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How law firms are becoming tech firms, and why it’s good for business

RMIT Online /

It’s fair to say the legaltech revolution started slowly. LexisNexis began digitising journals and case law in the 1970s (which, looking back now, seems remarkably prescient). 

WestLaw followed suit in the 1990s. Fax machines came – and quickly went. Paper slowly gave way to email.

But as Bob Goodman and Josh Harder wrote in 2014, the customer experience at the average law firm hadn’t changed in over half a century.

There were a couple of reasons for this. Law firms have always been rather cost-agnostic, since any additional expense usually flows smoothly onto the client. In fact, the billable model provides a positive disincentive for any kind of technological innovation: an increase in legal efficiency means fewer billable hours. Faster lawyers equal less profit.

Or at least, this used to be the case.

As early as 2012, the American Bar Association amended their Rules of Professional Conduct to require lawyers to stay up-to-date with “the benefits and risks associated with relevant technology.” 

But the winds of change were already blowing. More clients were hiring in-house legal counsels and turning to technology to trim costs. 

Demands and time pressure on law firms increased. And, more importantly, the legaltech industry boomed – the competitive risks of tech luddism suddenly outweighed the pain of adoption. 

Expectations had changed. In other words: it became more costly to stand still.

Increasingly, the practice of law requires a thorough understanding of the client and their industry, in addition to legal principles,” says Joni Pirovich from independent firm, Hall & Wilcox. 

“As technology trends are pervasive across all industries, it’s now incumbent upon law firms to ensure lawyers have a good starting language to interpret technology concepts and how they interact with legal principles.”

The rise of legaltech took some people by surprise. Forbes reports a 713% spike in legal technology investment in 2018 – up to $1.63 billion – driven largely by the advent of eDiscovery (an electronic process for finding relevant information about particular suits or investigations). 

Companies such as DocuSign, which operates in 188 countries and has over 100 million users, are disrupting traditional legal models.  Closer to home, PEXA has also disrupted the conveyancing game, leaving law firms with a big question: if we’re no longer the gatekeepers of legal knowledge or legal service, what role do we have to play? 

Pirovich says the answer is to double down on tech adoption and try to get ahead of the curve. “Emerging technologies like blockchain, smart legal contracts and AI are forcing the legal industry to reconceptualise traditional law firm business models,” she says. 

“Legal advice is traditionally delivered through a law firm to its clients for a fee – a privilege that law firms have enjoyed for centuries without significant disruption. However, at the heart of blockchain technology is the concept of decentralisation: that is, technology that removes the need to rely on a central entity or intermediary, like a law firm, for parties to transact with each other.”

According to Joni, if firms are to stay relevant, they’ll need to not only accept this change, but embrace it. In fact, this in part spurred the firm to partner with RMIT Online on a Graduate Certificate in Emerging Technologies and Law.  

“It’s not hard to imagine a blockchain-based project that incentivises law firms to contribute legal clauses into a library, which are available for purchase for a fee. Law firms would have a ranking based on use and public critique of their contribution. If such a model takes off, say in 10 years, law firms that haven’t contributed may struggle to maintain reputation and relevance in the market.” 

In some ways, we’ve seen this process already.

Firms like Atrium, engineered with legaltech at the core, are already disrupting the US market. Atrium was launched by the co-founder of streaming service, Twitch, and Y Combinator partner, Justin Kan. 

It’s a law firm and a tech firm in one slick, well-branded package: providing legal service, as well as “machine learning software that understands legal documents and automates repeatable processes, allowing lawyers to spend more time advising and solving problems for clients.” Investors like Andreessen Horowitz, General Catalyst, Thrive Capital have already jumped on board.

For companies like Atrium, machine learning and legaltech aren’t changing their business model. They are the business model.

Legal AI is an interesting field, partly because of the ethical implications in handing over sensitive information (and in some cases, human lives) to untested algorithms. But the trend is hard to shake.

recent report suggests that nearly 100,000 legal jobs will be automated in the next 20 years. New Jersey Bail Hearings are already overseen by an algorithm known as the Public Safety Assessment, which takes into account your age, prior convictions and so on, then calculates the chance you’ll re-offend. It worked too – after trialing the program, New Jersey’s jail population shrank by 30%.

Pirovich says that although AI will certainly change the legal landscape, the technology is still somewhat in its infancy.

“In forensic and document-heavy review procedures (like in litigation) AI is a proven tool, but truly disruptive AI assistants that can listen to a client meeting and prepare draft legal advice or relevant legal documents in the background, like JARVIS in the Marvel movie Ironman, are unfortunately a long way off.” 

“I think the efforts around machine readability of our laws will fuel this sort of technology and allow for greater and more affordable access to legal services.”

Want to learn more about legaltech in Australia? Check out RMIT Online’s new Graduate Certificate in Emerging Technology and Law. 

 
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