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Guest Comment: 2014 and Beyond – Ediscovery in Japan & South Korea

Asian countries are just starting to come of age in e-discovery. While e-discovery is becoming better understood, more broadly accepted and more thoroughly localized worldwide, the industry is still in its infancy in the APAC region. Because Japan and South Korea are home to some of the largest corporations doing business in the U.S., I’ve focused this article on those two countries.

by David Sannar*, VP International Development – Asia Region, Catalyst Repository Systems

Asian countries are just starting to come of age in e-discovery. While e-discovery is becoming better understood, more broadly accepted and more thoroughly localized worldwide, the industry is still in its infancy in the APAC region. Because Japan and South Korea are home to some of the largest corporations doing business in the U.S., I’ve focused this article on those two countries.

In Japan, there are no laws governing e-discovery for domestic litigation. Yet an expectation of data production exists for government investigations and international litigation matters. Consequently, U.S. law firms and vendors currently drive e-discovery in Japan.

Across the East Sea, South Korean companies are comparatively more litigious. This has resulted in broader awareness of legal issues related to electronic data among the country’s four major law firms. But e-discovery also faces a key restriction in Korea – its laws protecting corporate and personal data require data to be hosted domestically.

In spite of the fledgling e-discovery industry in both countries, however, there are modest opportunities for law firms, vendors and consultants with a presence in the region.  In particular, for those who are willing to take the time to educate potential clients on the benefits of a  proactive approach to managing data in anticipation of litigation or investigations, the benefits can be rewarding.

Current Japanese practices and trends
To understand e-discovery in Japan, it’s important to begin with the culture of litigation in that country. In general, the Japanese tend to avoid potentially embarrassing public activities that may cause customers to lose trust in their company. Therefore, they are often reluctant to sue each other if there are remedial options available that don’t require use of the courts and public airing of their disputes. The Japanese are much more comfortable working to create an atmosphere of harmony and cooperation in their relationships with others, even potential adversaries.

As a result, Japan is generally much less litigious than the U.S. Consequently, its litigation system is unsophisticated about e-discovery and the subject is not widely understood. However, when Japanese companies perceive a serious external threat, and other means do not provide resolution, they are increasingly turning to the U.S. court system.

Most U.S. law firms and e-discovery vendors in Japan tend to practice e-discovery following the Federal Rules of Civil Procedure. Recognizing the need for similar rules, the Japanese government is beginning to look at legislation related to electronic data, albeit slowly and cautiously.

When faced with inevitable litigation or investigations, Japanese corporations typically retain a Japanese law firm as consultants and a U.S. law firm to handle the litigation. Generally, corporations tend to be reactive in their approach to e-discovery, rarely thinking beyond the matter at hand. In most cases, the U.S. law firm selects the e-discovery tools and the Japanese law firm relies on the U.S. firm to handle the work.

Even so, corporations in Japan are now making more of an effort to learn about and deploy e-discovery practices commonly used in the U.S. There are three primary areas where e-discovery can make inroads in the near future:
    Litigation of IP disputes and product liability.
    Investigations, either internally driven or initiated by government regulators, which typically involve massive numbers of emails and thus lends itself to e-discovery.
    Litigation readiness, particularly involving proactive risk assessment and corporate compliance reviews.
This last category, especially, is looking like a potential growth area for savvy, experienced e-discovery vendors and law firms in Asia in the coming year and beyond.

E-discovery in South Korea: Focus on IP
While in Japan there remains an aura of shame surrounding lawsuits, corporations in South Korea are not particularly shy about suing in order to protect their intellectual property. I’ve been told that Samsung files somewhere around 300 lawsuits a year, although most of those – perhaps as many as 90% – end up being dismissed or settled. As a group, the Korean companies file plenty of lawsuits. Many filings are strategic in nature: they are used to threaten adversaries or to hamper the operations of competitors.

In spite of its relative litigiousness, Korea is still in the adolescent stage of e-discovery acceptance. Information technology, especially in the realm of government, continues to move slowly. Like Japan, Korea has not enacted laws related to electronic data discovery. However, problems associated with electronic information are very much on the minds of average citizens. Recent revelations that huge volumes of consumer credit card information being stolen are among the cited reasons.

For e-discovery practitioners aiming to get a toehold in South Korea, understanding two important laws, particularly in the wake of recent data breaches, will directly impact their business. The Unfair Competition Prevention and Trade Secret Protection Act, was created in 1961 to protect South Korean business interests. It has been amended over the years, most recently in 2013 to keep in step with technology and new threats. The Personal Information Protection Act (PIPA), was enacted by the South Korean government in 2011, partly based upon similar laws in Europe.

The combined authority of these two laws creates significant challenges for e-discovery vendors seeking to collect and maintain data from Korean companies. In fact, since the NSA scandal of 2013, nearly every South Korean company and law firm now insists that any data from South Korea must be hosted in-country.

A significant complicating factor for performing e-discovery services in South Korea is digital rights management (DRM), which is commonly deployed in companies at some of the most stringent levels in the world. Koreans are very keen on keeping their IP safe. As a result, much of the data housed in each company is protected by multiple layers of encryption. This makes data collection for litigation or investigative purposes much more difficult than in the U.S. South Koreans are quick to cite the Trade Secret Protection Act as a reason for data protection, and they maintain aggressive measures to combat piracy. In-country hosting of data is required for any e-discovery vendor.

The legal community in South Korea is beginning to show some interest in technology-assisted review, as well as multi-matter discovery. Adoption of new technologies is dependent upon demonstrating its efficacy handling the Korean language. In my view, the general acceptance of e-discovery practices will continue to lag across the entire Asia-Pacific region for at least another several years. If South Korea is more likely than many APAC countries to prove an exception, that’s largely because of the country’s aggressive stance toward IP protection.

In the wake of the NSA scandal last year and the recent credit card data scandals, an immediate response for stronger enforcement of existing data protection laws in South Korea is expected. E-discovery companies will face greater scrutiny from their South Korean client companies, law firms and government agencies with regard to how they handle data.

For e-discovery practitioners who have experience in South Korean laws and business practices, this creates a perfect storm of circumstances to expand into offering risk assessment and information governance services to Koreans eager to protect their data and prevent their company from becoming the center of the next data leak scandal.

Most signs point to the market remaining soft in Japan and South Korea for the coming months, and possibly even for the next few years. In response, some vendors and law firms attempting to generate additional business are turning to educational strategies, such as holding seminars to explain the value of proactively preparing for litigation, performing regular risk assessments via internal investigations and conducting early case assessments. While there is tremendous potential in the region, 2014 is likely to be a year of baby steps and slow, sporadic progress.

* David M. Sannar is responsible for all Catalyst operations and business growth throughout Japan and Asia, including our operations and data center in Tokyo. Dave has been immersed in the e-discovery industry since 2004, when he became president and COO of AccessData Corp. More recently, Dave was vice president of forensic business development for UBIC, a Tokyo-based international company specializing in Asian-language computer forensics and e-discovery. While at UBIC, Dave’s principal focus was on providing e-discovery services for U.S.-based matters involving Asian parties in the areas of patent infringement, products liability and government investigations. Over the course of his career, he has acquired more than 20 years’ experience working with companies in Asian markets. He has lived in Japan a total of seven years and is fluent in speaking and writing Japanese.