The State of Play in Legal Innovation

Several weeks ago I spoke at the Sinch Online Legal Services Conference in Sydney. My topic was the state of play in legal innovation and I covered what I thought were the most significant events of the past year (and of the near future). This column addresses some of those events. Special thanks goes to Jordan Furlong and Stephanie Kimbro for their input and, as always, to Simon Lewis for organizing the conference.

Disruptive Business Models

In November, 2010, Thomson Reuters acquired legal process outsourcing company Pangea3 and at the same time put bar examination preparation course provider BAR-BRI up for sale. This is a potentially transformative acquisition. As Furlong says in his blog, law21.ca, Thomson Reuters is going from being a law firm supplier to a law firm competitor, from a legal support services provider to something brand new. Outsourcing is potentially disruptive to conventional law firm business models because it can be done by in-house legal departments themselves, bypassing the law firms entirely (Rio Tinto, for example).

In October, 2011, alternative business structures will come into being in the UK. Described as law’s “Big Bang”, this regulatory change will allow non-lawyer investment in law firms for the first time. Richard Susskind says that existing law firms make unattractive investments and predicts that “external investment will be made exclusively in new forms of legal business.” These new business models will not be encumbered by existing organizational or cultural baggage and will be engineered for disruption from the ground up.

Australia, which already allows non-lawyers to invest in law firms, is currently working toward achieving national regulation of the legal profession to facilitate a national legal services market. So far, Western Australia and South Australia have chosen to opt out. However, multi-jurisdictional practice is already a reality in Australia because of existing mutual recognition rules among the various states. 

LegalZoom has launched in Canada, in association with CorporationCentre.ca. LegalZoom, a document preparation service, is perhaps the best known and best funded disruptor of the legal profession that exists to date.

In a recent journal article, I discussed Chrissy Burns’ PhD thesis findings that computers are good at rule-based thinking and logical intricacy (for example matching facts with the requirements of a rule) but not at work that requires judgment or conceptual thinking. During the past year, a couple of examples of where software is poised to replace lawyers have come to the fore. 

The first is a New York Times article on e-discovery entitled, “Armies of Expensive Lawyers, Replaced by Cheaper Software”. Using software for e-discovery is significantly cheaper than using lawyers and the cost ratio will change as the software improves. Documents that are flagged still have to be read by someone, but now one lawyer does the work that 1,000 did previously. Last year, DLA Piper used Clearwell software to run through 570,000 documents in two days. One lawyer ran documents from the 1980s and 1990s through e-discovery software and discovered that the lawyers had been only 60 percent accurate. 

As Furlong says, “It’s tempting to dismiss these forecasts as bleeding-edge speculation, and to repeat the old canard that a machine will never replace what a lawyer can do. But that’s not the issue. The issue is how much longer lawyers will try to replace what a machine can do.”

Meanwhile, IBM has moved on from chess applications to Jeopardy. IBM supercomputer Watson beat two human experts at Jeopardy before losing to another. Watson uses algorithms to understand natural language. Robert Weber, IBM’s general counsel, thinks that Watson could be used to extend the capabilities of lawyers when gathering facts or identifying ideas. 

Online Legal Services

The American Bar Association Ethics 20/20 Commission is investigating the use of technology to deliver legal services online. This is a 3-year project that will review “the U.S. system of lawyer regulation in the context of advances in technology and global legal practice developments.” It is looking at such things as cloud computing, social networking, lawyer websites, and blogging.

Two new organizations in the online legal services field were born in the past year. First, the Legal Cloud Computing Association came into existence, providing a voice to vendors in the cloud computing market. Members include Clio, DirectLaw, RocketMatter, and Total Attorneys. 

Second, LIIofIndia, the Legal Information Institute of India, came into being with the assistance of Graham Greenleaf and the team at AustLII, the Australasian Legal Information Institute. It provides free access to statutes and case law. LIIofIndia is the 34th member of the “free access to law” movement, whose core belief is that, if ignorance of the law is no excuse, then free access to the law should be made available to all. I view these information services as a base layer on top of which future online legal knowledge products can be built.

Expansion and Dissolution

UK law firm Norton Rose has expanded into Canada and South Africa after earlier moving into Australia. London-based firms Allen & Overy and Clifford Chance have recently established Sydney offices.

Meanwhile, Washington, D.C. based litigation firm Howrey has dissolved. A Wall Street Journal blog says that two factors were involved. First, alternative billing (contingency fees) led to partners walking out because they didn’t like the uncertainty of income. Second, third party document discovery specialists could provide competing litigation support services at lower rates.

Legal Education

Many doubts have been expressed recently about the sustainability of the current business model for legal education. Harvard and NYU have put together a contest that focuses on innovation in legal education. Proposals put forth at the April, 2011 conference included “Apps for justice: learning law by creating software” and “seriously gamifying legal learning”.

Predicting the Future

Transcendent Man, a new documentary about futurist Ray Kurzweil, was released earlier this year. Kurzweil says that we are just now at the knee of the technology curve and that the pace of change is happening at an exponential rate. The movie shows how Kurzweil’s relationship with his late father and a desire to resurrect him in digital form are a driving force in his life.

Tyler Cowen is more pessimistic than Kurzweil. In his new e-book called The Great Stagnation, he argues that the low-hanging fruit of free land, technological breakthroughs, and smart and uneducated children has already been picked in the United States. In his view, the Internet can’t compare to previous inventions like the automobile because it provides personal growth but little revenue or employment. He points out that companies like Facebook and Twitter don’t have that many employees. Twitter has an estimated 190 million users and perhaps 300 employees. 

Although the book is thought-provoking, I find these arguments to be unconvincing as the Internet continues to embed itself in all forms of commerce that can be digitized. Books and videos are the latest example. Increasingly, almost all businesses will derive revenue from the Internet.

Finally, Paul Krugman of the New York Times has written an article on the hollowing out of jobs for highly educated workers. He states that there is a hole in the middle caused by computerization and off shoring and that education is no longer the key to success that it once was. Work with a manual labour component is more difficult to automate or outsource. There are no robot electricians or plumbers.