By Andy Moseby

Technology could fundamentally change the relationship between lawyers and their clients — but the industry needs to be bolder at the way it is thinking about new tools.

“Investment into UK lawtech start-ups jumped from £2.5m in 2016 to £62m for the first three-quarters of 2019”

Lawtech investment is skyrocketing: the Legaltech Startup Report published last year showed that investment into UK lawtech startups jumped from £2.5m in 2016 to £62m for the first three-quarters of 2019. In November 2019, the Ministry of Justice announced it had earmarked £2m in funding to Tech Nation to support the digital transformation of the UK legal sector until March 2022, and there are plans to launch a Lawtech Sandbox — a development and testing environment, inviting tech companies and industry experts to join forces to reinvent the delivery of legal services.

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Law firms are getting in on the action too: Clifford Chance, Linklaters, Allen & Overy and Freshfields have all launched their own in-house innovation development hubs. Others such as Slaughter and May, and Mishcon de Reya have established incubators to invest in the next generation of lawtech businesses.

Not really new

The COVID-19 pandemic has also been a catalyst for the legal industry — like many others — to rethink the way it does things. The lockdown has impacted how lawyers and clients communicate, as well as how clients want to remotely access their lawyers’ output — which is likely to stick. But the developments here are hardly new: collaboration tools, document management, e-billing.

“Lawtech remains in an embryonic state.”

The truth is that lawtech remains in an embryonic state, with a fragmented ecosystem. Some law firms are developing tools purely for internal use and an ever-increasing number of startups are often developing one particular product for one particular law firm client.

In fact, most software tools currently on the market are focussed mainly on making existing law firm processes more efficient or helping lawyers become more effective managers. For example, we’ve seen a plethora of products aimed at legal project management, law firm governance and compliance, and contract management.

Going further

We think it is possible to go further. Using software to provide a more efficient legal service is already a given. What interests us is how cutting-edge technology can be used to fundamentally benefit our clients’ operation of their businesses and how they use their lawyers.

Because we’ve always focused on the technology sector, we’ve always attracted tech-inspired lawyers who are used to working with innovators — it is part of our DNA.

“There was a gap between the legal advice and business intelligence.”

We saw that a lot of clients were not getting what they really needed — there was a gap between the legal advice and business intelligence. We’ve created software that can bridge the gap.

Across the industry, billions of pounds are still being spent on complicated legal advice given by humans, yet this is rarely captured in any way which allows for future searching or tailoring. Software can be used to database and store legal advice in a way that means it is memorialised and can be updated in a tailored way to all that may need it in the future. The aim is that this will democratise the advice and save significant amounts in fees for repeat work.

We initially built a beta version in-house to help us manage large projects involving many complicated documents and then turned it into a product (4Corners) that we license externally as well. It is essentially a modern contract-analysis tool that pulls together information on holdings, contracts, assets and products, saving time on repeatedly looking up data.

We also have a product (DupeKiller) which monitors the whole web for design infringements, and filters the list of millions of potential results down to the couple of hundred real infringements, using advances in AI-vision. The reaction from brand owners has been very positive — the intel and data they now have around copycat products is transforming their design strategy and reducing sales leakage.

A growing part of legal revenues

This year we expect direct revenue from these projects to be the equivalent of about 5% of Kemp Little revenues, but we are undertaking hybrid projects where legal tech and traditional legal skills are being bought; taking these into account, the revenues are expected to be around 8–9%.

In fact, these are not a percentage of Kemp Little revenues at all since each product is developed by a separate company: that’s a deliberate strategy as the management and building of software companies is a fundamentally different exercise to building a legal services business. Forecasts project a significant increase in future years.

This is just the start of what new technologies could allow the industry to do. Other areas of growth are likely to be in data analytics and machine learning —real-time data analytics could revolutionise M&A deals by helping buyers identify transformative companies, and de-risk the acquisition and integration process, even during a crisis.

Enhancing not replacing

There has also been some worry in the industry about AI “replacing” lawyers or competing directly with the services we provide. But this fear is misplaced.

Lawtech must be seen as helping lawyers to win and support clients, not as replacing us or competing directly with the services we provide. It will be difficult for a piece of AI to build the trust required to work effectively as a business advisor — yet as “trusted advisor” we can look to harness the power of advances in software tools to provide a valuable combination of business and legal support.

There is a huge opportunity here to change how legal advice is delivered and how law firms look to meet the needs of their clients. The adoption of new technology by law firms during the current pandemic has increased dramatically and we hope this momentum continues beyond the current crisis to deliver transformative change within the legal sector.

Getting regulators on board

It won’t just be law firms driving this change. We need a greater flow of entrepreneurial talent (not just lawyers) into the market as well as policy and regulatory support to build client confidence in digital technology solutions.

“We need a greater flow of entrepreneurial talent (not just lawyers) into the market.”

Law is a highly regulated profession, but the tech industry isn’t. Regulation needs to help bridge the gap by making lawyers confident that they can apply tech solutions without breaching their professional duties and opening themselves up to negligence claims if things go wrong, but also giving clients comfort that they can rely on the tech solution as much as they rely on their lawyers. For example, lawyers have duties of confidentiality to clients; if a tech solution is collecting data there needs to be clear guidance whether similar duties need to apply.

 

Andy Moseby is Corporate Partner at Kemp Little