Improving Contract Management and Analysis
For over two decades, eDiscovery and computer assisted review hogged the legal technology limelight. Now, tools to improve contract management and analysis finally have hit the market. I share here why two fairly new products – Seal Software and DiligenceEngine – are good news for transactional lawyers. This is not a review; rather it’s about the potential value of these tools to companies and law firms.
Context – A Timeline of Contract Tools . Before focusing on these products, I provide some context with an approximate timeline of transactional tools (based only on memory, so I welcome corrections):
- Word processing
- Document assembly
- EDGAR filing and retrieval
- CD-ROM closing bibles
- Microsoft Word and Word macro suites
- Virtual deal rooms
- More sophisticated EDGAR research
- Contract consistency checkers
- KM tools for contracts
- Digital signing
- Contract lifecycle management (CLM) systems
- Contract analysis tools
The first contract analysis tools I learned about a few years ago were KM Standards (formerly KIIAC) and Exemplify. They help lawyers draft and standardize language and compare comparable contracts and provisions. Given prior press on both, I will not cover them here.
Seal Software. Seal Software’s tag line is “contract discovery and analytics”. In February, I spoke with Kevin Gidney, Co-Founder and Chief Technical Officer. He points out that there is “No Google for contracts:” finding contracts in an enterprise is hard. Seal crawls a network to find and collect all contracts. It then automatically extracts up to 52 contract provisions. Adding the new Contract Analytics module (CAM) allows customers to create an unlimited number of additional, unique extraction policies.
The extraction is 80% accurate; the remaining 20% requires human review. Two options address this. One is to use CAM to teach or re-teach the system. The other is to use legal process outsourcing (LPO) and comparable providers for human review. (Seal business partners Axiom, Huron Legal, Integreon, and Pangea3 offer this human review service).
I asked Kevin how Seal compares to contract lifecycle management systems. He explained several distinctions:
- Unlike CLM, Seal does not require workflow changes. Instead, a central group (e.g., the GC or procurement) collects contracts.
- CLM often manages only a subset of contracts. Seal provides visibility and accessibility to all contracts via search, reports, and alerts.
- CLM cannot automatically collect contracts of a newly acquired company.
- Some corporate users bypass a CLM. Seal can find contracts they create (and facilitate upload to CLM).
Seal sounds powerful but it does not manage rights and obligations as CLM does. In my view, most companies would benefit from better tracking of payments owed or due and renewal dates.
DiligenceEngine. DiligenceEngine (DE) automatically searches for specific contract provisions and creates summary tables of them. In March, I spoke with DE co-founder and CEO Noah Waisberg. Noah practiced M&A law at a top firm and saw first hand how long due diligence takes and how lawyers sometime make mistakes. He designed DE to make people faster and more accurate at reviewing contracts and assembling summaries. The software may or may not give perfect results on its own (he tells me it generally misses 10% or less). Rather, users should generate closer to perfect results than they would reviewing contracts without the system, and in less time too.
The DE website states that in system test,
“The DiligenceEngine user completed their review in 20–30% less time even when he still read-through every agreement page-by-page and close to 60% less time when he only spot checked system results. Both ways were more accurate than traditional, non-technology assisted review.”
DE comes with common provisions pre-programmed. Users can easily review for custom provisions too. Workflow features allow routing specific contracts to specific reviewers.
Discussion. Both products demo well and have interesting new features on their roadmaps. Both Kevin and Noah explained how their systems work. I decided not to report on this for two reason. First, it’s hard to explain machine learning, natural language processing, and pattern recognition. And second, what I learned in eDiscovery applies here: only computer scientists and computational linguists can really judge the algorithms that drive advanced software. The rest of us have to make do with evaluating outputs and comparing them to what the best alternative produces. So both seem similar to predictive coding: not perfect but far better than humans slogging through vast volumes.
To some extent, Seal and DE may directly compete but the primary use cases seem to me quite different. Seal finds contracts; DE currently does not. DE produces very nice summary reports; Seal currently does not.
Both extract terms. Seal seems a better fit to extract terms to load in a CLM while DE seems a better fit for lawyers conducting due diligence. These distinctions may change over time. And you may find other products that compete.
For companies that manage large volumes of contracts and for law firms that regularly conduct due diligence, the time has come to automate, whether with these products or others.
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