Report

6 April 2017 │ Zurich │ Switzerland
#InnoLaw2017

#Legalindustryforum17
#Zurich

Innovation.Law 2017: Explore the transformation of the legal industry

Many thanks for the report to:

The 7 key trends of legaltech and innovation


“Technology is at the service of the lawyer
who in turn is at the service of his client.”




On 6 April 2017, I had the opportunity to participate in one of the most important innovation and legal events in Europe so far this year: The Legal Industry Forum “Innovation.Law” organized by Lawbility under the direction of Jean-Luc Delli and Arlene McDaid.


The experience was most interesting and enriching not only because of the quality of the speakers but also for the topics analyzed (see videos and presentations) and the opportunity to network with practicing lawyers, corporate counsel, legal entrepreneurs and investors from various parts of the world such as Germany, United States, Finland, Holland, Mexico, Spain, United Kingdom and Switzerland.


The topics of discussion


The event analyzed the process of transformation of the legal services industry and the impact produced in the legal sector by technology.


Legaltech is a field of activity in which companies use information and communication technologies to create and offer legal services more efficiently for less cost.


It could be said that ”Innovation.Law“ was, to an important extent, a legaltech event. Four major thematic categories - innovation and legal design, artificial intelligence, big data, and digital platforms - were dealt with in the following subjects: Legal Marketplace, Practice Management, Document Automation, E-Discovery & Big Data Analytics, Online Dispute Resolution, Machine Learning & Artificial Intelligence, Blockchain & Smart Contracts, and New Legal Education.


Finally, the debates and discussions of the invited Corporate Counsel & Expert Panel were developed around the following questions:


• What can we (legal service providers) learn from other industries? (Transformation of businesses and industries)


• What technologies are and will in the future be available to legal service providers? (Digitalization of services)


• What are the opportunities for lawyers and legal service providers to cater to current and future events and trends? (Innovation)


• What are the challenges of a global legal industry? (Competition)


• What are the pros and cons of providing legal services compared to outsourcing, including implementation and application of new technology? (The future of in-house legal services)


• What kind of legal services will clients need in the future? (The future of external lawyers)



After reflecting on the content of the talks, I have come to the conclusion that there are 7 key trends that will mark the pathways where the discussion about legaltech will take place in the next few years.


But before referring to such tendencies I will summarize below the main ideas from “Innovation.Law“ presentations that struck me the most (for videos and presentations, click here):


Talk by Kenneth A. Grady:


Professor Grady compared the legal services industry to the automobile industry. For him, today's legal industry looks a lot like the automotive industry 100 years ago: many hours are worked, services are expensive, and the quality is inconsistent (there are good and bad services).


Nowadays legal service providers (law firms) have less power and earn less money than they did 100 years ago. According to Grady, this is due to two reasons: the high competition that exists in the legal industry and the fact that legal departments of companies have stopped considering the service provided by lawyers as a "fixed" cost. Although legal needs have increased today, the budget available to legal firms has declined, so now they have to do more with less.


To get the legal industry to improve and regain its hegemony, Grady recommends moving from a transactional (transaction-focused) model to a relational model (where clients and firms work together). The latter model fosters innovation and generates competitive advantages for all parties. But how can we move from a transactional model to a relational model? Grady proposes to apply what he calls ”Lean Law System“.


The Lean Law System is a working methodology that aims to reduce waste and increase efficiency without decreasing the quality of the legal service offered. It is, more or less, to make the lawyer “thinner“, stripping them of everything that distracts their attention and prevents them from being more efficient in their daily work. That is, to “dismantle“ the whole process of providing legal services in order to identify the stages that can be “rationalized“ (such as tasks that require little thought or are repetitive) or even eliminated.


Grady starts from the premise that there are two categories (or processes) of services: those that add value to the customer and those that do not. The Lean Law System aims to help eliminate ”waste” to focus the lawyer on the „processes“ that add value. And here is where “technological innovation” comes in, because through technology we can efficiently manage such waste by increasing efficiency.


To say it in my own words: the idea is that the lawyer's backpack becomes lighter (and gains space to devote to work that exclusively generates value for the client) which will allow them to multiply productivity by doubling or tripling performance.


Talk by Jeroen Zweers


Zweers explained what the project “Dutch Legal Tech” has achieved. This project is led by Zweers and his compatriot Jelle van Veenen.


Dutch Legal Tech is a platform for legaltech and legal innovation created in the Netherlands in 2014. Its mission is to organize meetings where innovative leaders can talk about their work to a stakeholder audience composed of lawyers, entrepreneurs, academics, legal service providers and public workers. They also organize "Legal Tech Student Meetups" in order to inspire and connect enterprising students.


According to Zweers, the success of the call for this initiative is due, to two reasons: first, they have replicated what other innovative industries have done; second, they promote collaborative work among their teams composed of people having different specialties, professional experiences and ages. In other words, Dutch Legal Tech brings together all players in the Dutch legal sector to achieve the maximum synergistic results produced fromcooperative efforts.


Talk by Sebastiaan Bos


RAVN Systems' Director of Operations for Europe spoke about the role that artificial intelligence will play in law firms. He stressed that machines in the future will help humans but will not replace them (at least in the short term), which is also applicable to the legal sector.


Artificial intelligence is not just robots but also machines and computer programs that facilitate the work of human beings. For example, in document analysis, what a machine can do in four weeks a human would do in seven years.


In short, the role of artificial intelligence in dispatches is summed up in the phrase "cognitive collaboration", i.e. an opportunity where humans and machines together will think better and produce better results. And this reality is also extendable to the legal services industry.


Talk by Serge Breslaw


Under the premise that “innovation” is an abstract idea and difficult to carry out, Localsearch's chief account manager presented a curious and interesting tool which he designed in order to analyze innovation and put it into practice.


Breslaw started from the premise that innovation is a controlled development (not governed by chance) to change something, while in the process understanding why one changes it. Innovation requires constant repetition before achieving the desired result.


This method called "Yoghurt Momentum framework tool" can be used in any discipline and knowledge sector, including legaltech. It is a tool that, through the disaggregation of processes, aims to help better analyze the causes, motivations, milestones and goals of the innovation pursued, particularly taking into account the impact on improving the customer experience.


Breslaw mentioned two examples of successful innovation: Swatch and Tesla.


Talk by Peter Carayiannis


For the partner of Deloitte Conduit Law LLP, the result of any innovation must have the client as first priority. Therefore, innovation should help to know your customer, to have a good relationship with your customer, and to provide an experience superior to what was expected.


When asked the question, “What kind of lawyer are you?” it is common for most lawyers to respond by saying "I am a lawyer or a specialist in [a branch of law]." Carayiannis believes that this response is not empathetic to the client since before knowing your specialty, to the client what matters is knowing if you are capable of offering the solution to their problem.


He also stressed the importance of designing a strategy of legal services for mobile since the use of smartphones is greater today than the use of desktop computers. Carayiannis believes it is possible to create a law firm exclusively based on apps. I agree with him.


He concluded his presentation by suggesting that today is the best time to innovate in law, proven by numerous important initiatives emerging in the world in legaltech and legal innovation, such as Clio, Rubby, Legal Nature, Lexicata, etc.


Talk by Daniel Biene


The founder of Legalbase reflected on the advantages offered by the so-called "platform business" or "marketplace" versus the so-called "pipeline business".


The business model based on a "platform" system is essentially to connect producers with consumers. To try connecting two or more distinct but interdependent customer groups. Examples of "pipeline” businesses include the taxi business, the Marriott Hotel, and supermarkets. Examples of "platform” businesses: Uber, Airbnb, Alibaba. The essential difference between the two models is that the former is not able to create the so-called "network effect".


In short, platforms offer the following advantages:
• They facilitate the connection between consumers and producers;
• Add value to both sides of the platform;
• Create a "network effect" (the value of the platforms increases as the number of users increases, encourages the building of business relationships as the interactions among the participants increase);
• Create the "data effect" (facilitates the identification of customer needs, recommendation of products and services, and cross-selling; improves the quality of services offered since it allows monitoring of deadlines; fulfillment); and
• Make the business scalable.


For a platform to function properly, it has to meet four essential requirements: from the point of view of suitability and presentation of products and services, (1) clarity and (2) predictability; and from the point of view of the recruitment and conversion of clients, (3) integrity and (4) neutrality (non-existence of camouflaged "spies").


In the legal industry, the vast majority of services can be offered and sold through platforms (focus on the law of Roman-Germanic legal tradition): trademark registration, incorporation of companies, divorce (by mutual agreement or uncontested), drafting of rental contracts, traffic offenses, wills, insurance law, consumer rights, etc.


But there are other legal services that could hardly be offered through a platform: contentious divorces, antitrust proceedings, unpredictable or indefinite legal tasks, legal services for government, negotiations, etc.


Personally, the platform business model (I would also call it “multilateral” platforms) is fascinating to me because the possibilities of multiplying benefits and synergies increase exponentially. Many of today's large companies, such as Google, Sony, Microsoft, Nintendo and Apple, support their lines of business in a marketplace logic.


For example, through its AdWords and AdSense services, Google connects advertisers with Internet users and content creators; Sony's Playstation, Microsoft Xbox and Nintendo Wii bring gamers in touch with game developers; Apple's iTunes Store (connects owners of music rights with buyers) and the Apple App Store (connects iPhone/iPad users with application developers) have also created powerful multilateral platforms.


Talk by Mark Holmes


The founder of Waymark Tech Ltd led the breakout session entitled, "How can the lawyer survive the apocalypse of automation?" For which he organized several working groups – in which I had the opportunity to participate - in order to discuss the following question: What are the legal tasks (internal and external) that could be automated thanks to the use of technologies?


The conclusions reached by all participants were as follows:


• The following "internal" tasks, primarily, can be automated: management of the compliance of instructions; and the control and supervision of clients in the process of due diligence, i.e. to know what they are doing and where their funds come from in order to avoid commercial relations with people and companies involved in money laundering, terrorism, government corruption or illicit trafficking of drugs.


• The following "external" tasks could largely be automated: administration and management of matters entrusted to the firm, document review, legal research, legal writing, contract writing and due diligence. Today there are several companies and startups dedicated to offering these services. Here is a list of startups that automate the drafting of contracts; and here is a list of startups offering legal research services.


• Some legal tasks cannot be automated. The case of regional rights was mentioned, which establish rules different from those of the state rights (in Spain, this is “foral” rights) to solve specific issues. In these cases, the lack of uniformity in legislation would prevent automated provision of legal services that require the possible application of both laws at once. Another case where automation seems to not work well would be in the negotiation of agreements since the casuistry can be quite varied.


Talk by Kaisa Kromhof


The co-founder and CEO of the Finish startup Contract Mill explained the operation of its legal technology company dedicated to the automated preparation of legal documents, especially contracts.


Contract Mill's business model is B2B (business-to-business) as it offers services directly to law firms, but not to end-users. Its technology uses software allowing automation of almost any kind of legal documents useful for law firms, particularly those related to corporate transactions (partnership agreements, confidentiality documents, contracts of share purchase, management contracts, etc.). Once a document is automated, the program allows the lawyer to "customize" the document and then print the final version and deliver it to the client. All information is stored in the cloud.


Based on the fact that every contract requires time (negotiation, agreement, drafting and fulfillment), the value proposition of this company is - as its CEO explained - in eliminating the "repetitive manual work" of the whole process of creation and distribution of legal documents.


What lessons have we learned?


Here I leave you with my personal conclusions: the seven key trends that will mark the paths of legaltech and innovation during the next following years:


1. The fervent desire for profitability is going to push, with increasing force, law firms and corporate legal advisory departments to adopt technologies that make these entities more efficient. Those who do not adapt run the risk of being marginalized – therefore, trend nº 1 is that technological innovation stands as the main way to achieve efficiency in the legal sector over the next few years.


2. Today the legal industry is more complex than ever (there are more laws, more regulation and more branches of law) and the legal requirements imposed on companies (and individuals) are greater than in the past. However, the budgets companies have to hire lawyers have been reduced. Therefore, and linked to the previous trend, trend nº 2 is that although the range of services offered by lawyers has increased, today they face the challenge of having to offer more legal work for less money. The way to compensate for this decrease is to expand the spectrum of services but within a framework of technological innovation.


3. Computer software should assist lawyers in performing their legal duties more efficiently in order to better serve their clients. Therefore, trend nº 3 is that software that automates stupid processes and does not change the obsolete modus operandi of the legal production chain will institutionalize waste. The challenge is to identify how and when to automate which legal tasks. In order to overcome this challenge, firms should seriously consider consulting experts to assist them in this task.


4. Lawyers will not be replaced by software. Only some legal work can (and should) be automated for performance improvement by a computer program. Trend nº 4, therefore, is that younger or less experienced lawyers will no longer do so much repetitive work (in the future much of such work will be performed by software) but will focus their work on activities including more analysis with a clear tendency to get deeply involved in the operations advising their office. Junior lawyers will not be without work or unemployed.


5. While not all legal services are likely to be offered through a multilateral platform business model, eligible services can generate profitable businesses for their creators (which will not be law firms but legaltech companies). Therefore, trend nº 5 is that there will emerge analysts of the legal industry who are dedicated to detecting business opportunities in order to propose the creation and distribution of legal services across platforms. 


6. The automation of contracts works best in a B2B model rather than in a B2C model (business-to-consumer) because in B2B, profitability can be higher and deontological problems do not exist. Therefore, trend nº 6 is that legal startups that intend to offer a contract automation service directly to end customers (common in Spanish startups dedicated to the automation of legal documents) must overcome two challenges: (i) they must clearly identify the lawyer who makes the final review of the legal document before delivering it to the final customer, in order to leave no doubt as to who actually provides the legal service and, thus, to respect the codes of ethics and consumer regulations; and (2) take into account the possible civil liability that could be assumed by the company against its clients in the event that a judge subsequently declares their automated contract invalid or ineffective. On the other hand, I have the impression that the big legal publishers (and big companies that sell legal software) will be the ones who will end up taking over the software market to automate contracts under a B2B model.


7. Legal innovation is not about implementing technology in the office. It is a matter of understanding the market, society and especially your customer, and as a consequence, offering better professional services thanks to existing technology already in use. University education will play an important role in changing the way of thinking of new lawyers. Therefore, trend nº 7 has to do with a paradigm shift in the way law is taught in universities: we have to train curious, open, risk-taking lawyers who experiment with technologies and who accept the risk of failure as a part of their vital learning. We have to create a culture where failure is accepted and seen as a life lesson that provides a great opportunity to make fewer mistakes the next time. These new lawyers will be the next legal innovators and jurists of the future. Law faculties and learning institutions that do not adapt to this new paradigm will run the risk of being without students and probably do not deserve to continue operating.


(The Spanish version of this article can be read here.)



About the author of the article:


Ricardo Oliva León is a lawyer and works in the areas of Technology Law and Commercial Law of his own firm (@Lexmotive). He teaches postgraduate courses and writes about legaltech, legal issues raised by the internet, protection of intangible assets, emerging technologies, and digital entrepreneurship. His blog is called Legal Algorithms. He is the director and co-author of the collective works "La Prueba Electrónica. Validez y eficacia procesal" (Electronic Evidence, Validity and Procedural Effectiveness) (2016) and "Testamento ¿Digital?" (Digital Will) (2016). He is the founder of Lenguaje Jurídico and the executive director of Juristas con Futuro. For a complete overview of his professional activities, visit the website The Cyberlawyer and his profile on LinkedIn. Interact with him on Twitter at @RicardoOliva_ and write to ricardo@lexmotive.com.