Artificial Intelligence and Adoption of Legal Technology
Responsibility, Increasing Pressure and Quantitative Lawyers
We can talk as much as we want about ethics, but at some point, right and wrong debated at length in politics will turn into law. Large technology companies such as Microsoft and its president argue that: “tech firms must stop ‘if it’s legal, it’s acceptable’ approach.” according to the Guardian (Hern, 2019). Microsoft is now a one trillion dollar company. However, it is not only technology companies that must think twice before they act and be lawful before new regulation hits. Is adapting faster better or worse, and how will the legal profession look like within technology?
Legal technology, also known as Legal Tech, refers to the use of technology and software to provide legal services.
LawTech Adoption
The Law Society in the United Kingdom released a report in February 2019 named LawTech Adoption Research. The report was written by the tech analysts TechMarketView (TMV). The Law Society represents over 190,000 solicitors in England and Wales.
According to the report: “Recent years have seen a rise in the number of lawtech companies, but not an acceleration in the rate of lawtech adoption among legal practitioners.” (TechMarketView, 2019) As such, technological innovation does not seem immediately to be a problem, however, the way that companies are choosing to adapt to this change may be, and is, connected. It may be too quick of a conclusion to draw.
TechMarketView identified and looked at more than 100 LawTech companies operating in the UK. Many were ‘single point solutions’ of an application by a lawyer or an ex-lawyer. Other LawTech vendors are tech providers that began by serving other sectors such as financial services and are now pivoting towards the legal market.
“I find the start-ups hard to engage with. Some that I have had dealings with seem to be set up by a disgruntled lawyer who happened to go to uni with an IT guy. I just feel that very few of them are actually doing anything new and tend to fall into three main types: they’re generating documents, reviewing and analysing documents or analysing Management Information such as legal spend or workflow. They are not necessarily reinventing the wheel but looking to provide a shinier newer wheel”.
However, as much as traditional lawyers may disagree or relate to existing solutions there is pressure from different actors to adopt new technology, which was outlined in this very same report.
I will list a few of the key points within these different are raised in the report:
- Clients: efficiency and productivity in responding to client pressure on fees, as well as the need for lawyers to show how they are innovating in the clients’ interests.
- General Councils expect to see more due diligence or e-discovery within the same budget.
- Demand for transparency. One area where client pressure is directly translating into lawtech adoption is in the space of legal cost transparency. Billing has at times been abstract and difficult, and this could change.
- Demand for new ways of working. Clients are putting increasing pressure on law firms to do things more cheaply and, in some cases, have progressed to requesting that law firms incorporate particular technology solutions within their services.
- Competition from accountancy providers that have adapted quicker. “All of the ‘Big Four’ accountancy providers in the UK now have a legal arm. PwC’s legal operation was granted ABS status in early 2014, with KPMG and EY receiving their SRA approval later in the same year. In June 2018 Deloitte UK was awarded ABS status.
- Hype. The hype and publicity associated with lawtech (particularly with AI and Machine Learning technologies) have had the positive effect of raising awareness throughout the legal sector.
- Regulatory drivers. So-called ‘regtech’ companies that have already been providing solutions to financial services and banking have started to pivot into the legal space
- Legacy IT-systems. Through maintaining existing with robotic process automation, and in some cases the need to finally move onto new systems.
- ‘Opening up of the law firm’ is placing greater demands on technology and IT to deliver a mobile working environment.
- Changing demographics. You may find people who have taken computer science modules and law from universities more often. There are increasingly modules focused on legal tech or law-tech.
- A lack of lawyers. In some cases, there is a lack of lawyers or for some, the lacking access to a lawyer. This can somewhat be changed in areas such as family law (where there has been a lack of lawyers).
- Cloud applications. Cloud computing has driven down the cost and commercial barriers to entry of a wide range of applications that can be brought into a business as legacy case management systems or practice management systems come to the end of their life.
Robotic process automation (RPA) is the term used for software tools that partially or fully automate human activities that are manual, rule-based, and repetitive.
A general counsel, chief counsel, or chief legal officer (CLO) is the chief lawyer of a legal department, usually in a company or a governmental department.
Quantitative Lawyers
The financial services industry saw the creation of a new direction within their field not long ago. They were called ‘quants’ or quantitative statisticians specialising in the application of mathematical and statistical methods to financial and risk management problems.
In a paper by Khandani, it has been argued that through indirect means that the events of August 6–10, 2007 may have been the result of a rapid unwinding of one or more large long/short equity portfolios, most likely initially a quantitative equity market-neutral portfolio. As such one factor that may have partly contributed to the massive financial crash in 2007–2008 (Khandani, 2007).
If quantitative statistics, sentiment analysis, and such are now entering the legal field, this is a call for caution. If lawyers or others in the legal industry believe themselves to be better at managing risk than the financial industry this can be a slippery slope — a relatively small first step leads to a chain of related events culminating in some significant (usually negative) effect. Perhaps we can hope it is with this in mind the legal profession has had such a hard time adapting technology, yet I doubt that to be the case.
Regardless it is important as the legal profession is likely to become more integrated with technology that the legal practitioners get used to going beyond the immediate gain to see the potential risk. Let me take a few hypotheticals.
- Imagine a contract adapting to local regulations serving 100'000 people with an easy insurance claim you can photograph and send in yourself.
- Maintaining the terms and conditions for more billions of users on a social media platform. Adapting to local regulations in most countries of the world through constant monitoring of reform by ‘scraping’ texts online from government postings in law and running predictions based on analysis from local actors.
- Sorting through 40'000 documents in a large international corporation to find historical data to support a lawsuit while running sentiment analysis online to find affected victims.
In all these cases: what could go horribly wrong? In the worst case scenario of law gone wild — what could we expect to see?
Then again in the best case scenario, what would great legal practice with technology look like?
Artificial Intelligence in Law
It has been said that law has language at its heart, so it’s not surprising that software that operates on natural language has played a role in some areas of the legal profession for a long time.
Natural Language Processing: usually shortened as NLP, is a branch of artificial intelligence that deals with the interaction between computers and humans using the natural language.
A lot of focus of debate and publicity concerning lawtech has been on artificial intelligence. It may be due to pressure from clients in demonstrating innovation (often shared through press releases). Many may have overestimated the potential of artificial intelligence to enhance operations. It seems first these technologies were adopted by the large companies in the UK and later by the smaller ones. As such, you end up with competing on price.
Technology does not solve everything. It’s pretty easy to ingest a document and extract the standard things but what is not easy is the understanding of contractual language. Therefore, in a legal context, it’s not so easy to be confident that you have extracted all the key data points. There is little standard contract language or labelled examples for which information is confidential so this provides for some difficulty.
Artificial intelligence can help reduce risk, often by assisting lawyers in a process. It is also extremely important because what is the risk profile of reviewing only one in 10 documents? The report asks: “Is one in 10 reviewed by a human less risky than an infant AI system looking at every document?” I am very sure the answer to this question is not straightforward.
Three Areas of LawTech
The LawTech Adoption Research report presents a segmentation into three areas of legal services with different needs.
- Business-to-business (B2B) law firms
- Business-to-consumer (B2C) law firms
- In-house legal departments (mostly found in larger commercial or public sector organisations).
The LawTech Landscape
There are more actors in the LawTech landscape in the UK and they were summed up relatively neatly in the aforementioned report.
A small group of firms have become established in the legal market over the last four years. Providers like Kira, Luminance and RAVN (now iManage) have gained traction in the B2B space.
Apperio is helping companies analyse their legal spend and had in mid 2018 raised $10 million (£7.5 million) in a Series A round. There have been fundraising in the £2- 10m space this year such as Clarilis, Lexoo and Juro, a situation that was unheard of just a couple of years ago.
In addition to this specific applications were also listed accompanying this to give a stronger understanding of where technologies and applications could be integrated or included. These also made up the focus of the research.
Conclusion
In addressing new issues we must sure not to create too many new ones. It is to some degree inevitable that the legal industry is so slow in changing its practices and maybe that has been for the better. This remains to be seen as legal companies may attempt to a larger degree to quantify information with math and statistics alongside computer science. There are plenty of solutions specifically on the UK market and there are likely to be a swathe of new contenders in this important space.
If you are interested in reading more about LawTech I wrote another article previously on this topic:
A Loud Side Note – There is a Climate Crisis
The question beyond what exciting new technical ways we can work with the legal profession a more pertinent question is what these innovators should focus on. One possible venue is of course the current climate crisis and legal applications within this area. More than 300'000 people were in the streets of Sydney, but millions were in the streets on the 20th of September to protest for us all to take the climate crisis more seriously and reduce our emissions. Which innovative lawyer will use these new technologies to tackle the issue of climate change? That is a deep side note for today.
References
Dale, R. (2019). Law and Word Order: NLP in Legal Tech. Natural Language Engineering, 25(1), 211–217.
Goodman, Bob (16 December 2014). “Four Areas of Legal Ripe for Disruption by Smart Startups”. Law Technology Today. Retrieved 20th of September 2019.
Hern, A. (2019, September 20). Microsoft boss: tech firms must stop ‘if it’s legal, it’s acceptable’ approach. Retrieved from https://www.theguardian.com/technology/2019/sep/20/microsoft-boss-tech-firms-must-stop-if-its-legal-its-acceptable-approach
Khandani, A., & Lo, A. W. (2007). What happened to the quants in August 2007?. Available at SSRN 1015987.
TechMarketView. (2019, February). Lawtech Adoption Research report. Retrieved from https://www.lawsociety.org.uk/support-services/research-trends/lawtech-adoption-report/
This is day 109 of #500daysofAI. My current focus for day 101–200 is mostly on Python programming, however today I decided to go into lawtech as I am working with a team tomorrow in a hackathon on this specific issue. If you enjoy this article please give me a response as I do want to improve my writing or discover new research, companies and projects.
