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INSIGHT: U.S. Adoption of Legal Tech Lags Behind Europe, But Set to Grow

Dec. 24, 2019, 9:00 AM

It may come as a surprise that, until recently, the United States, which has implemented much of modern society’s most prolific technological developments, has been somewhat lagging on the adoption of legal technology.

In contrast, Europe, led by the U.K., leads the way in the adoption of legal technology market, showing that demand remains strong for British law firms. In 2018, firms spent about $81 million (£61m), more than doubling the $29 million (£22m) spent in the previous 12 months.

The overall competitive advantage of law firms benefiting from the application of legal technology cannot be over-exaggerated and should not be overlooked. The domino effect of the uptake of legal technology in Europe has led to a growing expectation that it will be vital to the growth of the profession. Firms that don’t embrace the AI tools at their fingertips risk being left behind: A recent study of London’s law firms by CBRE discovered that 48% are already using AI, with a further 41% predicted to do so in the future.

Legal Tech Adoption Born Out of Necessity in Europe

For decades legal technology has not been up to the task of alleviating lawyers’ burdens. With lengthy deployments and complex interfaces, lawyers had to adapt their working ways to get anything out of the technology. With the new generation of AI systems, this has changed, as they are quick to implement and intuitive to use. We do, however, see different rates of adoption in different parts of the world.

Initially, adoption of legal technologies by European firms was borne primarily out of necessity. Many law firms are faced with indirect cost pressures from larger firms who use international offices in Europe to work locally for a deal which is run out of the U.S.

Smaller firms are working on a fixed fee, which makes it ever more important to protect margins on labor-intensive document review work.

The topic of time shifts the focus to an evergreen issue in the industry. For decades, the business model has been firmly established around the billable hour, with little promise of change. However, with the amount of corporate documentation growing exponentially, clients can to struggle to pay for such projects—and some even take work in-house. As such, European firms are turning to technology to remain profitable and competitive, using machine learning to make document review manageable again.

Legal tech has also been utilized by the European legal industry to remain competitive in a smaller talent pool by helping to ease pressure on staff. The squeeze on European talent in comparison to the U.S. means the most sought-after lawyers are often faced with burdensome workloads.

Machine learning provides junior lawyers with a means to alleviate the admin-heavy, time-consuming nature of this work. This allows them to focus on the more strategic, analytical thinking that attracted them to the profession, leading to a stronger sense of self-worth and general well-being at work.

Upping the Pace

As the legal sector is split between the haves and the have-nots, those who do not use legal tech risk finding their team up against a firm working with AI platforms. They quickly find themselves on the back foot as humans cannot keep up with the speed of an AI platform searching through and analysing documents.

We saw this first hand when our client Bird & Bird recently conducted a review of almost 200,000 employee contracts containing both English and German language. The legal team estimated that, in the same time it would have taken to review the whole project manually, they could have completed 50 projects in Luminance. When competition for work remains fierce, having any advantage—especially time and cost—makes all the difference in negotiations.

Stateside Trends

In the U.S., the billable hour still remains normal practice, with associates incentivized on target hours. Law firms can be highly profitable on this basis, so there has been little motivation to move away from this established model.

In addition, uncertainty over ongoing legacy lawsuits or complex billing in large scale, highly-variable and individualized cases leads to an unwillingness to alter the status quo, when there are already so many variables, for fear of error.

This heritage ethos plays into the mindset of junior lawyers, whose primary focus is to put the hours in, as opposed to adding value or maximizing efficiency through the adoption of tech.

But the tide is turning. Over the past year, we have witnessed first-hand a shift in attitudes as U.S. firms recognize the need to become more nimble. As a result, the adoption of AI is gathering pace among the larger corporations and pressure is ramping up across the board as their smaller counterparts look to follow suit.

Looking Ahead

Despite the scare-mongering in the mainstream press, this does not mean that machines are beginning to replace the lawyers; far from it. Rather, pattern recognition technology combined with machine learning complements the human skillset. Machines may alleviate the drudge work but this just makes the lawyer even more central to the process.

The profession is in a very healthy growth-mode, as lawyers’ training and expertise remains key in the sector, with machine learning playing the supportive role in helping lawyers to be faster and more thorough in their work. It gives the lawyer the ability to review a complete document set in a transaction, not a sample, flagging anomalous wording so that their focus is in the right places. This results in a stronger client relationship where the law firm is able to solve more problems and provide a genuine partnership based on deeper understanding of the business.

As Luminance celebrates its third birthday, I can testify to the fact that the U.S. legal tech market is fully engaged in catching up. We opened our New York office, our second location in U.S., late last year to cater to Luminance’s expanding customer base in the region.

New York is undoubtedly a hub for innovation across the U.S. legal community and lawyers are realizing the vast potential AI holds—to boost efficiency, quality and overall client service. The race for AI adoption is certainly not over, in fact it has only just begun.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Emily Foges is CEO of Luminance, now used by over 185 law firms and organizations across 46 countries and six continents. She has more than 20 years’ experience of growing and scaling technology-led businesses. Prior to joining Luminance, she worked in M&A as a consultant and in-house, building teams to drive acquisition strategy and deliver integration. In 2018, Foges was named Woman of the Year at the Women in IT Excellence Awards.