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It’s a common phrase used in business and economics in order to describe obstacles one faces when attempting to enter a particular market.

Tim Wu, in his book, The Master Switch, spends a fair amount of time discussing barriers to entry as he traces the rise of communications technology. Sometimes the barriers are physical, like a brick-and-mortar store or having to manufacture a product, like telephones. Sometimes the barriers to entry are stiff competition as there may be many players in a particular market. Sometimes the barriers to entry are regulatory, where the government has setup laws that are too costly to comply with for new ventures. After awhile, the phrase “when you take your eyes of the goal, all you see is obstacles,” fits. And when people keep their focus on their goal, barriers fall.

Technology has played a role in removing barriers, and cloud computing is no exception.

Kevin Smith of BigDoor made this point in his GeekWire post. BigDoor is a “Seattle-based startup dedicated to making the online world more rewarding  by providing gamification technology to non-gaming websites.” While it seems as if using the cloud would be a no-brainer for a start-up, he explains exactly what cloud computing has allowed his business to do:

AWS has allowed us to scale a complex system quickly, and extremely cost effectively.

At any given point in time, we have 12 database servers, 45 app servers, six static servers and six analytics servers up and running. Our systems auto-scale when traffic or processing requirements spike, and auto-shrink when not needed in order to conserve dollars.

For lawyers, technology such as cloud computing has allowed many to open up their own solo and small firms. The ability to practice remotely, or virtually, removes the “brick-and-mortar” barrier to entry. The freedom from being tied to a desk makes it easier to balance life and work. And being able to leverage technology in your solo or small firm practice can make it easier to charge a flat fee, or use a different fee structure than the typical billable hour. Alternative fee structures, coupled with a niche focus area can lower, perhaps eliminate, the competition barrier.

What remains is the regulatory barrier. Darryl Mounting discussed numerous barriers to virtual law practices, from the patchwork of state and federal rules in the US to barriers for virtual practices across the globe. Since his post, there has been movement towards reducing some of these barriers. The North Carolina State Bar has issued a Proposed Formal Ethics Opinion regarding lawyer use of cloud computing services, or Software-as-a-Service (SaaS). And the American Bar Association’s Ethics 20/20 Commission has published issues papers relating to lawyer use of technology, ”Client Confidentiality and Lawyers’ Use of Technology” (PDF) and “Lawyers’ Use of Internet Based Client Development Tools;” (PDF) cross-border practice, “Choice of Law in Cross-Border Practice” (PDF) and “Multijurisdictional Practice“ (PDF).

Technology like cloud computing can remove barriers that might otherwise prevent lawyers from starting and running their own practices, and the wide-spread use of cloud computing by solo and small firm lawyers is helping to lower, if not remove, regulatory barriers. The ABA has certainly taken note, as have state bar associations. Technology, perhaps, is indeed much like water: finding ways to flow through and around anything put in its path.

Back in February, we posted an overview of responses to the ABA Commission on Ethics 20/20 Implications of New Technologies Issues Papers. Earlier this month, the Commission published its initial draft proposals on Technology and Confidentiality (PDF).

There had been some concern, initially, on the direction the Commission would take, but as Carolyn Elefant of MyShingle.com pointed out, the Commission listened and has applied a reasoned approach. Instead of creating a one-size-fits-all set of changes, the Commission has suggested more nuanced changes that leave room for the inevitable progression of technology. The proposed changes also speak to a sentiment echoed by many who submitted comments, namely that lawyers, if given the proper tools and guidance, can make well-informed decisions.

Instead of proposing new, or even additional, competence rules (Model Rule 1.1), the Commission offers this:

To maintain the requisite knowledge and skill, a lawyer should keep abreast of changes in the law and its practice,  including the benefits and  risks associated with technology, engage in continuing study and education and comply with all continuing legal education requirements to which the lawyer is subject.

In the Report section, the Commission explains its reasoning for adding “including the benefits and risks associated with technology:”

Model Rule 1.1 requires a lawyer to provide competent representation, and Comment [6] specifies that, to remain competent, lawyers need to “keep abreast of changes in the law and its practice.”  The Commission concluded that, in order to keep abreast of changes in law practice, lawyers necessarily need to understand basic features of technology and that this aspect of competence should be expressed in the Comment.

Comment [6] already encompasses an obligation to remain aware of changes in technology that affect law practice, but the Commission concluded that the addition of the phrase “including the benefits and risks associated with technology” would offer greater clarity regarding a lawyer’s obligations in this area and emphasize the importance of technology to modern law practice.  The proposed amendment does not impose any new obligations on lawyers.  Rather, the amendment is intended to emphasize that a lawyer should remain aware of technology, including the benefits and risks associated with it, as part of a lawyer’s general ethical duty to remain competent.

We’re willing to bet there will be many more CLE sessions on cloud computing, social media, blogging, etc. in order to help lawyers “remain aware of technology, including benefits and risks associated with it, as part of a lawyer’s general ethical duty to remain competent.” We can already see this taking shape as cloud computing becomes increasingly pervasive and social media, particularly Facebook, are used in court cases.

On the subject of confidentiality (Model Rule 1.6), the Commission makes the following suggestion:

(c)  A lawyer shall make reasonable efforts to prevent the inadvertent disclosure of, or unauthorized access to, information relating to the representation of a client.

The reasoning offered by the Commission is interesting, and worth noting. The Commission states that:

Currently, Model Rule 1.6(a) states that a lawyer has a duty not to reveal a client’s confidential information, except for the circumstances described in Model Rule 1.6(b).  The Rule, however, does not indicate what  ethical obligations lawyers have to  prevent such a revelation.  Although this obligation is described in Comments [16] and  [17], the Commission concluded that technology has made this duty sufficiently important that it should be elevated to black letter status in the form of the proposed Model Rule 1.6(c).

The Commission has acknowledge a gap that has become clear in light of recent high-profile breaches at Sony and Epsilon. Prevention in the pre-digital age was easier: keep files under lock and key, and minimize the number of people with a key. Lines of responsibility were clear, and since you as the lawyer were the master keyholder, the responsibility ultimately landed on your shoulders. In the digital age, there was been some debate about keeping confidential documents online, and some debate about who is ultimately responsible for a data breach.

Neither debate has been completely resolved, but the Commission has proposed a solution. While acknowledging that technology continues to advance too rapidly to impose a specific set of security standards, it emphasizes that lawyers still have an “obligation to act reasonably when using technology and that Rule 1.6 should clearly state this general obligation.” The Commission also states that:

To emphasize the evolving nature of this obligation, the Commission is proposing accompanying amendments to Comment [16].  This Comment currently explains that a lawyer has a duty to  protect a client’s confidential information from inadvertent disclosure or unauthorized access, but the Commission proposes to identify in that Comment several factors that lawyers should consider when determining whether their efforts in this regard have been  reasonable, including the sensitivity of the information, the likelihood of disclosure if additional safeguards are not employed, and the  cost of employing additional safeguards.

In other words, the Commission has offered guidance on specific areas lawyers must consider when using, or considering, something like a cloud-based application.

Which brings us to that other stickler: data privacy. And here, the Commission points to “a dramatic growth in federal, state, and international laws and regulations.” Its proposed solution is quite simple: add a sentence reminding lawyers “that other laws  and regulations impose confidentiality-related obligations beyond those that are identified in the Model Rules of Professional Conduct.” In other words, there is no need to write another set of rules to govern issues of data privacy.

In its conclusion, the Commission echoes what many commenters said, namely that:

Technology can increase the quality of legal services, reduce the cost of legal services to existing clients, and enable lawyers to represent clients who might not otherwise have been able to afford those services

The Commission is seeking responses to these proposals, and we encourage you to read the full resolution.

Responses are due by July 15, 2011, and should be sent to:

Senior Research Paralegal Natalia Vera:
Email: natalia.vera@americanbar.org
Fax: 312/988-5280.