What are the seismic changes that are taking place in legal technology and what can we expect in the near future? If 2019 was a record-breaking year, 2020 is already on pace to set the bar even higher.
With a 45% increase in the number of funding rounds, totaling a 496% jump from US$100 million to US$597 million, 2019 was a record-breaking year for legaltech startups.
However, the developments in the sector don’t stop there. Legal practitioners are also now using state-of-the-art AI as a more intelligent approach to everything from auto-generating and assembling documents to legal analytics—meaning industry startups have now begun to take advantage of new legaltech applications and new opportunities for growth.
There are challenges, though—from both within and outside the industry. On one hand, we have regulatory issues like France banning legal analytics. On the other, an increasing number of legal professionals fear their jobs are threatened by these rapidly expanding technologies. However, the fact still remains that this industry is making room for technology to deliver better productivity going forward. Here is a look at how.
First, we must explore clients’ demands. Considering many lawyers charge a minimum fee, no one wants to pay for legal advice by the hour when such tasks may now take minutes or can be done entirely by a computer.
Second, today’s lawyers themselves can work more efficiently. Until now, the inconvenience and stress of working late in order to complete mundane tasks had been the norm.
Then there’s the fact that entrepreneurs are usually hungry to solve complex problems. And when this relates to legal issues, this certainly makes the sector fertile ground for technological change.
At the end of the day, the law is everywhere. No company today of any significant size can operate without a legal department. Countless everyday processes—including starting or closing a business, and buying or renting a property—simply cannot be done without involving a lawyer.
We must then ask how legal tech trends will shape the future of law. With nine funding rounds, totaling US$10 billion for visa application work in January alone, 2020 is looking to be promising. As legaltech continues to gather steam, these will be the key areas of interest going forward.
In 2019, investors began throwing money at privacy-focused solutions. With US$10 billion coming into this field in that year alone, it is clear just how important privacy has become.
However, investors aren’t the only ones taking note. Governments have also begun to take data protection very seriously. The EU’s GDPR and the California Consumer Privacy Act are being followed by new legislation like Brazil’s LGPD and others—meaning business literally cannot afford not to take data protection seriously as well. With fines for noncompliance skyrocketing, companies are having to consider their clients’ privacy rights very carefully. This is leading to more and more professionals taking the CIPP/E certification, and is creating new opportunities for legaltech to provide solutions. In many ways, privacy laws can be seen as the new consumer law—a trend that isn’t showing any signs of slowing down.
Few legal challenges are more difficult than extracting data patterns from countless words and pages. Contract analytics makes it easier to understand these documents while ensuring that nothing falls through the cracks.
With so many documents being drafted from templates, this field is also showing enormous potential. Sophisticated natural language processing techniques and algorithms that understand legal terminology are now widespread, picking out patterns which may elude a human lawyer. Unseen risks and potential savings can now be identified with minimal intervention from people. This technology is also easily accessible—Google’s open-source, NLP search algorithm BERT is teaching computers to understand language like a human does.
Contract analytics can bring order to unstructured data quickly and easily. Lawyers and their clients will benefit as this sector continues to grow in the future.
Legal technology and education
The faster legal technology advances, the quicker society adapts to the changes. No legal professional would have signed a contract online fifteen years ago—it would have simply not been secure.
Modern blockchain technology not only guarantees security, it can also make contracts smart, monitoring clause violations through connected devices and reporting noncompliance. But such changes can happen so quickly that those who are not up to date will be left behind.
Today, legal professionals must not only understand their clients’ issues—however complex or new they may be—they must also have the latest insights on new social habits, new tools for addressing these issues, and details of the new risks in doing so.
Edtech plays a key role in addressing these topics. The importance of edtech is being recognized not only by startups, some of the top legal and educational institutions in the world are getting on board as well. IE Law School’s Master in Legal Tech is a clear example of the relevance of edtech to both serious educators and modern sector specialists.
Having a strong educational foundation is key to keeping up with the constant changes and legal tech trends, such as the rise of edtech, which legal professionals must be aware of to succeed.
Legal research can be a daunting task for even the most experienced legal practitioner. Handling federal, state, and municipal legislation, precedents, and legal doctrine is time consuming, labor intensive and not even always billable. Despite the apparent obstacles legal research implies, it plays a central role in effectively serving clients.
Although there have been many technological advancements in the field of legal research, it is clear that they will not replace humans in the sector. This is because legal analytics products deliver extremely unpredictable results when compared to human work.
There is still much room for improvement in this sector, and room for new players to join. We can see an example if we examine the litigious culture of Brazil. With more than one million lawyers, over 80 million outstanding lawsuits—two and a half years of backlog—and special courts for minor cases, it’s an ideal testing ground for legaltech. Highlighting Brazil’s legaltech potential, JUIT—one of over 200 lawtech startups in Brazil—recently won IE Law School’s Legaltech Venture Day in São Paulo.
Future legal tech trends
With the rise of new technologies, long-established problems still to be solved, and low interest rates making money available to investors, we will increasingly see lawyers leaving law firms and legal departments to go out and innovate on their own.
Expectations are high, but the rewards could be even higher. If 2019 was a record-breaking year, 2020 is already on pace to set the bar even higher.
Deoclides Neto is the Founder of Juit, a legal tech startup founded in 2018 that solves significant legal challenges through the state of the art technologies. Lawyer and MBA in Big Data and extension in Data Science Applied to Law. He is guest lecturer and speaker at several renowned institutions and is the winner of the Global Legaltech Venture Days, Sao Paolo edition
Note: The views expressed by the author of this paper are completely personal and do not represent the position of any affiliated institution.