The Third Wave of Legal Technology Transformation

By structuring unstructured legal data, we have entered the third wave of legal technology. Lawyers will have to change What they do to take full advantage of these new sources of value capture.

As discussed in the first part of this article, there have been two waves of technological change that have impacted the legal industry. (The first wave focused on changing How lawyers perform certain tasks or activities they have always done, while the second wave was largely targeting Who was working in the law.) These first two waves mostly leveraged technology to replace high-volume, repetitive tasks, the types of tasks often performed by lower-paid workers in legal services—in many cases, the workflows in legal services that were least efficient, and hence most in need of optimization. This type of change, focused on optimization and efficiency, does not necessarily require technology. It often starts with business process optimization, but it is typically accelerated by leveraging technology.

Excitingly, with advances in artificial intelligence, particularly in machine learning (ML) and natural language processing (NLP), we are now in a third wave of legal technology. In this wave, technology is poised to help lawyers create new sources of value by changing What lawyers do. Much like any industry facing competitive pressure in a global economy, the legal profession is in need of transformation. It needs to take advantage of opportunities that new technology presents and keep up with client demands.

This doesn’t mean all lawyers should learn to code, but it does mean lawyers will need to adapt to the opportunities created by new technology and learn new skills. They will be rewarded by creating greater value for their clients.
To best understand this important upcoming transformation, let’s first look at where lawyers spend their time today, what technology can do that it could not do before, and then consider how this will help lawyers change What they do to provide greater value.

Where Lawyers Spend their Time

In 2017, McKinsey examined where litigation-based lawyers allocate their time. They found that for senior attorneys, about 44% of billable legal time was spent advising, communicating, negotiating or appearing in court, 29% of time was spent on research and analysis, 16% was spent writing and drafting, and the remaining 11% was split roughly evenly between document review, case administration and other more administrative tasks.

The reason most of us went to law school was surely not to do document review. We wanted to master the law and to partake in work that senior partners spend a good chunk of time doing—advising, communicating, negotiating, and arguing in court. In other words, we wanted to perform high-value legal activities that require knowledge of the law and strategic thinking, applying our legal expertise to facts and other contextual information. Perhaps unsurprisingly, these are also the types of activities that clients want to pay law firms and lawyers for—activities that require substantive legal knowledge combined with deep contextual understanding.

The good news is these are also the kinds of activities that technology will have the hardest time replacing. Document review has already been completely transformed by technology, displacing many billable legal hours to offshore locations (the Who) or even purely automated solutions (the How). New start-ups (companies like LegalMation and Casetext) are now replacing parts of writing and drafting. For these repetitive, high-volume legal activities, technology can replace the How and Who and optimize lawyers’ time. It can relieve them of tasks like sorting through stacks of documents and filing cabinets, online document tagging, and keyword review. More recently, technology has even taken over more complex tasks like responding to preliminary pleadings in insurance and other high-volume sectors of litigation.

But this is ultimately just more of the same story—new technology targeting the How and Who. While these technologies hopefully lead to a decrease in the firm’s billable hours, they are not generally enhancing or replacing time spent doing high-value legal work: the negotiating, the advising, the appearances in court. Can technology have a role in the more substantive realm of legal work, where lawyers provide their highest value?

Changing the What of the Legal Practice

Historically, lawyers have been tasked with mitigating and managing risk. To do this, lawyers have to understand their client’s situation (understand the facts or context) and then apply legal judgment (provide legal advice). This is not likely going to change anytime soon, but in 10 years, with access to structured legal data, what lawyers will be doing to achieve these goals will be very different.

To discuss how technology is changing the What of being a lawyer, I’ll give two examples, one in the area of litigation and one in contracting. Both examples are made possible by applying relatively new technology, ML and NLP—technologies that help turn text into data—to provide us with insights, derived from structured legal data, that were previously unattainable.

Armed with these insights, lawyers can shift their time from searching for information (data) to analyzing data, thereby engaging in a new way of understanding context. This will require a new skillset alongside the application of legal judgment. Lawyers will need to be adept at quantitative analysis and statistical inference, which may in time replace wordsmithing and analogizing.

Litigation Analytics

In the past 10 years, we have seen litigation analytics go from an unknown idea regarded with skepticism to a mainstream product used by most litigators. Companies like Lex Machina and Ravel Law pioneered the transformation of litigation information into data analytics. Starting with dockets—by adding deeper layers of structure to otherwise semi-structured pieces of data—Lex Machina created a tool that among other uses can tell you how long a certain judge takes to render a certain motion type, and what the expected outcome is. Using NLP and ML, Ravel took the words and sentences written by judges, the opinions they authored, and turned them into data to reveal how likely it is a certain motion type will be granted or denied by a certain judge. The data can even predict the words individual judges are most likely to use when replying to your argument.

Using real data rather than "anecdata," lawyers can now make data-driven decisions with probabilistic certainty regarding whether or not to file in a certain court or which arguments are most likely to resonate in front of a certain judge. Making such decisions still requires substantive legal judgment, but when that judgement is applied to big data, we are actually changing What lawyers do.

Contracts Data

This is not just happening in litigation. We are now seeing the beginning of a similar trend in contracts. Contracts, like dockets and opinions, are legal documents, filled with legal text. They have a certain level of structure, clauses, titles, definitions, and sections, but to a computer, without context, they remain pretty much unstructured. Using basic search, you can find a term or set of words, but can you tell whether an assignment clause is assignable in whole or in part, and to whom—to both parties or to one party only? What about more complex questions? How many contracts have we executed with force majeure clauses that allow for a pandemic to justify not meeting supply agreements? These are questions that to an outside observer would seem like the very role of in-house counsel: knowing what’s in your contracts. But given that most companies can’t even find their contracts, asking them to know what’s in them, and to identify trends across thousands of them, is an impossible ask.

Yet, in much the same way we have applied analytics to the language of dockets and opinions to reveal new insights, we are now using advanced technologies to turn contract language into data, adding structure that becomes something computers can compute. As a result, we can start to answer questions at scale with accuracy and confidence.

Changing What Lawyers Do with Structured Legal Data

By structuring unstructured legal data, we have entered the third wave of legal technology. Lawyers will have to change What they do to take full advantage of these new sources of value capture. They will likely need knowledge in statistics and quantitative analysis, and they will need to learn to apply legal judgement to big data, but as they do this, they will also create new value for their clients, win more cases, save their clients money, and even find lost revenue.

It is an exciting time for technology and law, one that is going to make being a lawyer very different 10 years from now.

Source: Law.com