L-R Beijing China Skyline and Tokyo Japan Skyline.
L-R Beijing China Skyline and Tokyo Japan Skyline. (shutterstock)

Both the world’s biggest economies after the United States, China and Japan have not traditionally been big players in the e-discovery market. But with an increasingly global economy, the advent of national cybersecurity and data localization laws, and growing international M&A activity, these two economic titans are steadily growing their e-discovery operations and expertise.

To understand what is driving this trend and how e-discovery is unique to each country, ALM spoke with legal professionals with e-discovery experience in the Far East. Here are highlights from the interview:

Plugged In

ALM: What is driving the e-discovery markets in China and Japan?

Tom Groom, vice president and managing director of D4 China: Currently for our clients, M&A- and IP-related matters are not the driving force, but for China specifically with the growing concerns of non-domestic companies as it relates to IP enforcement, it inevitably will play an increasing role.

We are primarily dealing with matters that are investigative in nature, corporate audits, internal audits and regulatory compliance. However, litigation is on the rise in China as state owned entities defend their business against non-domestic enterprises, which we support, and Chinese corporations continue to expand in the US, and international companies expand in China. Litigation is nowhere near the level of that in the U.S. and is a few years behind in maturity, but we continue to see more of it.

Jared Nelson, partner at MWE China Law Offices in Shanghai: In my home jurisdiction of China, we have seen a series of new laws and regulations over the last couple of years that target both data localization and data transfer restrictions. In China, this is sure to strengthen an already mature market for local e-discovery and data forensic services, which were already in place largely due to the combinations of local licensing requirements and long-standing concerns over one of the [restrictions] on [transferring data deemed to be] state secrets, beyond an approved scope of access, outside of China.

James O’Donoghue, founder and president at In-House Advisory Group, focused on advising Japanese corporations and institutions on U.S. legal matters: [In Japan,] the recent changes in the country’s Act on the Protection of Personal Information (APPI) have undoubtedly spurred the need for attorneys and e-discovery specialists with experience exporting data from [the country]. The APPI requirements of consent and waivers for the transfer of personal information combines an aspect of institutional compliance with e-discovery. Specialists familiar with Japanese business culture and prevailing practices will need to work closely with in-house counsel and corporate law departments to ensure they are in conformity with the law.

ALM: What technologies are e-discovery practitioners in China and Japan relying on?

Groom: The APAC region is accepting advancements in search technology such as machine learning, AI and other technologies based on conceptual search. Data volumes are growing by the expanded use of images, audio and video on new data platforms such as WeChat. There is just too much volume for a human-only review, and there is no sign of that trend slowing down.

Nelson: In China, we did our first predictive coding case in 2013, and we have seen a steady rise since. There is still a relatively slow adoption, but it is taking hold as more companies begin to better understand the advantages.

For investigations, in particular, these tools can result in very substantial time and cost savings. These gains are quickly recognized by general counsels who need, often more than the cost savings, immediate results and early case assessments to know how big of a problem they have, how significant of a scope the investigation should contain, and who in the organization needs to be suspended or immediately cut off from access to potential evidence.

O’Donoghue: I have seen a slight increase in the appearance of predictive coding on cases here in Japan, but Japanese document review remains largely a manual process.

AI still has a long way to go in both accurately assessing Japanese materials and gaining the trust of consumers in Japan. Japan’s corporate culture presents another obstacle. Japanese companies are a generation behind the U.S. with respect to electronic data storage. Most large review projects involve extensive amounts of scanned paper files that cannot always be accurately identified with optical character recognition methodology or automatically coded.

ALM: How does the discovery market in China and Japan differ from the U.S. market?

Nelson: In China, there is still a much greater focus on using e-discovery tools for investigations over litigation production. These two projects have a similar foundation, which can be seen in similar technology tools, a similar general process and a similar methodology; however, the differences are also shaping the market in significant ways.

For example, one of the early investments that we made at MWE China was to make further investments in the technology and personnel to be able to conduct forensic imaging, metadata analysis, data visualization, file deletion recovery and similar capabilities so that we could complete a full investigation process, end-to-end, all in-house under one team of lawyers. That approach is almost unheard of in a U.S. law firm, and is in stark contrast to the U.S. market, where most law firms will outsource e-discovery, often into several different pieces and different vendors for each of the phases.

The market for e-discovery products is also shaped by the need for solutions to specific local challenges. For example, in China much of the technology that is omnipresent in the U.S. (such as Google, Facebook, or Twitter) are blocked and in their absence homegrown replacements have flourished, most notably WeChat.

E-discovery solutions not capable of collecting or organizing WeChat data in an effective way have quickly been supplemented or replaced by Chinese companies or creative investigators who work directly with developers to make specific solutions for each of these types of local challenges.

O’Donoghue: The e-discovery products [that] are in Japan are predominately the same as what might be available in the U.S. One notable distinction is that Japanese vendors require forensic expertise in exporting and processing data from antiquated Japanese software and storage systems. Some global vendors have partnered with local e-discovery suppliers to combine the best possible products with local system expertise.

Both the world’s biggest economies after the United States, China and Japan have not traditionally been big players in the e-discovery market. But with an increasingly global economy, the advent of national cybersecurity and data localization laws, and growing international M&A activity, these two economic titans are steadily growing their e-discovery operations and expertise.

To understand what is driving this trend and how e-discovery is unique to each country, ALM spoke with legal professionals with e-discovery experience in the Far East. Here are highlights from the interview:

Plugged In

ALM: What is driving the e-discovery markets in China and Japan?

Tom Groom, vice president and managing director of D4 China: Currently for our clients, M&A- and IP-related matters are not the driving force, but for China specifically with the growing concerns of non-domestic companies as it relates to IP enforcement, it inevitably will play an increasing role.

We are primarily dealing with matters that are investigative in nature, corporate audits, internal audits and regulatory compliance. However, litigation is on the rise in China as state owned entities defend their business against non-domestic enterprises, which we support, and Chinese corporations continue to expand in the US, and international companies expand in China. Litigation is nowhere near the level of that in the U.S. and is a few years behind in maturity, but we continue to see more of it.

Jared Nelson, partner at MWE China Law Offices in Shanghai: In my home jurisdiction of China, we have seen a series of new laws and regulations over the last couple of years that target both data localization and data transfer restrictions. In China, this is sure to strengthen an already mature market for local e-discovery and data forensic services, which were already in place largely due to the combinations of local licensing requirements and long-standing concerns over one of the [restrictions] on [transferring data deemed to be] state secrets, beyond an approved scope of access, outside of China.

James O’Donoghue, founder and president at In-House Advisory Group, focused on advising Japanese corporations and institutions on U.S. legal matters: [In Japan,] the recent changes in the country’s Act on the Protection of Personal Information (APPI) have undoubtedly spurred the need for attorneys and e-discovery specialists with experience exporting data from [the country]. The APPI requirements of consent and waivers for the transfer of personal information combines an aspect of institutional compliance with e-discovery. Specialists familiar with Japanese business culture and prevailing practices will need to work closely with in-house counsel and corporate law departments to ensure they are in conformity with the law.

ALM: What technologies are e-discovery practitioners in China and Japan relying on?

Groom: The APAC region is accepting advancements in search technology such as machine learning, AI and other technologies based on conceptual search. Data volumes are growing by the expanded use of images, audio and video on new data platforms such as WeChat. There is just too much volume for a human-only review, and there is no sign of that trend slowing down.

Nelson: In China, we did our first predictive coding case in 2013, and we have seen a steady rise since. There is still a relatively slow adoption, but it is taking hold as more companies begin to better understand the advantages.

For investigations, in particular, these tools can result in very substantial time and cost savings. These gains are quickly recognized by general counsels who need, often more than the cost savings, immediate results and early case assessments to know how big of a problem they have, how significant of a scope the investigation should contain, and who in the organization needs to be suspended or immediately cut off from access to potential evidence.

O’Donoghue: I have seen a slight increase in the appearance of predictive coding on cases here in Japan, but Japanese document review remains largely a manual process.

AI still has a long way to go in both accurately assessing Japanese materials and gaining the trust of consumers in Japan. Japan’s corporate culture presents another obstacle. Japanese companies are a generation behind the U.S. with respect to electronic data storage. Most large review projects involve extensive amounts of scanned paper files that cannot always be accurately identified with optical character recognition methodology or automatically coded.

ALM: How does the discovery market in China and Japan differ from the U.S. market?

Nelson: In China, there is still a much greater focus on using e-discovery tools for investigations over litigation production. These two projects have a similar foundation, which can be seen in similar technology tools, a similar general process and a similar methodology; however, the differences are also shaping the market in significant ways.

For example, one of the early investments that we made at MWE China was to make further investments in the technology and personnel to be able to conduct forensic imaging, metadata analysis, data visualization, file deletion recovery and similar capabilities so that we could complete a full investigation process, end-to-end, all in-house under one team of lawyers. That approach is almost unheard of in a U.S. law firm, and is in stark contrast to the U.S. market, where most law firms will outsource e-discovery, often into several different pieces and different vendors for each of the phases.

The market for e-discovery products is also shaped by the need for solutions to specific local challenges. For example, in China much of the technology that is omnipresent in the U.S. (such as Google , Facebook, or Twitter) are blocked and in their absence homegrown replacements have flourished, most notably WeChat.

E-discovery solutions not capable of collecting or organizing WeChat data in an effective way have quickly been supplemented or replaced by Chinese companies or creative investigators who work directly with developers to make specific solutions for each of these types of local challenges.

O’Donoghue: The e-discovery products [that] are in Japan are predominately the same as what might be available in the U.S. One notable distinction is that Japanese vendors require forensic expertise in exporting and processing data from antiquated Japanese software and storage systems. Some global vendors have partnered with local e-discovery suppliers to combine the best possible products with local system expertise.