook County, Illinois; Atlantic County, New Jersey; New Mexico Appellate Courts.

Despite my good fortune in these venues, there is no secret sauce or magic in trying these cases. It takes hard work and a lot of common sense strategy that is often overlooked. Here are some things to keep in mind if you’re trying cases in similar venues.

JUDGES

For the most part, judges in various venues are relatively similar. If

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LITIGATION

your judge was a public defender or worked at a public interest organization, they trend towards plaintiffs. If they were a former prosecutor, they will adhere to the rules of evidence more strictly, thus being more favorable to defense.

Is there any concern that it will be a disadvantage that you are not from the venue? Generally, this has not been an issue for me. Most larger tort cases tend to be filed in metropolitan areas where they see attorneys from across the country.

But, to be clear, being hometowned by a local judge does happen. A while back, I tried a toxic tort in a well-known mid-west venue. My co-counsel and I were the only two attorneys from the West Coast. The trial judge was obviously familiar with the local plaintiff’s attorney, and a number of the defense attorneys. He would refer to counsel by their last name. However, he referred to my co-counsel and me as the “California Boys.” The first time, everyone in the courtroom chuckled.

someone who is on the judicial panel that nominates or vets judges.

Finally, know local rules and rules of evidence for the venue inside and out. If you talk and act like an attorney that knows the rules, the trial judge is more likely to forget you are not native to the jurisdiction.

TRIALS

If you thought people hated serving on juries pre-Covid, the disdain for being called to jury duty now has gone up exponentially. You need to shorten your defense case as much as possible. Jurors do not want to sit around for weeks in trial. Since your main part of the case is last, jurors will often take it out on the defense if they feel the case is needlessly dragging on. In my last trial, we were able to cram a trial that would normally last several weeks into one. While this took a lot of organization and very late nights, we reaped the benefits.

In a toxic tort, products liability or any case where the defense will

as possible. Keeping an expert on the stand for multiple days probably shows your client how smart you are and how much effort you put into the case, but this will likely go over like a lead balloon with the jury.

Ultimately, your greatest asset is your experience as a trial attorney and understanding the venue where you are about to defend your client.

Wish me luck in 2023. I am off to my next trial in a judicial hellhole. If I end up trying cases in Georgia or New York this year, I will have accomplished the quinfecta!

By the third time, I knew what was happening.

There are steps you can take to avoid this. First, hire a local counsel that regularly practices in the courthouse where your case is venued. Sometimes, because they already have national counsel, companies want to economize by hiring local counsel based on costs. Big mistake. You gain automatic credibility if your judge sees your co-counsel as a familiar face. Hire a co-counsel active in the state bar, and if possible,

typically rely heavily on scientific studies, jurors are now more skeptical than ever when presented with evidence from governmental or regulatory agencies.

Plaintiff’s attorneys do not need nor care about the science. In a toxic tort case, it is a common tactic to simply argue that chemicals are bad and that your client’s chemicals must be the reason their sympathetic client contracted cancer.

To combat this, keep the scientific presentation as simple and concise

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Robert Kum is partner at Duane Morris. He is a trial attorney focusing his practice on complex litigation matters concerning toxic torts, products liability, catastrophic injuries and business disputes in state and federal courts, and across industries including automotive, chemical, and construction. RKum@duanemorris.com
Hire a co-counsel active in the state bar, and if possible, someone who is on the judicial panel that nominates or vets judges.

Remote Employees and Patent Venue

Patent owners, accused infringers, and patent litigators spend a surprising amount of time thinking about and litigating venue. A wave of non-practicing entity cases made east Texas the epicenter of U.S. patent litigation until the Supreme Court clarified in TC Heartland v. Kraft Foods Group Brands that an accused business can

only be sued for patent infringement in its state of incorporation, or where it has committed acts of infringement and has a regular and established place of business.

More recently, Judge Albright in Waco, Texas used his location in a district that includes tech–friendly Austin to encourage patent plaintiffs to come to his court, and in short

order approximately 25 percent of all U.S. patent cases were pending there. Now that the Western District of Texas has changed its case assignment rules to distribute cases more evenly, the flood of cases to Waco appears to have subsided.

Yet venue disputes continue. The latest issue in the patent venue wars has now reached the Federal Circuit

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LITIGATION

Court of Appeals: whether and when employees working from home might establish venue for purposes of patent infringement litigation. In the case of In re Monolithic Power Systems, an accused infringer moved to dismiss or transfer a patent case from Judge Albright’s west Texas courtroom on the ground that it was neither incorporated in west Texas nor had a regular and established place of business there. The court denied the motion, concluding that the presence of remote employees in Austin who had been provided equipment by the defendant to use while working from home created a sufficiently permanent place of business in the district.

The accused infringer sought a writ of mandamus from the Federal Circuit, which a panel of the appellate court denied by a two-to-one

means knowing generally in what localities and states your business has employees; but it also means knowing specifically where individual units of the business are located, e.g., engineering, HR, website development, finance. Knowing the former allows you to assess quickly, if you are sued, how likely you are to be deemed to have a regular and established place of business in the venue. Knowing the latter allows you to consider a second line of defense — whether the patent-owner can plausibly allege that your business committed an act of infringement in the venue.

The case law is much less developed in the latter area, but the fact that your HR director lives in San Antonio does not mean your company did anything to infringe a patent to the architecture of your

will only grow in significance to their legal advisors.

vote. The majority rested its conclusion to uphold the lower court largely on the high standard of review, which requires a clear and indisputable right to the requested relief. The dissent noted, however, that by refusing to address the issue of remote employee venue head-on and now, the court’s order “threatens to bring confusion to the law,” especially “given the increased prevalence of remote work in recent years.”

While only the Federal Circuit can ultimately cut through the confusion, there are steps counsel can take to assess and manage the risk. Most obviously, keep up-to-date on your geographic footprint. This

retail website when she sat down at her kitchen table to review benefits packages. Finally, keep tabs on where you keep your documents — even if the answer is the cloud wherever that is. A case filed in a proper venue can still be transferred for the convenience of the parties and in the interest of justice. And one of the key factors is where the evidence is physically maintained, whether that is file cabinets of documents or warehouses of servers.

As businesses and employees continue to take advantage of the tremendous benefits of remote work, having a clear, accurate, and regularly updated picture of which employees are doing what and where

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While only the Federal Circuit can ultimately cut through the confusion, there are steps counsel can take to assess and manage the risk.
David SwetnamBurland is a partner with the Maine law firm, Brann & Isaacson. He represents business clients in intellectual property, privacy, class action, tax, and other business litigation. He also advises on compliance issues in the areas of data privacy and security, and state and local tax. dsb@brannlaw.com

Ask the Court If You Want Confidentiality

Abraham Lincoln’s wisdom revealed itself in a variety of spheres, ranging from the adversities associated with frontier life to challenges in stitching a divided nation together. In respect to legal disputes, Lincoln wisely advised lawyers to “discourage litigation” and, instead, “persuade your neighbors to compromise whenever you can.” Lincoln’s encouragement to compromise evolved into public policy, repeatedly expressed by

federal and state courts, that parties should endeavor to settle civil lawsuits.

In today’s litigation environment, mediations and judicial settlement conferences have become the primary method through which lawyers and their clients compromise. Most judges, lawyers, and policymakers — but not all — accept that confidentiality of settlement discussions, mediation statements, and the like encourages participants to be candid

and forthcoming, which increases the chances of a pretrial resolution.

The question arises, though, whether the so-called confidentiality of settlement-related discussions actually precludes those discussions from compelled disclosure, either from a party’s intra-litigation adversary, or a third party during subsequent litigation.

In that regard, let’s debunk a few assumptions and misconceptions. A federal statute requires each

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PLACE
COLUMN/PRIVILEGE

federal district court to implement alternative dispute resolution programs, and impose confidentiality requirements on the participants in those efforts. While most district courts have followed this mandate, their confidentiality rules vary. More importantly, a rule of confidentiality is not the equivalent of an evidentiary privilege. A confidentiality rule merely precludes a party from voluntarily disclosing settlement-related discussions; indeed, courts have sanctioned parties for disclosing settlement-related discussions without consent of all interested parties. But a confidentiality rule does not prevent the compelled disclosure of the settlement discussion. Only an evidentiary privilege fulfills that purpose.

Many of us routinely label settlement communications as “protected by Rule 408.” But what does that classification really safeguard? Federal Rule of Evidence 408, and its state counterparts, precludes the admissibility of settlement discussions, but does nothing to impede the discovery of those communications. And the inadmissibility has limits. The rule permits the admission of settlement communications to prove, for example, a witness’s bias.

If evidence rules and courtmandated confidentiality rules do not prevent the compelled discovery of settlement communications, one can ask whether any real protection exists. And if not, then does a party’s incentive to speak candidly during settlement negotiations evaporate?

At the federal level, the Sixth Circuit recognizes a “settlement

privilege” that prevents the compelled disclosure of communications made in furtherance of settlement. Courts have not fully developed this privilege, and limit it to settlement-related communications. Other circuits eschew this privilege in favor of a heightened discovery standard for dispute-resolution negotiations. Some district courts have adopted a mediation privilege which, as the name suggests, is limited to resolution discussions pertaining to a formal mediation.

Protection for settlement-related communications varies under state law. Some states have adopted a settlement privilege by statute or common law. Other states protect communications when related to a formal mediation. Some preclude discovering mediation communications from the mediator but not the mediation participants. And others, similar to federal district courts, impose duties of confidentiality without adopting an evidentiary privilege as required to prevent compelled disclosure. This morass makes it difficult to predict the discoverability of settlement communications.

Fortunately, we can reduce this unpredictability and increase the chances of protection. Let’s understand that a “408” designation does not create an impenetrable barrier to disclosure and choose our written words and positions carefully. Still, it remains important to demand an agreement from your adversary that settlement discussions will not be disclosed without a court order.

Ask the court to include confi-

dentiality requirements in any order referring the case to mediation. If your jurisdiction recognizes a settlement or mediation privilege, then use it and cite it when engaging in resolution discussions. In short, generate evidence of your confidentiality and non-disclosure intent to dissuade a judge from compelling disclosure. As Lincoln also quipped, “The most reliable way to predict the future is to create it.”

Todd Presnell is a trial lawyer in Bradley’s Nashville office. He is the creator and author of the legal blog Presnell on Privileges, presnellonprivileges. com, and provides internal investigation and privilege consulting services to in-house legal departments. tpresnell@bradley.com

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More importantly, a rule of confidentiality is not the equivalent of an evidentiary privilege.

A Playbook for Cost-Effective Patent Prosecution and Portfolio Management

18 TODAYSGENERALCOUNSEL.COM JUNE 2023 BACK TO CONTENTS FEATURE SPONSORED

INTRODUCTION

Whether a result of financial performance, a cyclical market downturn or a global crisis such as the COVID-19 pandemic, at some point, every IP decision maker will have to plan for cost reductions.

When it comes to an IP portfolio that takes time to build and time to generate an ROI, however, it can be difficult to navigate cost reductions as a short-term measure without negatively impacting a longer-term outlook.

Over-reactive measures may inadvertently harm competitiveness, increase risk exposure, limit recovery time frame, or limit future innovative advantages. Under-reactive measures may fail to meet the budgetary guidelines required to keep organization finances on track.

In this abbreviated playbook, Cognition IP patent attorneys provide proven strategies to reduce intellectual property costs, maximize the value of your IP portfolio and maintain an innovative edge.

PATENT COUNSEL

Before evaluating the intellectual property itself, the most immediate opportunity for cost savings may be to review your current relationship with counsel.

Re-evaluate premiums. While larger firms can have a great reputation, they can be more expensive. Boutique firms can be an excellent source for discovering attorneys who have gained expertise with larger firms earlier in their careers, at a more reasonable cost.

integrating with your team and scaling with the volume of work needed, so you’re not overpaying for longer commitments or the potential of work expected, typically, only services rendered.

Negotiate. Negotiating with your current counsel may be an effective means of reducing costs without compromising your intellectual property portfolio. Ask about alternative fee arrangements (AFA) such as flat fees or fixed fees, portfolio fees, blended rates, handicaps or the arrangement that best suits your needs. Be prepared with the firm’s statistics and competitor statistics which illustrate performance and the eventual costs of being a client, such as USPTO allowance rate, average number of office actions, success with examiners and continued examination.

Embrace tech. Legal tech can improve productivity, modernizing each step from budgeting to filing and reporting. What processes can you automate and save on costs? How is your IP counsel using legal tech in a meaningful way that affects your bottom line?

PATENT PORTFOLIO MANAGEMENT

When evaluating IP investments, a little bit of planning can go a long way.

significant for technological leaps. Use a higher score for inventions that are of high interest to competitors, easier to detect if infringed upon, broad in claim scope, and of course, inventions that are more likely to be patentable.

PATENT SEARCH

In any strategy, accurate data is key. IP searches can surface valuable preemptive insights on where and where not to spend.

Clear the path. A general patentability search may be an obvious yet worthwhile exercise in determining whether or not to pursue a particular patent. By surfacing prior art that potentially blocks your filing, you’ll have a sense for your chances of allowance and issuance. The cost of a patentability search is a fraction of the patent, so it can be a cost savings if you decide not to file.

Consider ‘on-demand.’ Fractional IP attorneys offer on-demand services,

Catalog & Score Inventions. We recommend using a weighted scale to decide what to cut, what to invest in and perhaps what to license or sell. The focus is always on quality rather than quantity. Use a higher score for inventions central to the business, critical to product, and

Leverage competitive intelligence. Landscape searches include portfolio insights of your top competitors. By understanding what they’ve filed, perhaps what they haven’t filed and what has been patented, you can better evaluate your IP investments. This competitive intelligence can also help in defending the IP budget with executives by illustrating where commercial opportunities may exist, where you may be exposed to risk, and where the longer-term investment of IP should maintain priority even during cost reduction periods.

PATENT PROSECUTION

After reviewing your current patent counsel and choosing the critical IP to protect, these strategies will help you get the most value out of the patent prosecution process.

JUNE 2023 TODAYSGENERALCOUNSEL.COM BACK TO CONTENTS 19 SPONSORED

Start narrow. Although the end game is typically to capture broad protection, start narrow and build your strategy with continuation applications. It may lead to quicker initial momentum with an examiner, with fewer adversarial costs. Continuation applications can later widen the scope with broader claims once you know what finds favor with the examiner.

Prioritized Patent Examination to expedite the completion of the prosecution within one year can have its benefits. Track One can also provide an early indication of whether you want to file internationally. In some cases, it might be even better than filing a PCT application, because you have a full prosecution history of a parent application completed within a year.

or competitors managed IP wisely, with favorable outcomes.

Cognition IP is a San Francisco based intellectual property law firm supporting General Counsel and in-house intellectual property teams with on-demand, fixed-fee IP counsel and the results expected from a top tier firm.

Layer protection. When starting with a parent application, a layered approach leaves the door open for unique continuation applications to follow. By layering claims, in effect, you can add protection which costs a fraction of the parent.

Address the competition. As you go to market, you may develop a keen sense of competitor offerings. You can then craft continuation claims that laser-focus on addressing their particular solutions and distinguish your features, emphasizing that your idea was filed first.

Leverage the Patent Cooperation Treaty application (PCT) and International Search Report (ISR). If you’re considering international filings, the International Search Report can help with an early indication of prior art and the possibility of patenting in other countries.

Get to allowance faster. Obtaining an allowance faster can reduce the overall costs of prosecution. Even though it comes with an additional fee, using USPTO Track One or

Approach international protection thoughtfully. Filing internationally can carry significant costs, so the reasoning should be sound. Consider location of manufacturing, potential customer base, where stronger legal enforcement systems exist, where competitors are and where infringement is most likely.

CONCLUSION

When financial challenges are imminent, it can be difficult to maintain perspective, especially with longer term investments. Having a plan and sticking to it are often the most effective preemptive measures which keep an organization on track. Consider the above strategies and prepare your own IP playbook or work with an intellectual property attorney to support the level of detail you need. By focusing on what matters most, you can reduce costs, ‘do more with less’ and preserve your innovative edge.

Remember that the timelines of planning IP do not always align with budgeting timelines, so be sure to communicate the importance of your IP investments, as it may not be obvious to other decision makers. When possible, learn from past financial challenges and understand where your enterprise

This abbreviated playbook was originally delivered as a Today’s General Counsel webinar and can be viewed here

Edward Steakley is Managing Partner of Cognition IP. Edward has over 23 years of experience building patent and trademark portfolios and creating IP strategies, formerly as Senior In-House Counsel at two Fortune 5 companies including Apple, and as a Senior Associate at a top ranking firm.

Hello@CognitionIP.com

Aroon Karuna is a Partner with Cognition IP and draws upon over 15 years of experience. In his career, Aroon has prepared and prosecuted patent applications covering a broad range of fields for established tech companies including Apple and Salesforce. Aroon was previously IP Counsel at Wolfram Research & GE Healthcare.

Hello@CognitionIP.com

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Every IP portfolio takes time to build and time to generate a ROI.

Texts, Instant Messaging, US Data Privacy Laws Oh My!

ON-DEMAND

This webinar analyzes key areas of data-related risks and provides tools/tips to establish defensible practices for protecting your organization in the event of a privacy breach, regulatory action, or litigation. Join us to explore: best practices for managing your company's data; how CLOs/GCs are shifting their focus to effectively managing these data-related challenges in-house; and how laws governing data are evolving and what that means for you.

Employee privacy is under scrutiny. Are you ready?

ON-DEMAND

In this webinar, we'll help to ensure you understand the evolving landscape of NLRB investigations and that your company has the processes & practices in place to meet them by discussing: what are the new compliance regulations and what's at stake; what policies (e.g., retention, monitoring, surveillance) and access controls should you have; how can you be proactive with meeting the new obligations; and what advice can labor insiders share.

The Current State of Corporate Law Departments –Controlling Costs Amid Budget Cuts

ON-DEMAND

Join this webinar to hear how today’s modern legal teams are saving time and money on contract review and data extraction with pre-trained AI-powered document analysis. You will learn: the state of the corporate legal department; top spend areas by U.S. legal departments; and how in-house departments can lean on technology to reduce outside counsel spend and empower their team.

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