Liquid Shard, Pershing Square, Los Angeles, designed by Patrick Shearn in collaboration with Now Art LA, AAV School, and Pershing Square.
Liquid Shard, Pershing Square, Los Angeles, designed by Patrick Shearn in collaboration with Now Art LA, AAV School, and Pershing Square. © Phil Sanchez

Terms such as big data and artificial intelligence are buzzwords for senior managers in business, but they have been more or less ignored in legal circles. Now law firms are under pressure from clients to use the latest technology to cut costs and improve efficiency.

However, the innate caution of big law firms means that many of the innovations in legal tech have been left to a new breed of nimble legal start-ups to develop. California-based Lex Machina, which specialises in litigation research, counts Nike and Microsoft among its clients, while LegalZoom has set up to offer online legal advice to consumers.

The new “lawtech” start-ups, specialising in legal technology and often backed by venture capital money, have spotted opportunities to disrupt their established rivals by automating routine legal work or by utilising big data to harness immense quantities of day-to-day information and analysing it for patterns.

The competition from new entrants has come at a time when the traditional business model of law firms, based on billing by the hour, is coming under intense pressure. Corporate clients want to reduce their budgets for legal services, are more demanding generally, and are pressing law firms to improve efficiency.

But US law firms are getting back on the front foot as they increasingly use tech to streamline processes and improve the service to clients.

One trend is for the firms to use technology to analyse data to help clients spot trends in litigation or alert them to potential business risks.

Jordan Furlong, a legal market analyst who runs Ottawa-based Law 21 Consultancy, says most law firms are looking at technology and AI along with other ways of improving efficiency such as outsourcing work and legal project work. “AI promises the ability to collect routine, straightforward work and to be able to do it much more quickly with much less expense and to a higher standard of quality,” he says.

Clients want clarity around exactly what they are purchasing in legal services as well as wanting to spend less money. “We are seeing a fundamental change in the market — law firms have got to come up with a more predictable way of delivering their services,” he says.

By combining machine learning, data science and legal expertise, some law firms are starting to offer the kind of predictive analytics services that were previously only available outside the law in fields such as financial services.

“Law firms see it is valuable and that clients care about it and there is a rush to be perceived to be doing more,” says Zev Eigen at Littler Mendelson, a firm specialising in employment law.

He should know. Mr Eigen is a former law professor who was hired in 2015 by Littler Mendelson as its first global director of data analytics. He brings years of experience in data science, statistics and law to the firm’s operations.

Littler Mendelson has developed a suite of tools under its Big Data Initiative that are able to analyse a client’s HR data and help shape legal risk management and litigation strategies. The aim is to help avoid potential lawsuits at a later date. For example, the firm can analyse data to uncover a gender bias in performance evaluations and flag it up as an issue.

It is also designed to spot trends and predict the likely duration, costs and outcome of law suits, which should help clients make decisions on litigation.

One use for Littler’s data, says Mr Eigen, was to analyse discrimination charges filed with the US Equal Employment Opportunity Commission (EEOC) by individuals complaining of unfair treatment or harassment. The Littler case system can help spot trends and see which cases are more likely to go to trial or if growing numbers of claims are being filed relating to certain policies.

“Before you file a lawsuit you have to file a charge. It’s like a canary in the coal mine and you want to know if the charges will get dismissed without cause or if it is a precursor to costly litigation,” Mr Eigen says.

Law firms usually have to rely on HR experts with data analysis programs to advise on these kinds of employment and labour law trends.

Other law firms have focused on making use of data about their own work in US courts to help win new business. Law firm Goodwin Procter developed Goodwin Litigation Intelligence, an online visualisation tool and database that identifies appearances by the firm in all US courts by work, class action and status. It also has an interactive dashboard showing outcomes and level of work for specific types of legal case.

David Hobbie, senior manager of knowledge management for litigation at Goodwin, says data can be used to help the firm match its previous work and experience with current client needs. He cites one law firm partner’s recent meeting with a potential client, who asked about the litigation that Goodwin undertakes in California. The partner was able to give more precise data than in the past, he says. “Instead of saying we do ‘a lot of litigation’, she was able to say ‘we have done 532 cases’,” he says. “It’s actually real data and more persuasive and more effective.”

As well as unearthing revealing patterns of information, law firms are using technology to automate the more routine and data-heavy tasks of legal work such as due diligence.

DLA Piper has started to use technology to handle labour-intensive aspects of mergers and acquisitions deals where due diligence has traditionally involved hundreds of lawyers crawling over clauses in documents. DLA Piper partnered with Kira Systems, a provider of machine learning software, to introduce a new artificial intelligence technology to assist with due diligence on M&A deals. It automatically reads and extracts relevant information from the documents under review in a fraction of the time, and more consistently, than humans.

Jonathan Klein, chairman of mergers and acquisitions in the US for DLA Piper, says the firm tested the new tool’s handling of due diligence data by running one process with and one without Kira and examining the error rate. He was “very happy” with the results and the system has been used on seven deals. “The clients want to know that we are utilising technology to do a better job for them,” he says.

‘Law is moving into the 21st century’

Billed as the world’s first “artificially intelligent attorney”, Silicon Valley-based legal-technology company Ross Intelligence grew out of a project at Toronto university. One of the co-founders, Andrew Arruda, is a former attorney at a Toronto litigation firm.

It uses IBM Watson’s artificial intelligence system and natural language processing, including the relationships and meanings of words and legal concepts, to do some of the research currently undertaken by US lawyers. It is able to research legal questions and find answers on what the law is on a particular area by searching thousands of pages of case law or assessing how opponents argued a particular case.

Unlike a lawyer, who would have to wade through pages of case law or use an automated word search, Ross Intelligence’s technology can scroll quickly through thousands of documents to research the relevant case law. It is also able to improve its results by “learning” from feedback.

The technology is being backed by NextLaw Labs, which is a venture fund set up by global law firm Dentons.

Mr Arruda says artificial intelligence in the legal sector is not about replacing lawyers with robots but rather using the technology to do routine “grunt” work or to research legal questions.

“It allows human lawyers to stick to what they excel at, such as advocacy or writing arguments, and allows law firms to be more competitive,” he says. Ross initially focused on US bankruptcy law.

While European law firms are “very innovative” on AI, he says, US law firms are also being pushed to change by clients — in particular, by the need to reduce costs. He says more corporate clients are asking law firms to compete for work or seeking fixed fees rather than billing by the hour, putting pressure on their income.

“In-house counsel has been very, very innovative and want to see a change,” he says. “Law firms had inefficiencies before, but these were not really relevant, [and] were certainly not punished. Now they need to be very efficient. Law is moving into 21st century.”

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