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Lab Notebooks and Litigation

By Tom Klaff

Feb. 12, 2007 | Research departments are brimming with binary data oozing from every possible acronymic pore in the laboratory: CAD, IM, LIMS, RMS, ELNs, etc. Capitalizing on the “faster, better, cheaper” mantra, R&D organizations are “going electronic” to gain a competitive edge at a far lower cost. Consequently, massive volumes of native electronic records are beginning to belch inside the new “labrosphere” where at some point, they will contain the keys to new and untapped markets, multi-billion dollar revenue streams, licensable patents, and/or critical evidence to defend or support a legal dispute.

A 2005 Atrium Research ELN report states that intellectual property generated inside a lab may be preserved anywhere from 15 to 100 years. These long-term archiving requirements, coupled with the cost to manage and store paper-based business records, can impact a company’s bottom line faster and harder than a Sarbanes-Oxley investigation.

R&D organizations understand the value of migrating toward electronic record management, where there are clear and demonstrable examples of return on the investment. But what are the downsides? Well, for one, it is far easier to maliciously alter electronic records than paper records. Moreover, it is far harder to prove they were never tampered with. But, prove to whom?

In the face of a legal dispute, business records are the first things subpoenaed by opposing counsel. Under the Federal Rules of Evidence, electronic business records are equally admissible and have the same legal weight and credibility as paper records. Can you withstand a data integrity challenge? Are you “litigation ready?”

If you are, then you:

1)         Have the right people in place to manage your electronic record management systems;

2)            Conceive, implement and document the right processes to ensure that your electronic records are classified, managed and preserved properly with the highest levels of security; and

3)         Adopt the right technology and systems to capture, secure, manage and archive your electronic records.

Practicing litigation readiness will enable you to defend a seemingly innocuous record generated today, like an email or a CAD drawing that at some point in the future may be your last and only line of defense to save your patents, protect your revenue stream and preserve your company’s shareholder value in the throes of a legal dispute.

Are You Litigation Ready?
It is not surprising that companies in highly innovative and regulated industries, such as life sciences, semiconductors, and IT, live in the long litigious shadows cast by their competitors. The investment to get products to market is enormous and because the pace of innovation is rapid, a product’s useful life may be counted in months, not quarters. Speed is the lowest common denominator in innovation, and it can be re-enforced in your record management processes. By maintaining data in native electronic format, and avoiding redundant paper copies, collaboration among scientists is more efficient and document preservation more cost effective. Adding litigation readiness to this process protects your investment today and in the future. Companies routinely insure their physical assets, like their trucks, people, inventory and plants. Similarly, why shouldn’t they “assure” that their electronic business records, which are their most critical asset, be protected and credible in the likely event that a legal dispute arises? 

The key to rolling out a litigation readiness initiative is to make a full commitment to the process. Back in the “dot-com” days, brick-and-mortar companies invested huge sums of money to develop the glitziest websites, only to have their electronic customer inquiries sent into a huge “black hole.” The commitment to adopt new technology and innovative marketing practices, though noble, was woefully inadequate without proper staffing and processes.

American Express fell prey to the same problems when it did not make the full commitment to litigation readiness. In a recent case, Vee Vinhnee, who owed in excess of $40,000 to the company before filing for bankruptcy, won his case — without even attending the trial! American Express’ sole evidentiary record was the electronic monthly statement it issued to the debtor. The court refused to admit this evidence because American Express failed to defend the processes, people and technology used to preserve and authenticate the electronic bills in question, nor could it adequately prove that its business records could not have been altered from the time they were generated until the time of the trial.

Fear, uncertainty and doubt prompt paralytic thinking and stifle innovation needlessly, especially if there are readily available safeguards. Investing in both electronic record management and litigation readiness is a rounding error compared to staying with paper or sticking your big toe in the water.


Tom Klaff is CEO of Surety.


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