Legal Tech: Do AI Lawyers Dream of Digital Contracts?
Artificial intelligence technology is promising to revolutionize the legal profession, but it might also cost some lawyers their jobs
Legal-tech has three unique characteristics: first, it is based almost entirely on artificial intelligence (AI) technologies; second, many of the founders of startups in the field are not tech professionals, they are lawyers who know what legal professionals actually need; and third, legal-tech goes far beyond just Silicon Valley, with a significant chunk of companies based in Europe. The biggest funding round in the field this year—$250 million—was raised by Burnaby, Canada-based company Clio, incorporated as Themis Solutions Inc.
Legal-tech startups raised about $1 billion worldwide in 2018 and about $1.2 billion so far in 2019. These are relatively low numbers compared to tens of billions of dollars invested in, say, fintech. But the massive wave of growth is likely on its way. In the U.S. alone, the legal industry is estimated to be a $300 billion industry, so the potential is vast.
In the meantime, two major elements are delaying the bloom in the field of legal tech. For one, charging clients by the clock, lawyers have no substantial motivation to become more efficient. Second, law being a highly risky business, a single error could potentially cost millions, so lawyers are wary of innovation, fearing a computer process might miss something that the human eye would not.For now, the reality seems to be proving this fear wrong. Tel Aviv-based startup Lawgeex, incorporated as Legalogic Ltd., develops an AI tool that reviews legal contracts, in search of errors, internal contradictions, clauses that are in contrast with the law, and possible loopholes. Tests showed that Lawgeex’s tool was more accurate than a human lawyer, identifying 94% of issues, compared to the 85% precision of a human professional. It is also way faster: Lawgeex scans through five contracts in 30 seconds, while a human would require 92 minutes for the same amount of material. At first, Lawgeex aimed for the private consumer market, reviewing contracts for small real estate deals, but it has now shifted focus to enterprizes. An automated system that reviews contracts with suppliers, for example, would save a lot of resources and allow organizations to downsize their legal departments. Speed is key in the legal industry and when it comes to business contracts tech can significantly shorten any intern’s biggest nightmare—due diligence investigations. In Israel, some law offices are using technology developed by London-based startup Luminance Technologies Ltd. that allows for the quick processing of legal documents as part of the due diligence process. Current technologies do not make human workers redundant in big firms but they do let them dedicate their time to more important tasks, Yaniv Aronowich a partner at law firm Tadmor & Co. Yuval Levy & Co. told Calcalist in a recent interview. “Technology cuts down the proofing time for documents from three hours to just 15 minutes,” he said.
Another dull task performed by lawyers is transcription. Tel Aviv-based startup Verbit Software Ltd., which raised $23 million in January, offers an AI-based system capable of automatically transcribing recorded speech, which it says is 99% accurate and 10 times as speedy as its competitors. It is already used by academic institutes such as Harvard and Stanford, but legal protocols and transcription offer a new market.
Legal-tech disrupts not only the work of young interns but also that of senior partners. Their vast experience means they know exactly what to do and how to get to a certain judge or colleague. But it turns out this experience may no longer be needed, as it is all in the cloud.
One of the hottest trends in legal-tech is ruling predictions based on statistics, past rulings by a certain judge, and even the way they speak, both in court and outside of it. California-based Ravel Law Inc. and Lex Machina Inc. both developed such technologies that were acquired by New York-based legal database company LexisNexis Group Inc. In the U.S., this software has a distinct influence on legal work. When the legal system identified an unusual number of patent lawsuits are being filed in a certain county in Texas, a probe showed the technology marked judges in that specific county to be pro-plaintiffs. The Supreme Court had to step in and ban the practice, requiring lawsuits be filed in the jurisdiction where the defendants are incorporated.