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October 2017 Cover Story - Legal Analytics: The Opening Salvo for AI into Legal Practice

by Gary E. Marchant and Josh D. Covey

Legal analytics is the application of artificial intelligence (AI), algorithms, and big data, alone or in combination, to the practice, business, and study of law. The primary technological dynamics underpinning legal analytics can be broadly summarized as: (1) an explosion of digital data (“big data”) coupled with significant advances in data-storage capacity; (2) exponential increases in computing power; and (3) the rapid evolution of AI, machine learning, and sophisticated algorithms. Together, these capabilities increasingly enable analyzing massive datasets, automating legal processes, producing data-driven legal insights, and creating innovative ways to provide and consume both traditional and novel legal services.

The practice of law has always been a data-driven enterprise, but new technologies are creating a qualitatively unique capability to understand and predict legally relevant observations. Traditional sources of legal data, such as invoices for legal services, case law, and regulations, are now being aggregated and analyzed at unprecedented levels. Even more disruptive is the collection and analysis of the proliferation of novel data sources, such as cell phone locational information, social media activity, online activity tracking, and data generated from the internet of things, to name but a few. Of course, data is merely a resource; to be valuable, it must be effectively analyzed and applied. That is where the legal analytics being provided by a variety of vendors is now disrupting the practice and business of law.

Technology is not the only driver of legal analytics—economics is also pushing both providers and consumers of legal services to increasingly rely on legal analytics. Many clients are faced with a conundrum: they have less money to spend on legal services, yet they have more legal, regulatory, and compliance work to do than in the past. Providers of legal services are thus tasked with delivering more services at lower costs. The application of legal analytics offers solutions to address that challenge.

Law firms use legal analytics based on billing-rate databases provided by vendors to benchmark their bidding and handling of legal matters. Firms compare their metrics against their competitors and make changes accordingly to improve operating efficiencies, to create competitive advantages, and to identify revenue opportunities. They also improve competitiveness and margins when negotiating or pitching legal fees, hourly-billing rates, and alternative fee arrangements, or when bidding on legal projects or contracts. Firms also use legal analytics to ensure they are efficiently staffing cases, practice groups, and geographical offices.

Law firms are not the only beneficiaries of applying legal analytics to benchmarking and modeling. Consumers of legal services, having access to the same data and insights, can evaluate law firms regarding performance, price, and client satisfaction. General counsel and internal legal departments can determine whether they should handle an issue internally or hire outside counsel by evaluating benchmarking and modeling data.

Legal analytics is also used to predict legal outcomes. This impact is substantial, as prediction is a core component of the counsel many lawyers offer. Applying legal analytics to outcome prediction enables law firms and businesses to assess the economic incentives or risks of any given case or transaction. Outcome-prediction applications impact the counsel lawyers provide to clients, including whether to pursue a claim or defense and whether to settle.

Judicial tendencies can also be illuminated by legal analytics. For example, legal analytics examines specific legal theories that judges rely on most, which part of a three-prong test is determinative for a specific judge, and what percent of a particular judge’s cases are decided at summary judgment. Likewise, predictive analysis can determine the forum that is most favorable for a particular set of circumstances, and can even recommend specific phrasings or words to use or avoid in briefing. Legal analytics has even demonstrated that judges in criminal proceedings give out harsher sentences when they are hungry or their college football team lost the previous weekend before.

Legal analytics also has many applications in transactional and compliance matters. Legal analytics is used to analyze and process massive quantities of contracts, regulatory records, production data, performance metrics, and other data to more accurately and quickly evaluate statements, representations, and claims. Legal-analytic applications help organizations monitor compliance in real-time and thus mitigate regulatory risks by detecting and addressing risk-inducing behaviors before litigation or enforcement ensues.

These are just some of the many applications of legal analytics now available to attorneys and clients. There are many other applications regarding attorney recruiting, human resources management, criminal sentencing, juror selection, expert witness identification and evaluation, and document discovery. This train is moving fast. The Coalition of Technology Resources for Lawyers survey found that 99% of surveyed attorneys agreed that data analytics will be “indispensable to the practice of law over the next ten years.” Legal analytics is quickly becoming a core part of legal practice, foreshadowing the broader adoption of AI in the practice of law. It is time to jump on this fast-moving train.

Gary E. Marchant is Regent’s Professor of Law at Arizona State University where he specializes in governance of emerging technologies. He can be reached at Gary.Marchant@asu.edu. Josh D. Covey is a technology, data privacy, and security lawyer at Quarles & Brady. He can be reached at josh.covey@quarles.com.