Welcome to your Law Tech briefing for Jun 19th, 2023, covering what happened in legal tech recently.
TLDR; Listen instead:
Have less than a 1 min? Three takeaways from yesterday
1. Employ data-driven approaches to improve law firm billing and pricing behavior by tracking key performance indicators and using business intelligence tools.
2. Prioritize self-care to maintain mental and physical health and avoid lapses in judgment due to the demanding nature of the profession.
3. Embrace legal technology, including data science and AI tools, but continue to verify accuracy and stay compliant with regulations and requirements.
Trends from yesterday
Pre/Dicta, a litigation prediction software startup from Maryland, uses data science and docket numbers to predict how judges will rule in cases. The company recently acquired Gavelytics, expanding its predictive offering to state courts. Meanwhile, law firms use data to improve their billing and pricing behavior. An industry report is expected after a survey to determine how firms track key performance indicators and the most commonly used business intelligence tools (we'll be sure to cover it when it's released).
Legal tech companies continue to expand their reach using data science. Pre/Dicta's acquisition of Gavelytics allows the company to predict how judges will rule in state courts. Law firms are also using data to improve their billing and pricing behavior, an approach that is expected to become more widespread. For law firms to compete, tracking KPIs and using business intelligence tools is necessary. In our key story we dive deeper into the ACC law department benchmarking report which considers much of the above.
Data science is increasingly seeing adoption by companies in legal technology. Pre/Dicta’s acquisition of Gavelytics provides the company with a more comprehensive legal prediction tool. Meanwhile, law firms are using data to remain competitive. Tracking key performance indicators is crucial for lawyers to identify trends and adapt their strategy accordingly, while the use of business intelligence tools is necessary for an effective decision-making process.
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The 2023 Law Department Management Benchmarking Report indicates a significant increase in legal spending among companies. The average legal spend has risen by 29% annually, from $2.4 million to $3.1 million. This increase is primarily driven by companies with more than $20 billion in revenue, which saw their median total legal spend rise from $50.8 million to $80 million, a 57% increase.
The report suggests that the increase in legal spending reflects the growing regulatory and legal complexity facing companies across industries. New technologies, particularly in the area of privacy, are creating new legal challenges. This is also reflected in the fact that privacy is now the most common function directly overseen by legal departments at 57%, overtaking compliance at 56%.
Another factor contributing to the increase in legal spending is the historic law firm rate increases. Law firms raised their rates an average of 5.5% in the first quarter of 2023, the largest quarterly increase since before the global financial crisis of 2008-09. However, this alone could not explain the magnitude of the increase in legal spending. Increased regulation, high levels of litigation, and dynamic business conditions, including growth, M&A activity, and layoffs, have driven up the need for legal services.
Here are some additional callouts
- Privacy is now the most common business function directly overseen by Legal, overtaking compliance, which traditionally tops the list. This is important because it shows a shift in priorities for legal departments.
- The median total legal spend for all participating companies increased from $2.4 million last year to $3.1 million this year. This is important because it indicates a trend of increasing legal costs.
- Intellectual property services and discovery – data processing and hosting are handled by outside counsel in larger numbers, although 62 percent and 54 percent of departments, respectively, still handle these areas in-house. This is important because it shows the areas where legal departments are more likely to outsource. Discovery work is the only task that more than ten percent of legal departments send to ALSPs.
- About three in ten departments track internal diversity metrics related to the legal department’s composition, and 21 percent report tracking diversity metrics with respect to their outside counsel. This is important because it shows the level of attention given to diversity and inclusion in legal departments.
- Among those who track internal diversity, almost all evaluate diversity related to new hires, and 72 percent also track diversity metrics related to promotions. This is important because it shows the areas where legal departments focus most on diversity. However, thirty-eight percent say that there is a formal strategy to improve legal department diversity, a result seven points lower compared to the one observed last year. This is important because it shows a decrease in the number of legal departments with a formal diversity strategy.
Pre/Dicta, a litigation prediction software startup based in Maryland, is using data science and docket numbers to predict how judges will rule in cases. The software analyzes a judge's past ruling history and incorporates judicial demographics data such as education, career history, financial information, and political affiliation to make predictions with an 85% accuracy rate. The company recently acquired Gavelytics, expanding its predictive offering to encompass state courts. Pre/Dicta's target clients include litigators, plaintiff and defense attorneys, in-house counsel, insurance companies, and litigation financiers.
Law firms use data to improve their billing, cost management, and pricing behaviors. A survey is being conducted to determine which behaviors firms are measuring and how they track key performance indicators. The survey will also identify the most commonly used business intelligence tools and the challenges faced by users. The results of the survey will form the basis of an industry report.
Lawyers' demanding profession often leads to neglect of their physical and mental health, which negatively affects their decision-making ability. To address this issue, lawyers should prioritize self-care and adopt healthy habits such as mindfulness, regular exercise, healthy eating habits, maintaining social connections, and seeking professional help when needed. Taking care of oneself is essential for long-term success and satisfaction in the legal profession and is equally important for clients.
Colorado Springs attorney Zachariah Crabill avoided a legal mishap by verifying the accuracy of legal research conducted by the AI tool ChatGPT. Crabill discovered that the tool had produced "dozens" of non-existent cases, which he cited in a motion to set aside a summary judgment. However, the judge had already identified the problem and threatened to file a complaint against Crabill. This incident follows the case of lawyers Steven Schwartz and Peter LoDuca, who used ChatGPT for legal research and filed fake opinions.
General counsel and chief legal officers play a dual role as companies explore the use of generative AI in their business and support functions. While examining use cases for the technology in their legal-team processes, they also look at what types of uses are likely to be acceptable from a risk-management perspective. Companies are looking at non-legal use cases, such as the HR function and communications team, as relatively safe experiments to deploy generative AI. Legal chiefs are expected to weigh in on acceptable use and set appropriate guardrails.
Legal expert Kelly Dobbs Bunting has warned of the potential legal risks posed by artificial intelligence (AI) in the workplace. Speaking at a conference in Las Vegas, Bunting compared AI to the robots in the TV show Westworld and said "The robots win. We all die". She also cited the 160 bills or regulations related to AI currently pending in 34 state legislatures, as well as the first major class-action lawsuit against a vendor filed against Workday earlier this year.