Death by due diligence? Legal tech takes one for the team.

In an industry where time is everything, legal technology is increasing both the efficiency and the accuracy of review. And this is only the beginning.

As a lawyer, life is divided into precious 6-minute increments – each tenth of an hour representing an expensive addition to an already-burgeoning client bill.  Worse: as a junior associate, much of this precious time is spent on tedious, repetitive tasks such as due diligence and standard document production.  In short, tasks that do not require the skills learned over many expensive years at law school.  With both law firms and clients aware of these inefficiencies, the legal profession has faced increased pressure to perform many tasks faster, more efficiently and at a lower cost.  Achieving this is key for law firms to attract and retain both clients and legal talent in a highly competitive legal market [1].

Since the process of law is inevitably time-consuming, law firms are increasingly turning to legal technology incorporating machine learning to improve these processes.  To the combined dismay and relief of many a junior legal associate, legal technology has been developed which automates, for example, the legal due diligence process.

In response to this, top U.S. law firm Latham & Watkins (Latham) elected to use Kira Systems’ legal software (Kira) from November 2017 [2].  Kira converts files into machine-readable form and thereafter uses machine learning to undertake contract analysis on both standard and non-standard contracts [3][4]. After completing its analysis, Kira can create “custom summary charts and summaries for almost any data point” [5]. Further, since Kira can be taught by users to identify provisions in documents, it is expected that its efficacy and relevance for users will increase over time [6]. In an industry where time is everything, Kira has been shown to increase both the efficiency and the accuracy of due diligence review [7].

Short and medium term

In the short term, the benefits of Kira are obvious. By automating the time-consuming process of due diligence, it frees lawyers to focus on more interpersonal or complex tasks such as meeting with clients, negotiations and court appearances [8][9]. More personally, for junior lawyers this represents exposure to intellectually challenging assignments earlier in their career [10].

In the medium term, it is expected that Kira will be applied in a broader range of reviews, will be used to identify key points for negotiation in documentation, and will even assist companies with regulatory compliance [11]. Industry trends also suggest that the medium term may see an even broader range of uses of legal technology.  From software which enables law firms to use previous deal data to inform current fee estimates, to algorithms which predict litigation outcomes based on pattern recognition from historic trial data – legal technology has the potential to revolutionize the legal profession [12][13].  As Latham prides itself on being at the “forefront of innovation in the legal sector”, it is expected that it will employ further technologies in the medium term to ensure it continues to deliver efficient client service [14].

Recommendations

Lawyers tend to be famously time-starved and risk averse.  When confronted with technology which requires a time-commitment to training and practice, adoption rates can be slow and attention spans short [15].  To ensure Latham remains an early adopter of legal innovation:

  • Latham should provide training to its professional staff on legal innovation and programming;
  • to build confidence, Latham should run Kira on a sample of due diligence projects recently completed by Latham to highlight Kira’s strengths and, if necessary, identify its weaknesses;
  • Latham should collaborate with Kira to train its employees on both the operation of the software and how Kira can be trained to increase efficacy;
  • Latham should consider hiring lawyers from alternative backgrounds such as data science [16]; and
  • Latham should task a specific team with ongoing strategic thinking on the use of legal technology, both through Kira and other legal technologies.

Conclusion

In an increasingly competitive legal market, law firms are under pressure to produce more for less.  As necessity is the mother of invention, legal technology has been developed to bridge the gap. Existing technology is revolutionizing the due diligence process and the sphere of application is expected to be even broader in the medium term. Perhaps future generations of legal associates will sleep more after all.

Important open questions

Confidentiality and privacy are of vital importance in the legal profession, but the 2016 leak of the “Panama Papers” demonstrates that law firms are highly appealing targets for hackers.  Since machine learning in the context of legal technology requires access to large amounts of confidential data:

  • how can law firms be confident that the use of legal technology will not violate the confidentiality of clients?
  • how can law firms address the risk of security breaches?

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Footnotes

[1] Deloitte LLP, “Developing Legal Talent. Stepping into the Future Law Firm”, February 2016, https://www2.deloitte.com/content/dam/Deloitte/uk/Documents/audit/deloitte-uk-developing-legal-talent-2016.pdf, accessed November 2018

[2] “Latham & Watkins Adopts Kira to Improve the Transactional Due Diligence Process” Latham & Watkins press release (Los Angeles, CA, November 28, 2017)

[3] Ibid.

[4] Kira, “How Kira Works”, https://kirasystems.com/how-it-works/, accessed November 2018

[5] Ibid

[6] Keiser, B. Artificial Intelligence and the Law. Online Searcher, 41(3) (2017), 16-20, ABI/INFORM via ProQuest, accessed November 2018.

[7] Bernard Marr, “How AI And Machine Learning Are Transforming Law Firms And The Legal Sector” Forbes, May 23, 2018, https://www.forbes.com/sites/bernardmarr/2018/05/23/how-ai-and-machine-learning-are-transforming-law-firms-and-the-legal-sector/#797037c32c38, accessed November 2018

[8] Ibid

[9] Charles Lew, “Artificial Intelligence And The Evolution of Law”, Forbes, July 17, 2018, https://www.forbes.com/sites/forbeslacouncil/2018/07/17/artificial-intelligence-and-the-evolution-of-law/#5d1197a036ee, accessed November 2018

[10] Sobowale, J. “Beyond imagination: How artificial intelligence is transforming the legal profession.” ABA Journal, 102(4), 46 (2016), accessed November 2018

[11] “Latham & Watkins Adopts Kira to Improve the Transactional Due Diligence Process” Latham & Watkins press release (Los Angeles, CA, November 28, 2017)

[12] Keiser, B. Artificial Intelligence and the Law. Online Searcher, 41(3) (2017)

[13] Sobowale, J. “Beyond imagination: How artificial intelligence is transforming the legal profession.” ABA Journal, 102(4), 46

[14] “Latham & Watkins Adopts Kira to Improve the Transactional Due Diligence Process” Latham & Watkins press release (Los Angeles, CA, November 28, 2017)

[15] Erin Winick, “Lawyer-Bots are Shaking Up Jobs”, MIT Technology Review, December 12, 2017,  https://www.technologyreview.com/s/609556/lawyer-bots-are-shaking-up-jobs/, accessed November 2018

[16] James Ovenden, “Why the Legal Profession is Turning to Machine Learning”, Innovation Enterprise, January 25, 2018, https://channels.theinnovationenterprise.com/articles/why-the-legal-profession-is-turning-to-machine-learning, accessed November 2018

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2 thoughts on “Death by due diligence? Legal tech takes one for the team.

  1. Fascinating article! I certainly can see the benefits of such technology from an efficiency perspective – and I’m sure improvements in quality and standardization would also follow. You raise a good point when it comes to confidentiality – client confidentiality is obviously key for law firms. When it comes to confidentiality, I wonder how this will impact the dialogue with the client. Will clients need to be made aware that their information is being used with this software, and how might they react? I can see some clients being skeptical regarding their data being fed into a machine rather than assessed by a human. I think there is room for firms to work with clients to determine what concerns clients may have and how they can be addressed. You mention the prospect of hiring data scientists but I wonder if this opens the need for firms to also hire cyber security experts with specific knowledge in this realm if the technology is going to be scaled.

  2. How does Latham think about prioritizing its people’s time into improving the integration of Kira? I would think the perspective of the associates would be helpful in improving this, but as you said, their time is already incredibly burdened.

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