Amid a flurry of law firms in recent years that have formed an e-discovery practice group, Drinker Biddle & Reath has taken the concept a step further by creating a subsidiary to handle the technical aspect of mining electronic data in litigation.

The concept is one consultants said could spread to other law firms as they look to recapture revenue lost to legal process outsource companies.

Drinker Discovery Solutions is a Chicago-based subsidiary of the law firm and was formed with an eye toward offering less expensive e-discovery management to the law firm’s clients as well as to serve non-law firm clients.

Thomas A. Lidbury, head of Drinker Biddle’s data management and discovery group within the law firm, is a founder of Drinker Discovery Solutions. The law firm then hired attorney Michael J. Boland of Winston & Strawn to serve as managing director of the subsidiary.

Lidbury said the point of starting the subsidiary was to own the technology and control the costs for clients.

“The pricing can zap the whole benefit of using [e-discovery technology] if you’re not careful,” Lidbury said.

He said a number of corporations were looking to bring this function in-house because of the high cost of e-discovery vendors.

“But as a firm we can make the purchase and leverage it across the client base,” Lidbury said. “We can make it once for them and then they all have access to it.”

Drinker Biddle spent “millions” of dollars on buying the technology and software and staffing the subsidiary, Lidbury and Boland said. The law firm essentially converted its litigation support staff into the staff of the 12-employee subsidiary.

The reason the firm created a subsidiary as opposed to bringing the work into the law firm was that it wanted to be able to serve as nationwide e-discovery counsel to large companies that might otherwise be conflicted out of using Drinker Biddle for legal services, Lidbury said.

While the law firm’s data management practice group and the subsidiary will both have their separate functions, Lidbury said the combination of the two allows him to offer clients one-stop pricing on both data collection and document review and legal services that he can control rather than relying on an outside vendor’s pricing for a piece of that total bill.

“I basically control both sides of the equation, not just the legal services but the technology services, so I can be really competitive,” Lidbury said.

Janet Stanton of Adam Smith, a legal consulting firm, said she hasn’t heard of any other firm taking the approach Drinker Biddle has with Drinker Discovery Solutions, but said she could see the concept spreading to other firms.

Stanton said she has always been struck by the fragmentation of the legal marketplace, with the highest earning law firm with revenues of more than $2 billion accounting for just 1 percent of the legal industry market share. No other industry is that fragmented, she said.

Firms thought for years they could control their own destiny, Stanton said, but with the increase of external forces like LPOs, firms are facing added pressure. She said Drinker Discovery Solutions makes “perfect sense” as a response to those pressures.

Stanton said she’s sure firms want to recoup the money they are losing to vendors and create an added revenue stream from clients who otherwise wouldn’t use the firm’s legal services.

“I believe that one of the great positive outcomes of what the legal industry is going through now is that there will be more and more experimentation,” Stanton said.

Drinker Discovery Solutions has been running for about four months now, though it was just announced publicly this week. Boland said the company has about 50 active matters and close to five terabytes of data housed on its servers, which are physically located in Ohio. The bulk of the staff is based in Chicago and Philadelphia, with project managers across the law firm’s offices.

After reviewing a number of software options, Lidbury said the firm decided on Autonomy, which is an HP company. The software allows the company to handle things like concept clustering, predictive coding and tech-assisted review, he said. The law firm’s lawyers, in-house legal attorneys and others can be given access to the data from anywhere in the world, Boland said. Lidbury said contract attorneys are still the most preferred method of reviewing the data once it is culled down by the technology.

Drinker Discovery Solutions can handle projects on a variety of different fee structures, including simply paying a monthly flat fee for its services. Boland said that gives corporations predictability in their technology costs.

“Our clients are clamoring for a solution to this e-discovery problem,” Lidbury said. “It just made sense to us to make this investment on their behalf. Document review was traditionally a law firm function. Because the technology didn’t catch up in law firms, it bred this industry” in which the data was sent out to vendors.

While document-review vendors are now prevalent, Lidbury said it seemed to him that was a function that should return to the law firm in some way. He said it was a win-win situation because the law firm could drive down costs for clients while making money off of its investment.

“The old tools that law firms were still clinging to, they were obsolete,” Lidbury said. “It was either step up or not and we stepped up.”

Lidbury said he thought Drinker Biddle may have been the first firm to create an e-discovery subsidiary.

A number of area firms, including most recently construction-law boutique Cohen Seglias Pallas Greenhall & Furman, have created e-discovery practice groups within the law firms. Other area firms that have created a practice group, e-discovery committee or named a partner in charge of e-discovery at their firms include: Littler Mendelson, Reed Smith, Morgan Lewis & Bockius, K&L Gates, Pepper Hamilton, Ballard Spahr, Obermayer Rebmann Maxwell & Hippel, Cozen O’Connor, Eckert Seamans Cherin & Mellott, Montgomery McCracken Walker & Rhoads, Buchanan Ingersoll & Rooney and Duane Morris.

While none of those firms have subsidiaries, Morgan Lewis has discovery management centers on the East and West coasts to manage client materials as part of its eData practice. K&L Gates has an automated litigation support department to manage client files as part of its e-discovery analysis and technology group.

Leonard Deutchman, general counsel of LDiscovery Solutions and a contributor to The Legal, said the model Drinker Biddle has created is certainly one firms are looking into. How it will shake out in the law firm space will depend on a number of factors, he said.

“Law firms can certainly do more than nothing, but whether they can replicate what a good vendor can do” is another issue, Deutchman said.

Creating an e-discovery vendor model requires a large investment of time and expertise, he said.

Gina Passarella can be contacted at 215-557-2494 or at gpassarella@alm.com. Follow her on Twitter @GPassarellaTLI.