Understanding The Risks and Opportunities Of Legal Innovation and AI

As AI evolves, its impact is being felt in virtually every industry, including the legal industry. Lawyers and law firms are increasingly finding innovative ways to use technology to help clients. While law firm innovation is exciting, there are important considerations to keep in mind.

In this article, we dig into law firm innovation, including its challenges and benefits. We’ll also explore some key trends, best practices, and ethical considerations you’ll need to keep in mind as you embrace innovation in the legal sector.

Read more about client-centred innovation by reading The Client-Centred Law Firm.

Understanding legal innovation

Legal innovation is the ongoing process of finding new, creative ways to effectively and efficiently deliver legal services. The idea is to apply concepts, processes, and technologies that improve the legal experience for clients and the process of providing services for law firms.

While much discussion of law firm innovation focuses on technology, such as AI and machine learning, innovation also encompasses mindsets that encourage openness to ideas, collaboration, and addressing client needs.

Benefits and challenges of legal innovation

A key point about legal innovation is that it provides benefits for both clients and law firms. Law firms benefit by standing out from the competition when their clients receive a seamless legal experience. This leads to loyal clients and increased referrals.

Additional benefits of legal innovation:

• Enhanced productivity: AI can automate repetitive tasks that take time away from more strategic or billable work, freeing you up to focus more on your clients.
• Enhanced client service: AI tools can provide clients with more streamlined services, greater access to legal resources, and a more robust process, decreasing their stress.
• Reduced overhead costs: Despite an initial investment in AI, AI tools can decrease overhead costs, potentially resulting in firms being able to adopt more legal technology tools and software.

Challenges associated with legal innovation:

• Job displacement: Automation of some tasks could lead to job losses for those who are usually responsible for carrying out routine administrative activities–however, they are often used as tools to improve processes and efficiencies for these employees.
• Client confidentiality: Law firms must ensure the tools they use have thorough security measures and are compliant with regulations– the SRA has released their risk outlook report for AI in the legal industry.
• Cost of implementation: AI tools may come with a high initial cost, making some expensive for small and mid-sized law firms.
• Lack of transparency: If AI is used to draw conclusions, there can be a lack of transparency into how that tool has arrived at its conclusions. This can be problematic in legal decision-making.

Key trends and technological advancements in legal innovation

AI has had a significant impact on the legal industry. Generative AI is used to analyse large amounts of legal data and case law. It can identify relevant precedents and arguments faster than traditional methods. It can also assist in drafting legal documents, saving lawyers time and ensuring consistency in the documents.

Cloud computing allows law firms to store and access data remotely. This

• Improves accessibility and fosters collaboration on client files.
• Enables clients to access information and have real-time insights into their cases.
• Provides access to a wide range of legal tools and applications, without an investment in expensive infrastructure, making technology more readily available for small- and mid-size firms.

Automation and artificial intelligence in the legal sector

AI is already used for contract review and due diligence, such as identifying inconsistencies and potential risks in a contract. It’s also used for legal and predictive analytics, to identify the likelihood of winning a case and even provide optimal pricing models for legal services.

Algorithms are trained on large datasets, which enables them to identify patterns and make predictions related to legal issues, such as identifying potential contract disputes or optimal litigation strategies.

What’s driving legal innovation?

While the legal industry may has historically been slower to embrace technology and innovation, in recent years there has been a dramatic increase in innovative solutions available to law firms. These have been driven by client expectations, increased competition, and regulatory changes.

Evolving client expectations and demands

Today’s clients are accustomed to the efficiency and transparency offered by online services and AI. While their experiences are based in other sectors, clients now demand similar services and experiences from their lawyers. This includes faster turnaround times, more cost-effective solutions, and easier access to legal services.

If clients are concerned about costs, they may expect their lawyers to take steps that maximise productivity, such as using AI and technology to provide quality service more quickly and efficiently.

Increasing competition in the legal market

Law firms face intense competition for clients. While this can provide clients with lower costs and increased access to services, it puts pressure on lawyers to lower their costs and work even longer hours.

With more legal tech companies and alternative legal service providers encouraging traditional firms to innovate and streamline their practices, law firms must find a way to keep up. If innovative law firms can provide a high level of service more quickly and cost-effectively, clients will be motivated to work with those firms.

Regulatory changes and compliance requirements

The legal industry tends to be traditional, holding onto established processes and procedures. Part of the reason for this is that they are subject to regulations from the government and the Solicitors Regulation Authority. Now that governments and regulatory associations are enacting regulations allowing–while still governing–the use of AI, law firms have a greater ability to innovate.

Innovation at your law firm

If you’re looking to adopt legal technology at your firm, there are some best practices to follow:

1. Prioritise security and data privacy first. When evaluating solutions, focus first on robust security measures and data protection. Client confidentiality is critical, so ensure any AI tools you use are compliant with all relevant regulations.
2. Start small and build up. Rather than overhauling your firm’s entire system, start by piloting a single, well-researched solution that addresses a specific law firm pain point. For example, if billing clients takes up too much administrative time, explore billing tools that automate your billing processes. Once your firm is comfortable with that tool, you can begin to explore and introduce AI tools.
3. Invest in user training and support. Your AI tools are only as effective as your staff. Ensure everyone who will use the tool is properly trained to do so. Each staff member who interacts with the tool should feel confident about and capable of integrating that tool into their tasks.

Some law firms may not embrace innovation right away. It could be up to you to champion innovation. Overcoming barriers might be an uphill battle but it’s worth it, and there are ways to show your team the value of AI.

• Start by building a business case that highlights a specific pain point in your firm. This should be focused on a pain point that significantly affects your firm, such as inefficient non-billable tasks, high overhead costs, or client dissatisfaction. Research AI tools that can address those issues and quantify the potential return on investment. Highlight how the AI tool can save your firm time or money, or improve client satisfaction.
• Find allies who will support you. Talk to other lawyers and staff members in your firm who are interested in legal tech and agree that there is a need to implement it. Form a group to advocate for changes, and explore potential solutions. As a group, you’ll likely have more success than as individuals trying to make a change.
• Focus on benefits. While features are nice, benefits mean more. Considering the ROI is vital when introducing new tools to your firm. When you share these tools with managing partners and firm staff, talk about how they will free up time for more strategic and billable work or enable you to improve the client experience.

Creating a culture of innovation in legal organisations

Cultivating a culture of innovation requires buy-in from others and encouraging innovation by taking the risk out of change. For example, creating a designated space–physical or virtual–to test out legal tools without affecting ongoing client work enables your firm to evaluate a tool without risking client confidentiality. If the tool works out, it can be implemented firm-wide. If not, it hasn’t affected clients.

Cross-departmental collaboration also enables law firm innovation. When members of different departments brainstorm solutions together, they’re more likely to support those solutions. Enabling staff to discuss innovative ideas with each other can lead to progress. If necessary, task one person or department with being responsible for innovation. They can spearhead the process and foster collaboration.

Ethical Considerations in legal innovation

While AI provides many benefits for lawyers and clients, there are some ethical concerns around using it for work in the law.

Maintaining client confidentiality

Client confidentiality is paramount in the legal industry. Your clients trust you with their personal and confidential information, which you have a professional and ethical duty to protect. Any tools you use must have robust security measures ensuring sensitive client data and information are secure. This is especially crucial when using public AI tools such as ChatGPT.

Whether data is being stored or transferred, it should always be encrypted using industry-standard algorithms. Additionally, only authorised personnel should have access to that data.

Input only the minimum amount of client data necessary for each AI tool to function properly. No unnecessary details should be stored in any system.

Here’s some important information on keeping your data secure. 

Ethical implications of AI and machine learning in legal practice

Lawsuits and legal decisions have life-altering consequences for clients. That’s why it’s crucial to ensure AI tools rely on and provide accurate information. Analyse the outputs and ask

• “Does this make sense?”
• “Is this information accurate?”
• “What is this output based on?”

You must remain accountable for the work your AI tools produce. Ensure anyone who uses the AI tools is properly trained and can evaluate AI outputs.

Lawyers have an ethical duty to provide their clients with competent representation. While AI and machine learning can provide powerful information and make predictions, it should not replace a lawyer’s judgment.

Learn more about the ethics of using AI in our article AI and the Law: What are the Ethical Considerations?

Ensuring fairness and transparency in algorithmic decision-making

AI algorithms are trained on data sets, which may contain inherent biases. If the AI relies on biases such as skewed demographics, its results will also contain biases. Such biases can lead to discriminatory and unjust outcomes in various legal areas.

For example, a law firm may use an AI tool to assess the potential value of new personal injury cases. Perhaps the data set the AI tool uses has a historical bias where past settlements for similar injuries were lower in certain jurisdictions, for reasons unrelated to the merits of the case. If a new client comes in from one of those jurisdictions, the AI tool might undervalue the claim based on that skewed data, with no regard to the merits of the case.

AI can be incredibly valuable in helping lawyers manage their firms, but it’s crucial to investigate data used to protect against biases. AI tools should be a starting point, not the final word.

There are ways to manage AI. Read Clio’s free downloadable guide, “A Lawyer’s Guide to Artificial Intelligence to learn more about the legal and ethical ramifications of using AI in your law firm.

Future Outlook of Legal Innovation

As legal technology continues to advance, and law firms focus even more on client-centric services, AI will likely become more deeply integrated into law firms. For example, when used with complex legal analysis and strategy development, potentially providing more personalised legal services for clients.

Technology like Clio Duo, Clio’s forthcoming proprietary AI, is designed to serve as a coach, collaborator, and consultant to legal professionals, enabling matter overviews, document summarisation, and business performance insights.

Lawyers and law firms may collaborate more with technologists to create tools that enhance the legal experience for clients and address specific law firm pain points. As clients become more accustomed to and familiar with the use of technology, they will increasingly expect their law firms to embrace AI and other technology.

By taking a client-focused approach to innovation and balancing ethical and professional responsibilities, your firm can embrace innovation and take advantage of all the benefits AI has to offer.

We published this blog post in June 2024. Last updated: July 9, 2024.

Categorized in: Technology