Is Artificial Intelligence the next frontier for legal?

The forces shaping the legal sector are already many and complex; mergers, industry reforms, intensifying competition, commoditisation of services, unregulated entrants, growing penetration of technology, and competition from accountants are all impacting the sector. However, a new technological force is emerging that could render all others seemingly irrelevant given the scale of change and opportunity it could bring about. What is this new dark art with such potentially epic powers of which we speak? It goes by the name of artificial intelligence (AI) – a box of seemingly magical technological wizardry that could change our world, and – depending on who you choose to believe – either lead to a total transformation of society or bring about the end of humanity. Either way, the lawyers could do very well – until they don’t!

Artificial intelligence has the potential to disrupt all industry areas; the legal sector in particular is one key sector that could be totally transformed. Artificial intelligence is a field of computer science focused on creating intelligent software tools that can replicate critical human mental faculties. The range of applications include speech recognition, language translation, visual perception, learning, reasoning, inference, strategising, planning, decision-making, and intuition.

As a result of a new generation of disruptive technologies and AI we are entering a fourth industrial revolution. The three previous revolutions gave us steam-based mechanisation, electrification and mass production, and then electronics, information technology and automation. This new fourth era, with its smart machines, is fuelled by exponential improvement and convergence of multiple scientific and technological fields and is driving new opportunities for the legal sector.

The pace of AI development is accelerating and astounding even those in the sector. In March 2016, Google DeepMind’s AlphaGo system beat the world GO champion and demonstrated the speed of development taking place in machine learning – the core technology of AI. The board game GO has over 560 million possible moves – meaning you cannot teach the system all the rules and permutations. Instead, AlphaGo was equipped with a machine learning algorithm that enabled it to deduce the rules and possible moves from observing thousands of games. This same technology can now be used across the various datasets held by law firms. A wide range of legal applications is already emerging such as inferring the outcome of a case, determining the best structure for a contract, suggesting how best to approach a new matter, or noting new risks or threats by analysing and interpreting data points from across the web.

The really transformational impacts arise when AI is combined with accelerating science and technology developments in neuroscience, large scale databases, super-computing hardware, network communications, blockchain distributed ledger systems, digital currencies, the Internet of Things (IoT), 3D / 4D printing, and cloud computing. For law firms, this is of particular interest as these exponential technologies will transform old industries and accelerate the creation of new ones. All of this will create 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, and the resultant risks of eliminating differentiation, commoditising premium revenue streams, losing out to technology providers, depersonalisation, and the loss of professional jobs.

While the risks are real, a growing number can also sense the opportunity – these technologies will transform the US$78 Trillion global economy. By 2025, of a global economy of around US$120 Trillion, over half will come from new sectors and those that don’t even exist today – such as synthetic energy, autonomous vehicles, self-replicating machines, and adaptive, self-repairing materials. They are also spawning new sectors offering services we didn’t know we wanted even a year ago – from smart home management systems and personal data protectors, to cryogenic freezing facilities and human body enhancement services – what seemed inconceivable last year will quickly become an evolving industry sector by next year. This creates massive opportunities for law firms representing the innovators, their adversaries, insurers, and regulators.

The legal requirements are real and there is massive potential to build relevant service offerings, acquire new customers and double current growth rates for both revenue and profitability. 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.

Potential Developments and Legal Implications

So, what kinds of changes and legal sector ramifications could these developments bring about – here are ten to help you sense the size of the prize. In each case, what are the possible legal implications and risks that need to be assessed and mitigated?

1. Online and fully automated services are emerging for situations ranging from fighting parking tickets and completing divorce proceedings through to undertaking class action law suits. Could your firm create the next one? When might they start to impact your firm’s work?
2. Estimates suggest that £3-4Bn could be saved annually on conveyancing legal fees by using distributed immutable electronic ledgers (blockchains) to uniquely hold all information related to a property. How might this transform conveyancing?
3. What are the liability implications of automated intelligent HR advisors guiding the actions of line manager and employees?
4. The UK financial services regulator sanctioned the use of robo-advisors three years ago. The industry has been slow to respond. What happens when they eventually do and someone loses their life savings because of incorrect advice given by an automated advisor?
5. In healthcare, AI will be used to make medical diagnoses and decisions, determine treatment regimens and even decide your right to access. How will humans seek a right of redress when the system is making the decisions?
6. The IoT will place sensors in literally everything – with objects in the room such as the coffee cup, TV, sofa and personal clothing providing the data that could verify whether you were at the scene of the crime.
7. Autonomous self-driving vehicles will lead to a new category of self-owning assets including buildings and public infrastructure – what issues does this raise around legal liability in the event of service failure and accidents?
8. 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?
9. If AI is increasingly used for scientific discovery and the system infringes a patent – who will be held liable?
10.  ‘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 and for protection of individual’s rights.

Convergence: AI and Blockchain

AI and related technologies have the potential to facilitate industry transformation and growth. AI will also power a raft of legal developments associated with the use of blockchain technology; blockchain is a form of distributed ledger technology that allows secure transaction encoding mechanisms, it underpins most digital currencies such as Bitcoin. Blockchain coupled with AI will facilitate a number of key developments.

For example, already the number of distributed autonomous organisations (DAOs) is growing; these organisations exist just in software alone and therefore require no human employees. We may see the creation of decentralised arbitration and mediation networks which operate outside existing national and international mechanisms and effectively operate as opt-in global justice systems for commercial transactions. The combination of blockchain and AI can enable smart contracts – encoded in software and requiring no human intervention. Indeed, we may see emergence of an algocracy (algorithmic democracy) – creating global codes of legal transacting by codifying and automating legal documents, including contracts, permits, organizational documents and consents. Ultimately, the law itself could be rewritten and embedded in software; fines may be issued automatically, and judgements could be automated.

There are also significant opportunities to bring about exponential improvements within legal firms, their offerings and their approach to service delivery. Artificial intelligence is already being used for diverse applications including the automation of common legal tasks and processes, decision support, outcome prediction, correspondence automation and compiling and analysing large data sets of similar decisions. We are also seeing AI being used to help create new products and service offerings and in the development of tools and applications for in-house legal teams. Process design and matter management can be improved and automated by the application of AI to existing procedures, and many aspects of the management of a legal practice itself can be enhanced and streamlined through effective use of AI. Finally, AI is helping to create and offer fully automated ‘direct to consumer’ online services, such as completion of legal forms, company formation, and answering legal queries.

Looking to the future

Exploring the potential impact of AI on legal services is a complex and multifaceted task – with the speed of development often rendering predictions outdated before they have been published. However, to give a flavour of the possibilities, we envisage the following five-year timeline emerging of the ways in which AI and these other key technologies could enter the mainstream of legal business.

The Next 18 Months

We expect to see a rise in law firms establishing internal technology innovation labs, creating seed funds to invest in legal technology start-ups, and running joint experiments with technology providers and clients. To assess the benefits AI can bring to firms, several law firms and in-house teams will run AI trials and develop applications that create smarter internal processes. In parallel, a range of trials and applications will focus on applying AI to lawyer decision support. The first client facing AI applications will be launched by law firms, as well as new AI-enabled products and services. With the growth of financial technology (FinTech) a rising pressure will be applied by the financial services for law firms to embrace the combination of AI and blockchain technology – the key driver being legal cost reduction. Finally, this convergence of AI with other disciplines will see the emergence of Blockchain Smart Contracts and DAOs – particularly in financial services.

The Next Three Years

Within the next three years, we expect to see the stakes get higher as AI penetrates deeper into the sector – it’s reasonable to anticipate that there will be widespread deployment of AI on core internal law firm processes, this will continue at an accelerating pace, with the first clear evidence of smart technologies replacing lawyers themselves. Equally, we’ll see AI applications and their impact extend beyond the firm; there will be a significant range of AI-based solutions for both in-house legal and offered direct to consumers, SMEs and technology driven businesses. Newer technology-centric firms will drive more widespread adoption of blockchain and smart contracts. Both the public and private sectors across many industries will start making use of DAOs. Finally, the quick expansion of AI combined with innovation from new firms will result in the first truly AI-centric law firms.

The Next Five Years

In five years, we imagine we could reasonably expect to see applications starting to emerge that display near-human levels of intelligence (Artificial General Intelligence) in certain domains. The convergence of AI and Fintech applications will be widespread; blockchain, smart contracts, DAOs will be used across financial services and other sectors. Core aspects of ‘routine’ legal work will be automated with as much as 20-50% of tasks run by AI with no law firm involvement. The combination of powerful technologies and innovative new firms will see the rise of technology-centric legal sector entrants competing head on with Big Law. We will see the first examples of true Algocracy – with countries moving to digitizing, automating and embedding the law. Finally, with AI in widespread use across law firms, its adoption will frequently be mandated by clients.

Strategies for navigating change

So, if we are intrigued by the possibilities, how do we get going? There are four typical reasons for developing new practice offerings in these emerging areas. Firstly, a client asks 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. Dax launched the first legal industry blockchain practice in May 2013 – this now has over 40 lawyers focused on the legal impacts of blockchain 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 anything from 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, mind and consciousness of the frozen individual. Cryogenics has the potential to become a trillion-dollar industry within a decade and new facilities are emerging worldwide. Servicing this sector requires a very deep understanding of cryogenics, the costs and risks involved, the customer commitments being made, and the status of the science that might deliver a regeneration solution.

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 enablers of tomorrow’s world. They run workshops and study tours to immerse their leaders and partners across the practice in a deep exploration 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 understanding the legal implications both for the emerging sectors and those impacted by them. For example, in smart healthcare this means advising the technology developers, hospitals, regulators, insurers, and patient groups.

The overall goal here is to help partners and business development professional 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 Meetup 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.

The next one to five years will see an explosion of legal opportunities arising from the transformation of existing sectors and the emergence of new ones. AI 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 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.