How Legal Analytics is Changing the Legal Landscape
Legal analytics is the discovery, interpretation and communication of valuable, actionable insights in legal data, and it is poised to transform both law firms and law departments. In today’s digital marketplace, the application of data-driven analytics is essential to both the practice and the business of law.
Law firms require analytics to remain competitive in a rapidly evolving marketplace. Firms are under relentless pressure to deliver more efficient and effective legal services, offer new and better services without raising costs, and demonstrate measurable value through more insightful legal counsel, data-driven legal strategies and positive legal outcomes. Clients expect firms to demonstrate the same level of technological sophistication and expertise that they bring to their own business. Firms that neglect these demands risk losing business to in-house teams or competitors.
Law departments require analytics to make smarter business and legal decisions, including which firms to retain and which lawyers to hire. Legal has a clear mandate within the enterprise to lower legal costs, reduce risk, become more efficient in every facet of its operations and become demonstrably more productive. Corporate executives are demanding improvements in cost efficiency, transparency and accountability so that legal operations align more closely with other business units within the organization.
There is ample real-world evidence that analytics can help legal practitioners meet all of these objectives. Analytics has already had a profound impact in a broad range of industries. In finance, businesses use advanced statistical modelling to personalize credit cards, identify and mitigate emerging areas of risk, forecast business performance, explore potential new revenue streams, retain current customers and maintain budgetary control across the organization. Travel, retail, energy, insurance, healthcare and countless other industries now routinely use analytics to gain business insight and optimize results.
The legal profession can learn from these other industries.
Not long ago it was commonplace for lawyers to rely on anecdotal information to understand a judge’s tendencies and predilections, evaluate opposing counsel, anticipate timelines and make guesses about dozens of other important variables in litigation. With the increasing availability of large volumes of litigation data – and with the use of machine learning, natural language processing and other artificial intelligence (A.I.) technologies to structure that data, make it easily searchable and yield previously inaccessible insights – lawyers now make key strategic decisions based on facts rather than anecdotes.
There are currently three primary categories of legal analytics that relate to legal workflows: litigation, regulatory compliance and transactions.
Litigation analytics is used to illuminate trends, insights and behaviours of opposing counsel, parties, judges and other participants in litigation so practitioners can develop more effective case strategies and predict potential outcomes. A legal team performing early case assessment can use analytics to determine whether or not to settle a dispute, and if so, when. Analytics tools provide quick access to historical data to assess the potential cost of litigation and predict how long it is likely to take to reach key litigation milestones in a particular jurisdiction. Analytics can help practitioners determine the specific strengths and weakness of opposing counsel and opposing parties, and review their behaviours and outcomes in similar cases.
Legal teams use litigation analytics to inform motion strategy by examining success rates and the specific language used successfully by litigators – and cited by individual judges – in specific kinds of cases. The technology also helps law firms make key strategic business and hiring decisions, support RFP processes and refine pitches for new business.
Both firms and law departments use analytics to access attorney track records when assessing candidates or identifying lawyers to recruit as they build or strengthen specific practice areas. They also monitor overall trends in legal practice areas to inform decision-making in areas like business development and marketing.
Regulatory analytics helps legal professionals track rapidly changing regulatory developments, make data-based determinations about compliance risk and predict whether specific legislation will pass.
For example, lawyers at a pharmaceutical company researching the viability of introducing a generic drug into the marketplace can use analytics tools to find pending legislation and recently passed legislation, see the latest deals and identify legal matters related to similar generic drugs. They can also quickly identify any relevant intellectual property-related actions and their outcomes.
Transactional analytics is deployed by organizations looking for potentially advantageous targets for acquisition and to carry out the research required to complete a transaction. Lawyers use analytics to review similar deals and agreements and strengthen their negotiating position in transactions by benchmarking what others are disclosing. They also run transaction searches for insight on current market practice and deal precedents covering the complete spectrum of transaction-related topics, including capital markets and corporate governance, corporate and M&A, and employee benefits and executive compensation. Analytics can also help identify pending legislative action that may impact the target of acquisition.
During the due diligence process, analytics helps legal teams identify any other transactions the acquiring company is currently undertaking, review any actions against the company and quickly identify counsel handling the transaction. Analytics tools can also shed additional light on the target organization, revealing financial transactions they have already completed, details about executive and employee compensation, and key variables that impact the company’s bottom line.
A look ahead
As the legal profession begins to integrate analytics into its workflows, we will see a broad transformation of firms and legal departments. They will operate more efficiently as business units, incorporate more accurate forecasting into budgetary and business decisions, make better and more targeted hiring decisions, pursue new lines of business by identifying data-based trends and, most importantly, perform better legal work and achieve better outcomes for the organizations they represent.
Josh Becker (pictured) is CEO of legal analytics vendor Lex Machina, which is part of LexisNexis
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