Legal tech uses AI to help business to help itself
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When the UK’s Serious Fraud Office embarked on a four-year corruption probe into Rolls-Royce, it faced a big challenge. Some 30m documents had been turned over to the agency in what was then its largest investigation to date, but many would prove unusable — they were protected by legal professional privilege. The SFO had to figure out which and how to keep its cost down while doing it.
The SFO’s solution was to use artificial intelligence software from the London-based start-up Ravn, since acquired by iManage, to sift through the documents.
“We’re investigating some of the most complex and data-heavy cases in any jurisdiction,” says Ben Denison, SFO chief technology officer. “At the time, the Rolls case was our largest, with just over 30m documents. We’re now working on a case more than twice that size, with 65m, and there’s one on the way with over 100m. It’s impossible to investigate cases like ours without technology.”
The legal technology, or “lawtech”, sector is not new — even if it has taken a while to catch up with higher-profile peers, such as fintech. iManage, a Chicago-based document management and artificial intelligence provider to law firms, in-house legal teams and other professional services groups, was founded in 1998, before being acquired by Autonomy and spun out of HP in a management buyout in 2015.
HighQ, another professional services technology business, was set up in London 17 years ago. While a decade ago companies may have been most worried about how to share files securely, legal technology now encompasses machine learning algorithms and natural language processing to help with due diligence and disclosure exercises, smart contracts that can be populated with information scraped from large data sets, and a plethora of practice management tools.
“We’ve definitely seen an explosion in legal tech,” says Stuart Barr, chief product and strategy officer for HighQ.
Established law firms, large organisations and start-ups have all entered the fray.
Some firms have developed their own tech incubators, such as Allen & Overy’s Fuse, while Slaughter and May has taken a stake in Luminance, set up in 2015 by Cambridge university mathematicians, which has developed document analytics software. In the US, Dentons has set up Nextlaw Labs, which has a portfolio of interests in companies trying to disrupt legal services provision.
Some of the technology players have graduated from start-ups to significant forces in the industry. HighQ took a $50m private equity investment from One Peak, Morgan Stanley and Goldman Sachs in 2016, while in September this year one of the other leading lawtech businesses, Kira Systems, secured $50m in venture capital funding. In the US, Everlaw has raised almost $35m from investors including Andreessen Horowitz and Menlo Ventures, according to data from Crunchbase.
The legal industry is ripe for greater innovation and use of technology, says Michel Sahyoun, co-founder of QuisLex, a specialist outsourcing firm that uses tech from a range of other providers to solve clients’ problems. According to Mr Sahyoun, this is “in part because the legal field has been rather neglected by the technology industry, and because legal costs are elevated and under pressure from businesses”.
After the financial crisis costs came under pressure. Companies moved legal work in-house as they sought to reduce their reliance on external advisers. That, in turn, created a renewed focus on how to do more for less — and how to use technology and more efficient management of internal processes to do it.
“One need look only as far as the Corporate Legal Operations Consortium, and its exploding membership numbers, to see that the movement of work in-house after last decade’s economic downturn continues to have ripple effects in this market,” says Jon Kerry-Tyerman of Everlaw. “Corporates have realised that the latest technology lets them do much more themselves, reducing reliance on both outside counsel and outside vendors, and that the cloud lets them take this on without a massive investment in on-premises infrastructure.”
That has driven projects such as Anheuser-Busch InBev’s BrewRight global compliance app, developed in-house, but has also put pressure on external advisers to take a more tech-centric approach.
At Deloitte, technology-focused partner Marc Verdonk says the firm recognised it needed to develop its own tech to augment its services or risk losing clients — even if, in the short term, that meant lower fees for some work.
“The client is happy because using the tech means ultimately they often pay less, and we can be more efficient, which allows us to continue investing in innovation, and everybody benefits,” says Mr Verdonk, part of Deloitte’s risk advisory practice in Amsterdam.
Rapid development in legal and regulatory technologies have led to problems, however. Many developers provide niche products, which can leave in-house teams — and law firms — wrestling with different platforms and tools.
Others have overstated the ability of their technology, which has deterred investors and clients from considering others in the sector. “The technical capabilities and claims of several products proved to have been significantly exaggerated,” Mr Sahyoun of QuisLex says.
In other cases, the technology is up to scratch, but the expertise about legal and professional services needed to apply the tech is missing.
“In regtech, you can either start with tech, or with people and a network,” says Mr Verdonk. “A lot of start-ups are starting with tech but at some point you realise you’re missing the expertise and the people.”
Top 10 legal tech companies with the greatest impact on practice and business of law
Relativity, founded 2001
What its technology does: Relativity’s core business is providing technology to support litigation, investigations and freedom of information requests. Its technology is now also used by lawyers to store, index and search documents of all types, and to automate contract review, due diligence and regulatory work. Built on an open platform, it allows developers to create new applications for a variety of uses.
How it has had an impact: Used by nearly all the 200 biggest US law firms by revenue, and more than three-quaters of Fortune 100 companies, it has 180,000 active users and developers. Law firms and corporate legal departments have hired Relativity experts to build their own internal ediscovery departments. Law firms have also created new businesses in partnership with Relativity.
Apttus, founded 2006
The tech: Manages the sales lifecycle from start to finish, or “quote to cash”.
The impact: The management software has changed the way companies manage sales processes and contracts, removing the need for lawyers to be involved at every stage. In one case, it has cut the sales cycle time in half.
Everlaw, founded 2011
The tech: The software is used by law firms, companies and US state attorney-general offices to manage litigation and ediscovery.
The impact: Its ease of use and speed have helped Everlaw expand its market share and attract $25m in investment this year. It allows lawyers to work more collaboratively to build timelines and arguments for litigation cases together.
HighQ, founded 2001
The tech: Software that can be configured for uses ranging from file sharing and client extranets to complex workflow management and automating legal processes.
The impact: It is used by more than half the top 100 global law firms and by professional services firms and company clients. Law firms have created multimillion-dollar services and subsidiary consulting businesses using the platform.
iManage, founded 1998
The tech: Document and email management that was recently augmented with Ravn’s artificial intelligence and Elegrity’s risk and compliance technology.
The impact: The standard tool for document management at law firms, it is also used by other professional services and businesses. Acquisitions since the management buyout of the company from HP in 2015 are helping it build demand among clients.
Intapp, founded 2000
The tech: Manages everything from pricing to time recording and automating financial processes.
The impact: The company is integrating its wide range of products, used by most of the top 100 law firms, to provide a platform for professional services firms to manage the full range of their business operations.
Kira Systems, founded 2010
The tech: Artificial intelligence technology to automate contract review and analysis.
The impact: One of the youngest companies on the list, Kira has become the AI review technology most used by the world’s biggest law firms and established the viability of this type of tech for transactional document review and due diligence. It has a partnership with Deloitte and received $50m in private equity funding this year.
Mitratech, founded 1987
The tech: Software to manage legal processes, operations, policies and data.
The impact: Its products are used by nearly 40 per cent of Fortune 500 companies’ legal departments to help cut legal costs.
Neota Logic, founded 2010
The tech: An expert system technology that can be configured by law firm, financial services and, increasingly, company clients to automate legal services.
The impact: More than 2,500 applications have been built on the technology, including 120 created by students to provide free legal advice to individuals and small businesses.
The tech: Its Contract Express tool is easily configured to automate drafting contracts or other documents.
The impact: One of the most widely used contract automation technologies, it has cut the time taken to draft a range of legal documents and allows business clients and colleagues to create contracts themselves.
Fresh thinking: the best in technology
NetApp and Mitratech, TAP automated workflow
The risk assessment processes at NetApp were laborious, costly and required detailed management by senior lawyers until the legal team began to automate it with Mitratech’s TAP technology.
Information collected from sales partners is given an automatic risk rating and directed to the appropriate person in the legal team or third-party legal provider. Other processes have also been automated, allowing the business to collect operational data and tailor compliance training with less effort.
Lawyers at the technology company have developed 42 use cases for six other NetApp departments. Using the same technology across different departments has helped to connect business processes and improve communication.
AIG legal intake tool
AIG’s legal team created a legal intake tool to manage new requests and to allocate work more efficiently. Since it launched in Europe, the tool has handled more than 5,000 matters and is collecting valuable management information about work volume and type to help direct resources and training within the legal team.
Aviva Investors and Kim Technologies
Aviva’s property business was using 30 law firms whose services varied in quality and price without a centralised tracking system to monitor spending. After a panel review, the legal team implemented a portal configured on Kim’s legal operations platform to manage law firm agreements and new instructions. The portal has been used to transfer 300 property-relate d legal matters from law firms, managing instruction through signature and sign-off and collecting data on costs.
New reporting standards require companies to put property leases on balance sheets from 2019. A client of the firm faced having to digitise 114,000 leases in different languages and formats. Deloitte built DoQminer, a machine learning technology, to handle the task. The program leverages open-source algorithms to replace a proportion of the estimated 500 people working full-time that would be required to complete the job in two months. DoQminer has been used by 10 clients and completes the full review process in less than 40 per cent of the time it would take to do manually.
Litigation over faulty ignition switches in General Motors vehicles eventually involved 31 law firms, 200 reviewers and 2.5m documents. Everlaw’s application, StoryBuilder, was used to help lawyers from 10 firms representing plaintiffs collaborate across time zones and jurisdictions.
The technology allowed lawyers to review documents, build a detailed timeline and formulate strategies.
Research for profiles: RSG Consulting