Glenlegal 2019: The advent of legaltech platforms and overhyped AI

Legaltech vendors have proliferated at a remarkable rate in recent years. Dan Katz, scientist, technologist and law professor at the Illinois Tech – Chicago Kent College of Law, likens the multitude of start-ups to “more than a thousand flowers blooming”.  But he says: “If I could collectively short these companies, then I would.”

The job of law firms, he told delegates at the 2019 Legal Leaders IT Forum, is to create the frameworks required to navigate this mass of new technologies and to “pick the flowers that really make sense for what they are doing.”

Law firms are approaching this challenge in all manner of different ways. Katz points to initiatives such as Dentons’ Nextlaw Labs, the Mishcon de Reya incubator, Allen & Overy’s Fuse and Orrick’s venture capital fund, as just a handful of the strategies currently being explored.

But there is no doubt that we will see consolidation amongst these myriad start-ups, he explained. “That will happen in three ways. Companies will be acquired by service providers. Companies will go out of business and companies will be rolled up into wider technology platforms.”

Legaltech platforms

Platform economics have been a dominant feature of the post internet world in every area of our lives. The fact that it is now starting to emerge in law is therefore unsurprising.

Platforms make it easier for buyers and sellers to find one another and lower the transaction costs associated with that process. Prominent examples include everything from Uber and Paypal to Appstore and

We are starting to see platforms emerge in law, particularly around artificial intelligence, said Katz, pointing to events of the past 18 months including HighQ’s launch of an AI Hub and NetDocuments launch of an AI marketplace with Kira Systems. “You have a bunch of vendors starting to roll up start-ups to make it easier for customers to buy these products,” he said. For the seller, meanwhile, the platform overcomes the hurdle of pre clearance, lowering the cost of sale.

The most high-profile legaltech platform to have hit the headlines of late, of course, is start-up services automation platform Reynen Court, which has secured backing from heavyweights including Clifford Chance, Linklaters and White & Case. “I think this is a preview of what we will see in the 2020s,” said Katz.

Hype vs reality

The overwhelming majority of these 1000-plus legaltech start-ups claim to be focused on AI. But, according to Katz, not only is the robot lawyer meme hugely exaggerated, but the valuations that have been associated with AI businesses are vastly overblown. “If I could collectively short these companies, then I would,” he said.

“AI sounds sexy and is designed to get money from venture capitalists. Machine learning is the only real AI and is traditionally an academic discipline, not concerned with real world software implementation. It is data science that applies machine learning to create actual products that deal with real world complexity.”

Data science is applying machine learning in a wide range of different use cases, ranging from settlement forecasting and cost predictions in litigation, to pre-deal negotiation optimisation and post-deal batch analysis for the purposes of due diligence, for example, in the world of transactional law.  The key to making the individual products better is to create a data collection feedback loop.  In many instances it is the service providers (not the product companies) who are in best position to collect relevant data.  “In many instances, it is the exhaust the work that folks do every day that can fuel legal data science.”

The problem is, said Katz, that law is supposed to be a business about providing high-end insights. And particularly in the litigation space, the majority of legal data products are not yet fit-for-purpose.

“If you took most of these products into a more quantitative field such as finance setting you wouldn’t even make it into the room,” he said. “These products are focused on giving you averages, or variances, and presenting them on a dashboard. It may be a necessary step but lets be clear it is not where it really needs to be. They are just not ready for primetime.”

Katz concluded his keynote with some final predictions for 2020. He believes we will see more law firms looking to list in order to access funds to develop their tech products. He also believes self-negotiating contracts systems will be a reality (with some driver assist) and that we will see a proper publicly traded litigations security offering.

Finally, Katz believes that in the next few years, we will see the emergence of a “real” app store for enterprise legal technology. “It’s on its way – the platform race is on,” he said.