In the second of our two-part series on legal technology, we peer into the undefined future of legal tech and explore how AI is already reshaping the business of law. Just how long will it be before Jarvis makes partner? Mithun Varkey reports

Although slow to gain momentum, legal tech has been through several iterations and cycles of adoption. What really sets the current wave of legal tech adaptation apart is not just the variety of the tools on offer, but their sheer ambition. While it was the pandemic and the need for new tools to ride out the so-called new normal that were clearly triggers for the recent adoption of tech, the fact is that a lot of these tools, powered by artificial intelligence (AI) and machine learning, have ensured the change is permanent, and have changed the practice of law.

Where’s the action?

“What is overwhelming is the sheer variety of new applications that are being imagined and developed and proffered to the legal industry, in the interest of innovation and acceleration of change, which buyers of legal services have jumped onto because there’s the promise of more efficiency, more transparency and better quality legal service,” says Andrew Klein, the Amsterdam-based founder of Reynen Court, a legal tech aggregation platform.

Haley Altman, global head of corporate development for US-based Litera Microsystems, adds: “What law firms have started to do more is they are stepping back and saying, ‘hey, it’s not about just finding cool new things that are interesting and seem exciting, it’s about what are the processes and problems that we need to solve?’”

According to a 2020 survey conducted by Daisy Chain, ACC and legal technology firm Yarris in Australia, 45% of respondents indicated that they acquired legal technology in the preceding 12 months. For those respondents who reported acquiring legal technology in the past 12 months, 44% acquired matter management systems, 37% acquired contract management systems, 26% acquired document management systems, 22% acquired knowledge management systems, and 22% acquired project management systems.

legal tech“The majority of legal tech companies are focused on something to do with contracts. Contracting obviously is a huge opportunity, and it very much affects in-house and law firms themselves,” says Philipp Thurner, CEO and founder of NEXL, a Sydney-based client relationship management software provider.

“With the firms, it’s all around eDiscovery, automated due diligence and review of contracts, drafting,” says Thurner. “And then there’s the contract management systems for in-house, which is a market that is exploding. And then, obviously, law firms also automating some of their kind of processes around documents. Those are things that are really booming. Lawyers also work a lot with documents, and there’s a lot of efficiencies to be gained.”

In terms of legal tech categories that are being adopted, “it has been a very mixed experience for the legal tech vendor community since the pandemic”, says Klein. “If you were lucky enough to be a vendor that sold the technology that was relevant to that transition, you were off the charts with the demand,” he says.

“Those who were not in that space suffered because even the most exciting new AI companies are more about the mid term and the long term than about surviving the pandemic. A lot of projects that were previously racing ahead got put on hold for very important categories of legal technology and that was very, very painful because they just stop.

“Now they’ve started again, but not nearly at the pace they were before the pandemic. Even though these firms are making more money and are busier than anyone imagined, they’re acting quite cautiously.”

Altman says one thing that has changed is that with technology people used to want to see a 10-fold improvement before engaging with it – not so much anymore.

“People always have this expectation that you have to change things dramatically to go through the pain of trying a new tool,” she says. “When the pandemic started, people started to go back to these core-building block technologiest that would allow them to work and obtain even incremental improvements. The focus shifted to enabling people to work remotely rather than entertaining cool, trendy things, like how do we look at blockchain?”

The needs for clients changed, too, says Altman. “How can I better use technology that we already have? How do I make better use of those tools and start to bring them together? I need to be able to use the data in my documents better. I need to be able to create a table of contents. I need to be able to make my outline not break halfway through,” she says.

“I think the other thing you’re seeing is people wanting to understand the data that they have in the firm. Firms have so much data, but tons of data do not mean that you’re going to be able to do anything meaningful with it. You need to have technologies that help you make sense of the data. So, if I understand who can do the work for me, or what work have they done in the past, I can better make choices as to who joins my team.”

According to Klein, the big law firms are under a lot of stress. “People are working more hours because they have so much work to do,” he says. “One of the casualties of that is innovation. No one has time to do things that do not have an immediate impact, and that’s been hard for a lot of vendors, I think.”

The top two applications adopted in the past year on Reynen Court’s platform were both transaction management platforms. “Collaboration platforms for deals to get done without anybody being in the conference room, or any other documents being physically printed and signed,” Klein says.

Altman says that due to the pandemic the legal tech market has shaped around a few concepts. “You saw the need for collaboration,” she says. “How do we do different workflows? How do we automate processes? Then we saw the return to basics such as, ‘how do I actually just draft my documents? How do I put these things together?’

“Then you saw a lot of, ‘I need to know how to work across offices. To do that, I really need to be able to intelligently access data that helps me make the decision’, so that, being able to understand the knowledge that a firm has, things started to become a lot more important.”

Collaboration is crucial for law firms, says Klein. “Lawyers do a lot of different things in a lot of different languages and countries and regimes,” he says, “and so it’s an extraordinarily complex array of solutions.

“For global law firms that’s very challenging because some of these law firms are in 50 countries. So, they don’t just need one solution, they need a solution that works in Germany and they need one that works in Thailand.”

legal techWhen to specialise

While there are lots of legal tech vendors, there isn’t any clear winner. Unlike in some other business areas like finance, where there are one or two big software vendors that integrate and solve all needs, legal is caught in two minds. There are platforms trying to do it all for law firms, and there are focused ones who are trying to solve a small pain point. The debate is still open – should legal tech go the platform way or should companies focus on their specialised solutions?

“If you think about every vertical within a corporation, finance has Oracle and SAP. We know all those are finance systems,” says Mary O’Carroll, chief community officer at San Francisco-based contract lifecycle management company, Ironclad. “For HR, they have Workday, for sales, they have Salesforce, but in legal there isn’t one system,” she says.

“There isn’t that name that we have all heard. That’s because we are in the early days of technology, disruption, transformation and implementation than all these other verticals. I think the practice areas of legal all see their needs a little bit differently.

“So for e-billing, for e-Discovery, for contracts, life cycle management, for IP management, you might want to have each one of those as separate systems. But if you’re a small firm … you can probably go with one of these enterprise solutions that say they do it all, but probably don’t do all of it that well.

“We’re not quite at the place where you have one system for everything. I don’t even know if that’s the direction we are headed, but I think there’s a good reason for best-in-breed systems within legal right now.”

And that seems to be the consensus among legal tech companies – specialised vendors are, at least for now, the way to go.

“The problem with one-fits-all solutions is in the words themselves,” says Thurner. “The problem might be that it doesn’t fit anyone. Out-of-the-box, it never fits. You have to spend a lot of money to actually customise it to make it work for you.”

legal techAltman says there are big problems with systems and trying to tackle all of them is hard. “I think you’re going to see a lot of consolidation,” she says. “I also think law is so different – what a 1,000-person law firm needs is very different from a solo practitioner. Having technologies that go up and down in a vertical stack is very challenging. The needs and experiences are very different. The ability to kind of look at customers and provide tools that apply up and down that stack is a definite challenge.”

Colin Bohanna, the Dublin-based general manager for Europe, Middle East and Africa at Canadian legal tech company Clio, says that while a lot of law firms are similar in structure, how they work and how they operate is quite different. “So, understanding the value of different technologies that can work together, and providing unique tech within each law firm, based on what their specific needs and structures, are going to be really important,” says Bohanna.

“With Clio, law firms can plug in the different technologies they already use, so that it acts as the central platform for their firm,” he says.

Chris Combs, co-founder and senior vice president of business development at Linksquares, a Boston-based contract management and analytics platform, says beware of companies that say they can do all things and do them well. “We call that a white whale,” says Combs. “It would be a very rare thing to find, a company that could literally do everything. It may be more of a myth than a reality.

“With our product, we do see a little bit of e-Discovery, HR and corporate management, things that clients can use our platform for. We don’t want to be the best e-Discovery company. We want to be the best corporate legal management company that’s powered by AI – that’s really our focus.

“But we do partner with other companies and create what we call a technology stack. If a company needs those additional products and services – practice management, matter management, things like that – we have other companies that we partner with. That makes that easy and seamless.”

legal tech(A)Innovation

Even as legal tech vendors focus on solving immediate pain points and the basics, innovation is at the heart of this tech transformation. AI and machine learning are the buzz words in technology. The legal services market also seems geared to shake off its laggard tag and embrace the buzz, but the question remains as to whether some of these are technologies for technology’s sake.

“As the legal tech world started emerging, the message was initially for lawyers to embrace any great technology that would streamline workflow and ease practice,” says O’Carroll. “However, as the industry has evolved, we see that it is AI-powered solutions that are truly bringing cutting-edge technologies. Moving forward, I would see AI-powered solutions being at the forefront of the industry and likely dominating the market.

“And I often say, if we can use robots to perform eye surgery on humans, how silly for us to think that a robot will not be able to draft a contract in 20, 30, 50 years,” she says. “On the other hand, is it here today? Is it here now and should I be investing in it? I think that it is not quite there to the extent where you can take your eyes off the road. And with legal, there’s enough risk that you still want to make sure that things are reviewed, and you’re signing off on it. I would be very uncomfortable if you didn’t have a human to look at it.”

Litera’s Altman echoes this view. “The ability to use machine learning to complete a bigger task is going to be important,” she says. “If I need to draft an agreement, and I want to find a clause, I can start saving clauses in a word document, or somewhere that these are the clauses I’d like to use for this type of agreement.

“But it would be a lot easier if I could see what clause I need. It has to be industry-specific for this type of agreement. I need something relevant. So being able to use machine learning to help us go through these complicated processes will be helpful.”

Altman says that in the diligence process, there are hundreds of thousands of documents that underlie the structure of a company. “An attorney can’t go through and read them all,” she says. “You don’t necessarily have time to do that detailed review, nor does the client have the financial capacity to support doing that. So, technology that can take large data sets and do work quickly will be valuable.

“But right now, I think we’re in the stage of human-plus-technology provides greater value to both the firm and the client than trying to just add more people to the project.”

Robert Lewis, co-founder of docQbot, a China-based legal tech company, says: “When you look at it in terms of what AI can do, it is a big data play. And if you look at the Chinese legal services market, there are some big data plays, but no one’s so far been able to crack it. The big data plays were on all the published court decisions. They were going through this whole database. It’s all searchable and predictive and that’s a pretty cool thing, I think it’s got value, but I just don’t think it’s been done right yet.”

legal techBecause of the nature of AI and machine learning tools, Lewis says a lot of its application, for example in litigation, will happen at the generic, lower end of the market where you have high volume, generally similar fact patterns, or enough fact patterns where things fall into predictable categories.

“Whereas for high-end business litigation, it is probably harder,” he says. “There are some things you can do. I think someone will crack that, but it’s not going to affect the high end of legal services.”

Lewis sees an area of great opportunity, for AI, in particular, is natural language processing for contract or document reviews. Klein agrees this is a hot topic. “Everybody wants it,” he says. “But you have to train models on language and law and character-based languages, and smaller markets mean it’s a lot harder for the vendors to make the investments in building those products when there aren’t so many users.”

Lewis is sceptical of any immediate possibilities. “I compare automated contract review to autonomous driving vehicles,” he says. “I’ve read that people are less and less optimistic that we’re going to see fully autonomous vehicles. It’s probably 10 or 20 years out.

“People think that AI will review the contract and revise it for you. With the self-driving vehicle, it is all about sampling. [A self-driving vehicle] has all these sensors, and it’s sampling all of its environment. For autonomous vehicles, it’s a known universe. It is within whatever radius it is sampling.

“But when you’re giving the contract to an algorithm to review it, [AI] doesn’t know the context. It cannot sample the environment to know what the context is. You can’t decipher it from the body of the contract. Therein lies the challenge for AI in legal tech – it is possibly more complex than building a self-driving car.

The other challenge sometimes with legal technology, Lewis points out is that a lot of the tools are heavy on tech and much lighter on law.

However, there is no denying that legal technology has well and truly arrived, and there is no turning the clock back on it now. The way forward for law firms is to adapt and build their businesses around emerging technologies.