Legal Analytics and the Evolving Practice of Law

I fully expect that our health and economic crisis will push companies and firms to make substantial changes to their structures and business decisions. In fact, I've already heard of two firms who are creating plans to make remote work a permanent option. Others are focused on the need to know what clauses are in contracts or strategies to win new business in a recession.

And I'm not alone in this thinking. Our Lex Machina team has had many discussions with colleagues about the future of the industry as it relates to analytics and the future of law. One recent roundtable conversation included both corporate general counsel and large law firm partners and centered around the drive toward legal analytics, the current challenges of using analytics, and future trends.

From listening to these lawyers, I learned that while we may use analytics differently in our respective companies, one thing is certain: Legal analytics is the future and it's time to jump on board.

Analytics Provide Credibility

While the rest of the business world has been making data-driven decisions for years, the legal industry remained hesitant to introduce technology into a very traditional, human-driven process.

However, the business of law is changing and it's increasingly important when making a recommendation — be that to a client or C-Suite — about a strategic decision, litigation or going after new business, that you have the credibility and confidence to back up your decisions. Data and analytics provide that credibility. For example, Lex Machina helps clients make data-driven decisions about litigation. Through machine learning and natural language processing, lawyers can find out how a judge is likely to behave in a certain scenario or the experience of opposing counsel. This data-driven insight puts the lawyer on a path to success s/he might not otherwise have had.

During the roundtable, Peter Geovanes, who leads data strategy, analytics and artificial intelligence for Winston & Strawn, provided an example he calls augmented analytics. His law firm collects data for every lawsuit filed in the United States and uses several analytics tools for its clients to analyze that data. As he explained: "It looks for outliers or trends across industries. Knowing that information can change the whole dynamic of a law firm-GC relationship, where you can be proactive as a law firm and tell your GC how to get in front of an issue." Winston & Strawn's process of automating the whole process of spotting potential leads has helped both the business and practice sides of law.

From the GC-perspective, I was pleased to hear how a large corporation such as DHL wants its outside counsel to use analytics. Mark Smolik, general counsel at DHL, said he expects his law firms to be data-savvy because he must justify his decisions and spends to his CEO. He wants his law firms to be proactive, innovative, and use analytics to identify trends and risks and advise on what steps can be taken to mitigate those risks and reduce costs.

Eric Falkenberry, a partner at DLA Piper who manages litigation risk through data mining, litigation analytics and predictive modeling, said his goal is to provide clients an analytically-created knowledge base. He explained this could create a new revenue stream for a law firm by selling clients a tool, so the client doesn't have to pay the law firm for low-level work.

Falkenberry also mentioned that there's no evidence that dragging a case on results in a better outcome, yet that's often what happens when companies think they can get more money. Instead, analytics can provide credible historical evidence about judges' decisions or settlement dollars and a firm can use data to show that certain cases which took three years had the same result as a case that only took one year. Therefore, the efficiencies that law firms were very afraid of for a long time because of the billable hour, they are now embracing due to efficiency and cost savings.

Analytics also can play a major role in business development and recruitment. As we head into some potentially tough economic times on a global level, analytics can play a role in landing new clients or hiring new employees. Showcasing your company's analytic capabilities in an RFP demonstrates commitment to data-driven decisions and sets you apart from the competition. Similarly, when recruiting law students, many of them have been exposed to legal analytics tools in law school and they expect their employers to utilize these same tools.

Current Challenges

But even as the legal industry embraces analytics, we must remain cognizant of and acknowledge that there are still challenges related to retrieving and applying the data. Just because a law firm has collected data, doesn't mean that data is usable.

One of the biggest issues is "noise" in data, which can be inaccurate, incomplete or input incorrectly. In essence, a dataset is only as good as what can be mined from it. That's where machine learning and natural language processing come into play — these tools can filter out the noise to provide functional insights that lead to strategic decisions.

Another challenge is creating trust. As Falkenberry pointed out during the discussion, lawyers inherently want to see the sausage being made, to know where the data came from, how it's being used, and what its limits are. Being upfront and showing the documents that the data was generated from actually generates usage in the tools because lawyers understand the reach and capabilities up front.

Geovanes agreed with this assessment and said Winston & Strawn uses various statistical techniques, such as neural networks or decision trees, that can help decipher the thought process and show the data from source to end point.

And there is still the (I think unfounded) concern about machines taking over human jobs. These tools are generating more data to analyze and it's ultimately the lawyer that has to interpret the data and recommend a strategy. These tools help lawyers test their gut and make "data-driven decisions." In fact, analytics tools are going to create additional jobs, as well as allow lawyers — both internal and external — to focus on being lawyers and give strategic guidance to their clients.

The Evolving Practice of Law

I think my biggest takeaway from this conversation was that in the future, no legal decision or strategic recommendation will be made without data — especially in our current environment. With contracts under scrutiny like never before, law firms forced to transition to remote work, and many non-essential businesses still closed or operating in reduced capacity, it's critical that firms and corporations understand the drivers and consequences of their actions.

In fact, I think our present circumstances are going to speed up what I would consider the Holy Grail of legal analytics: taking the data that analytics providers have and combining it with anonymized internal data that firms and companies have into one centralized searchable repository.

This would include bringing together all the different sources of data. For example, companies have myriad information on the litigations they have been involved in that also spans multiple law firms. Law firms not only have information on their own firm, but also information that spans multiple companies. Providers like Lex Machina have broad litigation records.

We still might be a long way from there, but I predict we're going to see the legal industry have a mindset shift and begin to embrace legal analytics and technology with open arms.

I'm sure that would make my colleagues happy, as they too feel that the business of law needs to change sooner rather than later. Here are their projections as shared during the roundtable:

• Smolik says general counsels needs to be more of a business leader than a lawyer: "We all hear about running your law department like a business, and these aren't small spends that we are managing. We need to leverage the data in a way to educate the business about how to identify and mitigate risk."
• Geovanes wants the role of a chief data or analytic officer to become well entrenched within large law firms: "The role of the law firm is changing — it's not just spotting issues, it's providing solutions. Data and analytics are a big part of those solutions."
• Falkenberry predicts that data scientists and domain experts will work more closely together to not only produce tailored solutions, but better solutions: "You can't have a data scientist work in isolation and create a good legal product. The only question is, are enough experienced lawyers going to take the time to actually get into long discussions about how they work and the manner in which they produce results, so that the data scientists can understand and therefore produce the tool that is desired?"

Whatever the future really does hold, we know legal analytics will play a role. How quickly remains to be seen, but those of us in the development side are ready to embrace the opportunities that await.

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Josh Becker is Chairman of Lex Machina. He is a long-time recognized thought leader on leveraging technology to improve the practice of law. Previously, Josh served as Lex Machina CEO for seven years leading strategy and operations. During his tenure, Lex Machina was acquired by LexisNexis.