Legal Tech: The Era of Bad Ideas

Legal technology is starting to attract serious attention. Just a few years ago, when I was still in law school, talking to a lawyer or professor about legal tech was like pulling teeth. Maybe it was because I was just an annoying law student (and I was), but no one really wanted to talk about the topic.

Today, everyone I meet wants to talk about legal tech. Here in Norway, a number of law firms are seriously exploring the area. At Law Tech Factory, we get invited to deliver a presentation or speak to some group on almost a weekly basis. This is a great time for legal tech.

Unfortunately, I’ve discovered that the legal tech space is plagued by some truly bad ideas. There are two bad ideas in particular that I want to discuss in this post. The first bad idea is that legal tech is about innovation, and that we can apply the lessons of the tech sector to see returns in the legal industry. The second bad idea is that blockchain is relevant to legal tech. In this post, I explain what is wrong with both of these ideas.

The Innovation Myth

Pretty much every legal tech “visionary” I know pushes the idea that law firms need to be more flexible if they want to keep up. They preach the typical innovator’s dilemma stuff: start small, allow internal entrepreneurship, target different customers, fail fast and often, etc. It’s all rather boring. They also tend to push the “equip lawyers with 21st century skills” trope.

It’s certainly true that innovation requires an environment for testing new ideas. The problem, however, is that law firms aren’t at the “new idea” stage yet. Innovation is not the correct prescription for the ailment that law firms suffer from. What law firms need is an environment that allows them to realize the potential of existing technology. That environment is not about testing new ideas and taking risks.

By way of example, law firms have an enormous amount of text data contained in contracts. However, if a lawyer wants to understand this data, he or she is forced to manually read the contracts. Fairly straightforward machine learning techniques exist that could process this text data and serve up structured data that would be useful to lawyers. This would result in an efficiency improvement, as lawyers could get the information they are looking for more quickly.

It also would result in a quality improvement, as lawyers could find useful insights in that data. For example, if a lawyer is advising on a draft share purchase agreement for an acquisition of a large tech company, he or she could utilize this data to answer questions like, “Of the share purchase agreements on file executed in the last five years in the tech sector, what percentage utilized a locked box mechanism?” 

This isn’t risky new technology. It’s well-traveled ground, and I could program the whole thing myself if I had to. Importantly, it’s not innovative. It doesn’t require law firms re-evaluate their hierarchical structures, rethink their business models, or take any great risk. Yet it is still valuable legal technology that law firms are not fully utilizing. We need to bring law firms up to speed with modern technology before we can start thinking about innovating for the future.

Why Blockchain?

I don’t think I’ll ever understand how blockchain inserted itself into discussions about legal tech. Maybe it’s because “smart contract” has contract in the name. Maybe it’s because blockchain has just been so hyped that it has inserted itself into every discussion. I don’t know. Regardless, lawyers don’t really need to know about blockchain unless they are advising on an issue related to a blockchain.

I’ve been fairly critical of blockchain generally. However, even if I am wrong and blockchain is great, I still have no idea what blockchain has to do with legal tech. Blockchain solutions might be developed by governments to replace centralized database systems; for example, a blockchain-based land registry might one day exist. However, law firms aren’t going to be the ones developing that system, and there will be plenty of time to learn how it works before it is put into production.

As for smart contracts, there’s very little relevance to the work that lawyers do. Lawyers advise on contracts that are rich in legal phrases that are impossible to formalize: negligent misrepresentation, force majeure, material breach, etc. These phrases give contracts an ambiguity and flexibility that is desirable, as the contract can be used to achieve the desired purpose across a range of unforeseen circumstances. Smart contracts can’t do that, and they won’t be able to do that no matter how much machine learning we throw at the problem.

Smart contracts might find use in automating transactions that are already somewhat automated. For example, instead of buying a book for my Kindle on Amazon and having Amazon’s server run some code to send me my book, I might buy my book from the author, and execute the agreement through code that we both can verify (the smart contract). I am not sure there is any real reason for doing that, but even if there is, this doesn’t have much to do with the work of law firms.

Moving Forward with Legal Tech

There will probably be some pretty cool technology in the future, but there’s also plenty of cool technology right now that law firms are simply ignoring. Anyone involved in legal tech that fails to recognize that, or thinks it is an unimportant point compared to other tech trends, is doing the legal industry a disservice.

My advice to law firms is to resist the desire to buy into hype by playing the role of an entrepreneur (or worse, a VC fund). Instead, chart the course ahead by implementing proven technology into your workflow. If you want to do something stupid with your money that makes you feel techy, buy Bitcoin.

This post has first been published here.

Zack Korman is co-founder at Awesome Power Inc and a programmer.