Let the law-tech wars begin

The legal technology revolution appears to be in full swing, as a number of global law firms have recently announced incubators or accelerators to nurture law-tech startups.

Jim Middlemiss
The legal technology revolution appears to be in full swing, as a number of global law firms have recently announced incubators or accelerators to nurture law-tech startups.

They are adopting a model that has been successfully used by the venture capital industry and other professional service industries to fast-track technology developments and bring disrupting products and services to market. It’s a model that the legal industry has traditionally shunned but now seems to be embracing.

It’s also a far cry from the 1990s, when firms developing technology solutions for the legal industry had to beg law firms to try their offerings. An investment into their efforts then was as rare as an Anton Piller order or punitive damages in Canada.

That’s quickly changing as law firms around the world compete to land portfolio companies to put in their emerging incubators. They are all hoping to land a law-tech whale that will change the way lawyers practise. Some firms are ponying cash for an initial stake, while others are offering to be a test lab to help develop the next generation of technology, similar to the way accounting firms, banks and brokerages helped spawn technology developments in their industries.

The latest incubator effort comes from Allen & Overy, which in March announced the creation of Fuse, a space where it will invite tech companies to collaborate with the firm and its clients when developing law-tech solutions.

Mishcon de Reya LLP launched its MDR Lab incubator in January and, in January 2016, Canada’s Osler Hoskin & Harcourt LLP partnered with Ryerson University’s, incubator, the Legal Innovation Zone — or “LIZ”. Its current portfolio includes 15 companies.

The law firm that seems furthest down the road with its own initiative, however, is Dentons, which launched NextLaw Labs, in the spring of 2015. IBM is one of its partners. NextLaw has 10 portfolio companies, including three with Canadian connections, Beagle Inc., FileFacets and ROSS Intelligence. It also has a venture capital arm with a mandate to invest in such technology.

Dan Jansen, a technology entrepreneur who is CEO of NextLaw Labs, said that legal technology is reaching critical mass and drawing the attention of venture capitalists.

He said that, globally, there are 1,400 companies working to disrupt various aspects of the legal business and those companies have attracted more than US$1 billion in investment.
“Institutional money is starting to come.”

Mara Nickerson, Osler’s chief knowledge officer, who is responsible for the firm’s partnership with LIZ, said the advantage of backing a law tech is early access to new products, which firms can help shape. “We can bring them in and work with them and help develop the technology.”

One firm it works with is Codify, which is developing technology to better track legislation and regulation. Nickerson said Oslers has put up development dollars. “We are looking to work with products that we are going to use.”

Former attorney general Chris Bentley, who runs LIZ, said, “The legal industry is worth about $30 billion in Canada and $600 billion in the United States. You are talking about a huge amount of money and a huge opportunity for entrepreneurs.

“What we’re trying to do is provide innovative entrepreneurs with the opportunity to develop their products and get them out to the market. We’re working with the legal profession to encourage them to be innovative.” He’s worried, however. “I would say the legal profession isn’t doing enough to be innovative.”

Jansen agrees, noting that industries such as telecom and biotech plow 10 per cent of revenues back into research and development. Typically, for professional services, it’s five per cent.
However, law firms spend less than one per cent on R&D. “Law firms, with all due respect, have been laggards,” he said. As such, the profession stands on the precipice of disruption.

Jansen said the profession’s salvation may very well be its clients.

Law firms are “service oriented,” he said. “The best way to change a lawyer’s behaviour is to have a client tell them they have to do something different.”

In the meantime, as partners look to split the profit pie, they’d better put a plate aside for innovation; otherwise, they might find themselves going hungry in the future, displaced by a legal upstart with a better way of feeding clients what they want. I say let the law-tech wars begin.

Jim Middlemiss is a principal at WebNewsManagement.com.

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