Welcome to your Law Tech briefing for July 17th, 2023, covering what happened in legal tech recently.
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Have less than a 1 min? Three takeaways from yesterday
- The rise of AI in the legal industry necessitates caution and responsible use of technology to avoid potential job losses and the obsoleteness of specific roles. It's important to bridge the communication gap between law firms and clients to ensure the beneficial adoption of AI and meet clients' technological expectations.
- Legal project management (LPM) is key to maintaining competitiveness in an increasingly digital industry. Firms should start small with new technologies or processes and identify specific problems before implementing solutions, allowing them to integrate technological innovation effectively.
- Given the increased interest in environmental and social changes among prominent companies, legal professionals must focus more on ESG activism. The evolving role of compliance professionals underlines the complexity of the modern legal landscape and should be closely monitored as it will significantly impact the future of the legal profession.
The legal technology landscape continues to expand and evolve. Notable developments include the widely praised efforts of The Lawyers Hub in Kenya, which provides tech startups with much-needed assistance with regulatory compliance and fundraising. The Hub, founded by digital law expert Linda Bonyo, also organizes an annual Law Tech Festival in Nairobi. TimeSolv, a time-tracking and billing platform, provides customizable dashboards that enable law firms to consolidate business data, driving performance and profitability in the rapidly growing legal industry.
AI technology continues to make waves in the sector. Assembly Software's CEO, Daniel Farrar, predicts that generative AI will become commonplace in law firms. Despite the optimism, a poll by Wolters Kluwer and Above the Law found varying perceptions about the impact of AI. While many respondents foresee AI streamlining research and routine tasks, only a minority think it will revolutionize high-level legal work. Further illustrating the trend toward AI, a LexisNexis report underscored a disconnect between in-house counsels and law firms regarding the adoption and expectations of AI technology. Another trend is the evolving role of legal project management (LPM) highlighted by India Preston, Director of Platform Solutions at legal tech startup Lupl. She advises firms to start small with new technologies or processes and to identify specific problems before implementing solutions.
The role of AI in the legal industry is a rising trend that cannot be ignored, but it's perceived with a healthy dose of caution. The primary worry is over potential job losses and the obsoleteness of specific roles due to AI. This concern leads to a call for the responsible use of AI technology. The discrepancy among in-house counsels and law firms in their expectation of AI indicates a possible communication gap that could hinder optimally beneficial adoption. Law firms may need to emphasize more on understanding their client's technological expectations. The importance of LPM in helping law firms remain competitive demonstrates the need for meticulous planning and management in tandem with an increasingly digital industry. Lupl's advice to start small and focus on specific problems before implementing new solutions gives a practical perspective on integrating technological innovation. A surge of interest in environmental and social changes in Russell 3000 companies underscores the pressing need for legal professionals to augment their focus on ESG activism. Significant changes in the roles of compliance professionals also reinforce the complexity of the modern legal landscape. These developments bear further scrutiny as they will become defining aspects of the legal profession's future.
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A survey released by Wolters Kluwer and Above the Law has revealed mixed feelings about generative AI in the legal industry. While 62% of respondents believe that effective use of this technology will decide which law firms prosper in the next five years, only 31% believe AI will transform high-level legal work. However, more than 80% agree that AI will bring transformative efficiencies to routine tasks and research. Law librarians, document review lawyers, and those involved in knowledge management and research are among those most threatened by generative AI, according to the survey. Practice areas most likely to be affected include corporate law, litigation, and intellectual property.
India Preston's intriguing discussion on Fringe Legal delved into the evolution of legal project management (LPM) and how to adopt and challenge established legal processes effectively. Preston's experience, stretching from setting up Linklaters' LPM function to joining legal tech startup Lupl, sets valuable insights about the adoption of LPM principles. She advocates for a gradual approach to implementing new processes or technology, starting with a minor section of the organization. Preston emphasized the need for a problem-oriented mindset before adopting new solutions and the relevance of soft skills for legal project managers to interact with legal teams seamlessly. One of her impactful suggestions is using process mapping workshops to examine and enhance conventional processes, thereby promoting innovation.
The article "The Maroons & The Grays: The Next Chapter" by Bruce MacEwen on Adam Smith, Esq. provides an update on a law firm market segmentation model introduced four years ago. The model categorizes law firms into two groups: the "Maroons" and the "Grays," further divided into well-run and poorly managed segments.
The article argues that poorly managed Maroons and Grays, found in the bottom quadrants of the model, often struggle to recover once they've started to falter, with issues such as compromised standards, internal squabbles, and loss of market share to competitors.
Well-run Maroons, in the top left quadrant, are advised to maintain quality across all aspects of their operations. The author emphasizes the importance of a "virtuous cycle" where critical matters demand elite lawyers, who are highly remunerated, allowing the firm to command high rates for their work. Any compromise on these elements could lead to the firm's downfall.
The "Superb Grays," well-run firms in the top right quadrant, are described as fascinating and rare. These firms are characterized by their business-first approach and their commitment to efficient, reliable, and high-quality legal process optimization. The author warns that lawyers may not be the best choice to manage these process optimization challenges, suggesting that business professionals are better suited for this role.
The article concludes by encouraging law firms to consider whether they could navigate to the Superb Grays quadrant if they're uncertain about their current prospects. The author suggests that this quadrant offers great financial success, growing prominence, and a growing client base, as well as challenging and rewarding work.
The Lawyers Hub in Kenya, founded by digital law expert Linda Bonyo, is a platform assisting startups with regulatory compliance and fundraising. Bonyo's work in digital policies, including Kenya's Data Protection Act, has been widely recognized. TechCrunch highlights the Lawyers Hub as a valuable resource for startups. The Hub also organizes an annual Law Tech Festival in Nairobi.
The legal industry is expected to hit a market value of $860 billion by 2023. TimeSolv, a time-tracking and billing platform, is helping law firms improve performance and profitability with customizable dashboards that consolidate business data. These dashboards provide instant insights, aid in data-driven decision making and risk management, and allow firms to track billable time and identify trends, thereby increasing operational efficiency.
The legal sector is increasingly adopting AI technology, with Assembly Software CEO, Daniel Farrar, predicting generative AI will become commonplace. However, some law firms have not disclosed their use of AI tools, as required by certain judges. Elon Musk's new AI company and OpenAI's FTC investigation are also noteworthy developments. The OECD warns of potential job losses in the legal sector due to AI, advocating responsible use. The proposed EU AI Act could significantly impact US firms.
A LexisNexis report reveals a disparity between in-house counsels and law firms regarding the adoption of generative AI. Nearly half of in-house counsels expect their law firms to use AI within a year, while only a quarter of firms believe their clients want them to use AI. Despite potential applications in research and document analysis, concerns about the risks of AI technology continue to linger.
Veristar, a legal services provider, has promoted Ben Gardner and Rick Kaminski to its executive team and appointed Bob Saltzstein as director of client engagement. Gardner, formerly of PwC, will serve as CFO, while Kaminski, previously senior director of e-discovery operations at Veristar, is now COO. Saltzstein, who has nearly 20 years of experience in legal technology, will manage client accounts and business development. The changes follow Veristar's financial restructuring after several acquisitions.
Shareholder proposals aimed at changing environmental and social practices at Russell 3000 companies have surged by 52% in 2023, says law firm Freshfields. However, only about 1% to 1.2% of these proposals won majority backing. The rise in proposals is partly due to increased pressure for corporate action on climate change. Meanwhile, the Securities and Exchange Commission is pushing for standardized sustainability reporting, while Republican lawmakers argue that ESG activism harms investors and hinders companies' ability to enhance shareholder value.
Federal and state authorities are increasingly examining noncompete clauses in employment contracts, prompting employers to reassess their usage. Barbara Klementz of Baker McKenzie advises businesses to also review noncompetes in employees' equity award agreements. She recommends that noncompetes should be reasonably applied to higher-level employees and their duration and applicability should be objectively reasonable. Additionally, noncompetes should comply with the laws of the state where the employee resides and works.
Michael W. Peregrine, a partner at McDermott Will & Emery, suggests that the traditional reporting relationship between the Chief Compliance Officer (CCO) and CEO may need to evolve to include the Chief Legal Officer (CLO), due to increasing complexity in corporate structures and compliance risks. This is supported by a survey from the Association of Corporate Counsel, which found 80% of CLOs oversee compliance. Changes should maintain the CCO's seniority and the organization's compliance program.