AI and the Legal Sector: Gift Bearing Friend or Havoc-Wreaking Foe?

By Rohit Talwar and Steve Wells

How might law firms harness the transformational potential of technological change to drive exponential business growth?

We are at the start of a Fourth Industrial Revolution—a wave of transformation fueled by powerful technologies such as artificial intelligence (AI). This could drive a bigger wave of growth in the legal sector than any other change in history. Previous transformations gave us steam-based mechanization, electrification and mass production, and then electronics, information technology, and automation. This new era of smart machines is fueled by exponential improvement and convergence of multiple scientific and technological fields.

So, what is AI? Artificial intelligence is a computer science discipline that seeks to create intelligent machines that can replicate critical human mental faculties. Key applications include speech recognition, language translation, visual perception, learning, reasoning, inference, strategy formation, planning, decision-making, and intuition. The truly transformational impacts arise when AI is combined with accelerating science and technology developments in other fields, including neuroscience, large-scale databases, super-computing hardware, network communications, cloud computing, hyperconnectivity, blockchain distributed ledger systems, the Internet of things, 3D and 4D printing, and digital currencies.

These technologies will transform old industries and accelerate the creation of new ones. All this will generate massive opportunities for law firms, particularly in the corporate sector. However, some lawyers see AI and the technologies it enables as an existential threat to a US$650 billion global industry. They worry about automating their own knowledge, expertise, and advice-based roles. They are particularly concerned about the resultant risks of eliminating differentiation, commoditizing premium revenue streams, losing out to technology providers, depersonalization, and the loss of professional jobs.

While these risks are real, a growing number can smell opportunity, realizing that these technologies will transform the US$75 trillion global economy. By 2025, in a global economy of around US$120 trillion, over half of it will arise from newborn sectors and those that don’t even exist today—such as synthetic energy, autonomous vehicles, self-replicating machines, and adaptive, self-repairing materials. In most cases, we haven’t started to assess the legal implications—and that means opportunity.

What happens when each industry in every country has its “Uber moment”? Ambitious upstarts are, or soon will be, challenging long-established norms and unspoken rules of engagement in every industry. This creates massive opportunities for law firms, whether by representing the innovators, their adversaries, or the regulators.

The changes are happening fast. The legal requirements are real and there is massive potential to build relevant service offerings, acquire new customers, and increase current rates of revenue and profitability growth. In addition, there’s the opportunity to harness the technologies internally to deliver improvements in areas such as professional productivity, responding to client queries, proposal development, research efficiency, and completing multi-jurisdictional submissions.

There are four typical reasons for developing new practice offerings in these emergent areas. Firstly, clients ask the firm to help explore the implications of a new field it is venturing into. Indeed, many law firms now have big practices in internet law, biotech, and cloud computing because clients led them there.

A second approach is where individuals see opportunity and pursue it. A good example is US law firm Perkins Coie, where Dax Hansen, a partner in IT, payments, and international transactions, saw the opportunities arising out of digital currencies such as Bitcoin and their underlying core technology—the blockchain. Hansen launched the first legal industry blockchain practice in May 2013. The firm’s blockchain practice now has over 40 lawyers focused on the legal impacts from digital currencies to capital markets and a range of distributed applications.

A third approach is becoming increasingly popular with small to medium-sized firms, where partners and relatively junior staff are seconded to spend a few days to several weeks truly immersing themselves in a client’s business. This is typically done where the core technology is extremely complex, and the legal ramifications are myriad. For example, there is growing interest in the notion of cryogenically freezing someone on death (or while still alive) with the hope that one day, technology will emerge to restore the physical body, memory, and consciousness of the frozen individual.

Cryogenics has the potential to become a trillion-dollar industry within a decade, and facilities are emerging worldwide. Servicing this sector’s legal needs requires a very deep understanding of cryogenics, the costs and risks involved, the customer commitments being made, the status of the science that might deliver a regeneration solution, and the current status of the sector in law.

The fourth approach is where firms acknowledge the changes taking place and decide to immerse themselves in the opportunity in the hope of building profitable legal offerings for the emerging sectors. Such firms make a conscious commitment to put professional staff at all levels through a deep immersion in the technological enablers of tomorrow’s world. They run workshops and study tours to immerse their leaders and partners across the practice in a deep exploration of the technologies shaping the future and the ways in which they could transform current industries and enable new sectors. The aim is to be at the forefront in advising both the emerging sectors and those impacted by them. For example, in smart healthcare this means that firms advise the technology solution developers, hospitals, regulators, and patient groups.

The goal here is to help partners and business development professionals understand the emerging science and technology in sufficient depth to be able to start meaningful conversations with current and potential customers. Other key steps in the immersion process include joining and participating actively in the formation of industry associations, hosting events for meet-up groups in the relevant sector, attending conferences, and devoting time to reading about the client industry, and writing thought leadership articles on the legal ramifications.

For example, it is almost certain that legal considerations will not be top of mind for the 17-year-old developer of an AI facial recognition app that shows the dating history and associated comments and ratings for everyone you meet in a club. Such an app could prove very popular but fall foul of laws in a number of ways that the developer had never considered. Indeed, as we scan across AI and related technologies and the trillion-dollar sectors they are helping to spawn, the range of legal issues and resulting opportunities are almost overwhelming. For example:

• The emergence of autonomous self-driving vehicles opens up the potential for self-owning assets including buildings and public infrastructure. What issues does this raise around legal liability in the event of failure to perform or when accidents occur?
• If an AI-based system makes a poor decision that leads to a car crash, the death of a patient, or an aircraft being delayed, who will be held liable: the owners of the application, the developer of the underlying AI tool, the provider of the data set from which the system was trained, those guiding the training, or the provider of the technology platform on which the system runs?
• If AI is increasingly used for scientific discovery and the system infringes a patent, who will be held liable?
• Where AI is being used to run hugely complex and interconnected transaction platforms with the trading taking place in digital currencies and via blockchains (i.e. the source of the funds and information about the counterparties is unknown), how can the risk of fraud and money laundering be addressed?
• What procedures will be required for rollback, recovery, contract review, and dispute arbitration for fully automated AI and blockchain-based financial transaction systems?
• How should we account for the jurisdictional and taxation implications of firms that are using AI systems to move their financial assets around the world on a continuous basis in real time to attract the best second-by-second interest rates?
• How should we write the contracts for goods and services when AI tools are being used to define and combine the elements of the offering and set the pricing in real time based on the user’s profile and requirements?
• Precog systems are emerging that can predict an individual’s propensity to crime. What governance frameworks might be required for such AI-enabled “pre-crime” units?

We have focused quite deliberately on the potential of AI and emerging technologies to create exponential business growth opportunities in the marketplace. There are also immense opportunities to drive exponential improvements within the firm, in the products and services it provides, and in the ways it delivers its offerings. We have identified seven distinct areas of opportunity:

• Automation of legal tasks and processes;
• Decision support and outcome prediction;
• Creation of new product and service offerings;
• Development of tools and applications for in-house legal teams;
• Process design and matter management;
• Practice management; and,
• Fully automated online services.

In all of these areas, live AI applications are already in use or under development across the legal sector. In the next five years, we will see an explosion of legal opportunities arising from the transformation of existing sectors and the emergence of new ones. Artificial intelligence and related technologies will enable and accelerate the birth of new markets, commercial concepts, business models, and delivery mechanisms—spawning ideas we would struggle to get our heads around today.

Growth-motivated law firms of all sizes are “giving themselves permission” to invest the time and energy to embrace this new world thinking that could deliver exponential growth. The big question for everyone to ask is: What will it take for our firm to believe it can be a winner in the exponential future of legal?

• What would the new quality standards for law firms be in the exponential future of legal and AI?
• How should law firms divide their innovation time and resources between developing new externally-focused practicing offerings and improving internal processes?
• What are the biggest changes we might see in the legal profession as a result of the introduction of AI?

This article is excerpted from The Future Reinvented – Reimagining Life, Society, and Business. You can order the book here.

A version of this article was originally published in Latin Lawyer.