Just what is a legal service? It obviously includes courtroom representation, but what about drawing up wills, giving tax advice, or closing on home sales? That's the question facing the legal profession and the American Bar Association, which has asked a panel to define what lawyers do in the high-tech economy. The ABA's draft proposal should be ready in May, for debate at its general meeting in August, said Alfred Carlton, ABA president.

The definition is important because many states outlaw or curb any "unauthorized practice of law." Consumers, however, are increasingly using nonlawyers, such as real estate agents and financial advisers, to perform quasi-legal services, such as closing on a home sale. Moreover, both traditional legal services and much quasi-legal work are being delivered across state lines using computer software and Web sites.

This doubled-headed problem - what is a legal service and who can perform it across state lines - is becoming a bigger headache as the online economy gradually converts a localized legal marketplace into a national marketplace, said Jerry Ellig, deputy director of policy planning for the Federal Trade Commission. In cooperation with the Justice Department's Antitrust Division, the commission has recently protested that a September 2002 draft ABA plan would define legal services too broadly, constraining the free market. "When we have various kinds of established industry practices, and state and local regulations based on the premise that markets are local, then significant economic change leads to pressure for [regulatory] change," Ellig said.

Other state-regulated professions are facing comparable challenges. For example, the Commerce Department is expected to soon issue a call for easing state regulations that hinder online medical services. Under looser regulations, a patient in Indiana, for example, could get a low-cost diagnosis from a New York based company that out sources its work to doctors in Bombay. As in the legal business, only some medical services can now be provided online - analysis of X-ray images is one - but advocates expect that new technology will expand the range of Web-based services. "The pretext [for existing state curbs] is that states are supposedly protecting consumers," said Jonathan Linkous, executive director of the American Telemedicine Association. "That's not what's happening."

Web Medicine: X-ray analysis is not available online, and the Commerce Department would like to see such trends continue.

There's little chance that nonlawyers, or online lawyers, will take over the practice of pressing lawsuits, drafting mergers, or advocating plea bargains. But nonlawyers and online lawyers are in an excellent position to provide low-cost advice in simpler matters, such as settling an amicable divorce or drafting a will. In some states, this type of work provides a steady stream of income to lawyers, who consequently have a great incentive to curb online legal services from their counterparts in other states. For example, the Texas bar sought to ban the use of legal advice software but was overruled by the Texas Legislature.

Without a clear definition of legal services, "there is a chilling effect on nonlawyers in terms of services they could provide, and lawyers have no guidance for when to use nonlawyers" as employees, said Carlton. By writing a clear definition, the ABA hopes to increase access to lawyers, he added. "There's a great deal of irony in that the motivating factor is the exact opposite of what the FTC thinks we're all about."

With a clear definition, some services - such as incorporating a company - would be clearly marked as nonlegal, allowing nonlawyers to do the work, sometimes on behalf of law firms, Carlton said. But other work, such as giving complex tax advice or drawing up a deed or a will, should remain defined as legal services, he said. Carlton added that he does not know what the ABA panel will recommend in May. The panel "is not telling anybody what they're thinking."

Plenty of critics oppose this ABA effort, and some of them are in the ABA and the legal profession. For example, the definition of legal services is straightforward, argues James Turner, executive director of HALT, a Washington-based group that advocates greater access to legal services. "What [lawyers] do is provide a special kind of relationship and service to consumers - the attorney-client relationship ... [which is] a confidential, fiduciary relationship."

Moreover, new high-tech legal services don't pose a significant threat to the profession, Turner said. "The actual economic threat posed to lawyers is minimal, because the vast majority of [consumers] taking advantage of the new technology are priced out of the business already.... Also, the automated tasks are small-revenue generators." If the rules are tightened, consumers seeking low-cost services will be hurt, and the ABA will have abandoned its professional ethics to become merely "a hired gun," he said. The proposed redefinition of legal services has also drawn criticism from the Progressive Policy Institute, a Democratic think tank. "This is an area where we agree with more libertarian groups like Cato and groups like the Consumer Federation of America ... that business interests should not dominate or trump consumer interests," said Robert Atkinson, vice president and director of the Technology and New Economy Project at the PPI. In a January 2001 report, Atkinson estimated that regulatory curbs on Internet commerce cost consumers about $15 billion a year. There should be a national standard, but one that boosts competition, he said.

This dispute, he said, "is really more just about [the ABA] keeping their share of the transaction."