An inside look at the legal sector—from one of the industry’s own

@LawAhead

From marketplaces and app stores for legal technology to self-negotiating contracts. Are we on the brink of these innovations finally making it big time?

Author: Calum Hedigan, Chief of Business Development at Legolex, LLM Candidate at IE Law School

No area of society goes untouched by the diverse and intricate legal sector. To understand its full scope, we must understand how it’s changing and the future of this sector which is becoming increasingly dependent on emerging technologies. Luckily, we were able to hear all about it from one of the industry’s leading professionals.

At LawAhead’s event on big data and machine learning, we had the pleasure of hosting Daniel Martin Katz, Professor at Chicago-Kent College of Law and at our Master in Legaltech, and co-founder and Chief Strategy Officer of LexPredict. LexPredict is a legal technology and consulting firm with an annual revenue of $50 million.[1] It was recently acquired by Elevate,[2] a top legal tech business in the US.

How the legal sector is changing right now

The biggest changes that Katz emphasized were how the legal industry is shifting their focus from a purely service business to more of a product-oriented business. However, neither of these extremes actually fulfill the client’s needs. As a result, legal professionals and tech startups have made multiple attempts to combine the two. Despite their continued efforts in the pursuit of finding the perfect combination, Katz believes that no single market player has hit the sweet spot yet.

One reason for this, according to Katz, is that most products are currently being developed outside of the market. It is mainly tech firms or lawyers who are branching off to create their own startups, rather than law firms – despite being in the best position to be making such moves.

Another development in the sector is the overwhelming emergence of marketplaces – in Spain alone there are over 20. Certain marketplaces have been designed specifically for legal technologies, acting as a sort of verification mechanism for lawyers and firms to have an element of confidence and trust in the tech they buy. On the other hand, there are also marketplaces that connect lawyers with clients, such as UpCounsel in the US (which has received over $20 million in investment[3]) and elAbogado.com in Spain (which just received $800,000 in investments in 2019[4]).

Most products are currently being developed outside of the market. It is mainly tech firms or lawyers who are branching off to create their own startups, rather than law firms – despite being in the best position to be making such moves.

These marketplaces have a huge potential to break down the barriers for adopting legal technology. From a lawyer’s perspective, the three biggest barriers surrounding the use of legal tech are price, lack of qualified personnel to implement it, and the fact that other objectives take priority.[5] From legal tech’s perspective, their biggest problems lie not only in the cost of their technologies, but also in the lack of market confidence as well as the highly specialized nature of most legal technologies. If a marketplace could bring the best technologies together and help the firms to sell them to law firms, then they could have the potential to play a highly influential role in bringing the legal industry into the 21st century.

 

 

Thirdly, and perhaps the biggest advancement in the legal sector, is without a doubt the development and evolution of AI and solutions based on machine learning, in combination with big data. This has, of course, brought up the cliché fear in this sector (and many others): “Will robots steal our jobs?” However, regarding all of the possible changes in the foreseeable future, the replacement of lawyers and judges by machines is one of, if not the, least feasible. The reason for this, Katz argues, is that the key value a lawyer essentially provides is two-fold: risk management, and the ability to navigate complex socio-economic situations. These two capabilities are still far from being perfected in the wiring of our silicon-based friends. According to Katz, the only lawyers that will be replaced by robots are the ones that work like robots.

 

Predictions for the future

Katz rounded things off with some predictions for the upcoming years, post-2020. He highlighted the impact of the fourth industrial revolution’s role in these developments, insisting that all of these technologies by themselves work great, but they are only truly revolutionary when combined. Blockchain by itself is fine, but when integrated with big data and machine learning, the possibilities are endless.

His first prediction was the emergence of real app stores for legal technology. At some point, one of the various marketplaces will get the formula exactly right and will be able to offer real value to its customers.

Katz’s second prediction was the introduction of self-negotiating contract systems to be used between businesses in order to bring about the best possible deal for both sides. Of course, these would not be entirely automated – there would most likely always be some sort of supervision by the lawyers and executives from both sides before closing the deal.

 

An interesting time ahead…

It certainly does seem to be an exciting time in the legal industry. As companies such as Elevate continue acquiring more and more tech firms (they’ve acquired four related companies since November 2018), the developments will just keep on coming. After all of the buzz that has engulfed the legal sector regarding new technologies, we may very well be on the brink of these innovations finally making it big time.

 

Calum is the Co-founder of LegoLex, a legal technology company soon to open its Exclusive Network of lawyers. He studied the Dual Law Degree in IE University and is currently studying the Dual LLM in Law, Entrepreneurship and Technology in IE Law School. In September, he will start working for White & Case in Madrid.

Note: The views expressed by the author of this paper are completely personal and do not represent the position of any affiliated institution.

[1] Crunchbase, LexPredict Overview, https://www.crunchbase.com/organization/lexpredict#section-overview
[2] Zach Warren, Law Company Elevate Acquires LexPredict and Its Data Science, AI Technology, LegalTech News, Nov. 2018
[3] Crunchbase, UpCounsel, https://www.crunchbase.com/organization/upcounsel
[4] Crunchbase, ElAbogado.com, https://www.crunchbase.com/organization/elabogado-com#section-overview
[5] Lefevre, II Estudio de Innovación en el Sector Jurídico 2019