Legal technology, commonly known as LegalTech, refers to software that enable lawyers to do their jobs more efficiently and cost-effectively. Though very much an emerging sector, LegalTech already comprises a $16 billion market in the U.S and is growing. Undoubtedly the biggest change in this burgeoning market —taking lawyers by storm—is the rapid rise of artificial intelligence technologies.
Here we look at how AI is transforming the everyday practice of law, changing the profession and skills required by lawyers. More than 40 companies are offering solutions—from removing arduous contract reviews, to eDiscovery, or even providing intelligence on where best to try a case.
Why AI for legal tasks?
The promise of AI for lawyers lies in the automation of previously tedious manual processes that have not changed for decades. It is allowing lawyers, particularly in-house lawyers which we focus on here, to devote more time to valuable and strategic work. The current applications of AI in legal work includes drafting and reviewing contracts, mining documents in discovery and due diligence, answering routine questions or sifting data to predict outcomes.
The infographic below is taken from a new report on the changing face of LegalTech for in-house lawyers. The landscape reveals AI’s appeal in removing much of the drudge work that pervades law across nine daily legal tasks. It is ensuring more cost-effective and efficient lawyering and changing the entire dynamic of the legal department for thousands of companies globally.
What Are The Most Promising Applications Of AI In Law?
1. Contract review
The average law department wastes a significant percentage of its available work hours on reviewing contracts before they’re signed. In-house legal departments can spend 50% of their time reviewing contracts even as basic as a Non-Disclosure Agreement, creating unnecessary bottlenecks and slowing down business and deals. If you have ever needed a contract or sales agreement signed, you will know the situation of trying to get legal clearance.
In contract review, AI engines can answer the question “Can I sign this?” within one hour or less, reducing legal bottlenecks and shortening contract turn-around time. AI is a human-like legal issues spotter providing relevant information on contract terms, therefore allowing lawyers to focus their review on the relevant segments of each contract, saving countless lawyer-hours. Some big companies have created their own AI solutions – JP Morgan has created software that does in seconds what it is claimed took their lawyers 360,000 hours to achieve.
2. Contract due diligence
Lawyers have a role to ensure contracts are not hiding obligations, other liabilities or legal exposures. In addition, legal teams must also keep up to date with the ever-changing compliance rules globally, from IFRS to evolving legislation such as Dodd-Frank. When a major event such as an M&A transaction occurs, the faster you can access those contracts, and the more contracts you can analyze, the faster you will strike better deals.
New AI players in the legal field are creating time savings of 20–40% on routine tasks. Customers, of AI due diligence engines include some of the world’s largest corporations and professional services firms. It is already being used to review billions of dollars in M&A transactions and to extract and manage data of multi-national corporations in several languages. Technology can ensure swift renewal of contracts or notify account owners of pending contract expirations. Users can also create reports that show at a glance which contracts will expire and in what timeframes.
3. Legal research
Practicing law requires a lot of research—and AI is stepping into this sector in a major way. Attorneys spend their early years in the profession learning how to conduct precise, accurate research that wins cases and positions them as authorities in their field. But Professor, Richard Susskind, author of Tomorrow’s Lawyers: An Introduction to Your Future comments: “If properly primed, (these legal AI searches) are now able, in terms of precision and recall, to outperform paralegals and junior lawyers when reviewing and categorizing large bodies of documents.” New players, including ones making use of IBM Watson, can respond to legal questions in plain English and in some cases are outperforming more famous legal names. Tools can now predict how courts are likely to rule on new cases, including on areas, such as tax and at more than 90 per cent accuracy rate.
Parties engaged in litigation are legally obliged to find and exchange all relevant documents prior to trial. eDiscovery can account for as much as 70% of the cost of any legal action or lawsuit. One eDiscovery expert and consultant, Jonathan Maas says the major potential of AI is developing methods of increasing technical complexity to reduce the volume or to focus the legal review team on the most potentially relevant documents. In one case, Maas claims that use of this technology saved the client £3.4 million of review costs. The tools are simple to use, making litigation document management easier and more efficient, allowing companies to manage more of this work in-house without resorting to outside counsel.
5. Intellectual Property
Lawyers are the guardians of a company’s intellectual property, which is most often a company’s most valuable asset. For companies with multiple brands to promote, and trademarks to protect, this could mean monitoring and engaging with more than 30 digital platforms, and technology is stepping in to help.AI is helping with invention disclosures, docketing, deadlines, filing applications, valuing your IP portfolio, and budgeting. The systems can be tailor-made and customized to the company’s specific needs.
According to lawyers for IBM, using AI has cut the total time their lawyers spent analyzing trademark search results by at least 50%. This includes algorithms which try to model the outcome of trademark litigation by analyzing a wide variety of factors.
Moreover, lawyers are using such advances to deploy big data sets to more effectively analyze the brands they are protecting. These lawyers are spotting warning signals of upcoming issues, ultimately increasing the value of the brand portfolio.
6. Expertise automation
Legal knowledge resides in lawyers’ heads, creating a dependency on lawyers sharing their know-how. AI is helping to distribute this knowledge simply. Expertise automation is the intelligent automation of legal expertise and processes. It provides a simple way for lawyers to build legal self-help applications for their organizations. AI solutions provide a route for creating partial delivery of legal services, such as “walkthroughs” or “virtual assistants” on compliance and regulatory matters for a particular sector or legal field. Chrissie Lightfoot founder and CEO of Robot Lawyer LISA (Legal Intelligence Support Assistant) says: “ With emerging technologies, such as AI, a GC’s knowledge, experience and intelligence can be ‘brain-dumped’ into an intelligent machine—like LISA. Your unique brain—legal knowledge experience, and wisdom.”
Expertise Automation AI products are better diffusing existing legal knowledge, codifying expert advice and making it available cross-departmentally 24 hours a day. This may make it easier to access quick advice—on issues such as bribery and corruption policy in a geographic location, or providing concise guidance on critical employment law questions. In other cases, AI is automating drafting of NDAs or joint venture agreements, particularly useful in helping startups.
Despite the importance of billing for law firms, the vast majority of lawyers manage legal spend manually (normally this means a Microsoft Excel spreadsheet). But AI is stepping, generating detailed insight into costs, strategic sourcing and rationalization of legal services vendors. Not only are vendors promising to track time (where there are already plenty of eBilling solutions), but also providing deeper analytics breakdowns so lawyers can look at time spent on every matter and task. If an attorney is spending too much time on emails rather than substantive work, they can adjust your practice and set aside one hour a day to manage emails and make sure they are spending the rest of their time drafting documents instead.
8. Legal Analytics
Legal analytics is the management process of extracting actionable knowledge from data to legal leaders and decision-makers. This can provide insights on topics as diverse as matter forecasting, process improvement, comparative costs, billing optimization, resource management, and financial operations.
Though still in its infancy as a legal AI sector, Brightflag is looking at legal spend by in-house lawyers to gain more insight and transparency for each dollar spent on outside counsel. This involves an AI engine reading and reviewing invoices automatically. It makes budgeting more predictable, improves the invoice and legal spend review process and drives greater value and efficiency. It can also drive resource consolidation of outside counsels, in some cases from hundreds of law firms to tens—with better actionable information.
9. Prediction Technology
Predictive technology analyzes past legal reference data to provide insights into future outcomes, powered by advances in machine learning. Legal analytics quantitatively could forecast a judge’s holding in litigation, or an examiner’s allowance of a patent application.
By analyzing cases in this way, AI-base players offer exciting possibilities— such as revealing that certain judges are re-using the same language over and over again, or according themselves to patterns. These solutions are promising to increase the odds of winning in litigation by showing the win rate of motions in a particular court.
One new study using the Supreme Court Database (contains information on cases dating back to 1791) involved building machine-learning statistical model, to build a general algorithm for predicting any justice’s vote at any time. From 1816 until 2015, the algorithm correctly predicted 70.2% of the court’s 28,000 decisions and 71.9% of the justices’ 240,000 votes, the authors report in PLOS ONE.
Legal has one big problem with AI
AI is garnering a great deal of attention as well as fear among lawyers. It is offering a powerful ability to automate and enhance daily processes that have remained unchanged for decades. However, the challenges lie with the ability of exciting AI players to shakeup an old profession. Up until now, the legal sector has relied on words such as “skepticism” and “precedent”. Lawyers are now slowly waking up to new buzzwords—such as “algorithms”, “data” and “analytics”.
The biggest challenge remains many lawyers choosing to favor the status quo. Though the growth of AI in legal has exploded, the overall value of a $16billion LegalTech market pales in comparison against the size of the overall U.S legal services market worth $437 billion. Legal is playing catch up to the rest of the service-based industries which have automated tasks faster. Research shows 75% of law firms spend somewhere between 0 and 4% of their total revenue on technology, compared to 5.2% for the average U.S company.
But the success of these players will lie in continuing to identify the problem-solving opportunities that lawyers crave and demonstrate achievable results in improving their everyday tasks.