- How AI For Lawyers is Changing the Legal Industry
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A new technology has emerged as a powerful tool for lawyers and legal professionals: artificial intelligence. AI for lawyers is set to change the legal industry as we know it and is a hot-button topic for lawyers and legal professionals of all levels.
For some, the idea of AI in law firms conjures up fearful images of packing their desk because they’ve been laid off due to redundancy, while others are looking at artificial intelligence lawyers with healthy skepticism, wondering if AI-powered legal software can really transform the way that complex legal matters can be handled. Some professionals think that the ceiling of AI for lawyers surrounds general efficiency increases like streamlining document creation and using natural language processing to aid in legal knowledge database searches.
Another important thought is that the billable hour will finally become unsustainable—as with the transition from pen and paper to computers, law firms eventually won’t be able to ignore the efficiency gains from AI. And as we all know, the billable hour model falls apart when lawyers become more efficient.
Regardless of a legal professional’s personal feelings about AI for lawyers, it’s clear that the technology is creating quite a buzz across the legal industry. Sources have even gone to extremes by asking directly if lawyers will be completely replaced by AI at some point in the future—which we’ll touch on in this article.
Understanding how AI for lawyers is affecting the industry requires a deep dive into how the technology is used and where AI for lawyers is causing shifts in how lawyers work every day.
How is AI for Law Firms Most Commonly Used?
To understand where and when AI for lawyers is making significant industry changes, it’s important to know how lawyers and legal professionals use AI in legal services. If you’re new to incorporating law tech into your firm or solo practice, here is a breakdown of how artificial intelligence works.
At a high level, AI is a technology that combines advancements in computer science and problem-solving to create intelligent computer programs that can understand and mimic human intelligence. The applications of this technology are nearly limitless, but in the legal industry specifically, it has so far been used to enhance efficiency in work across the board.
Some ways that AI for lawyers is being used today include:
- Assisting with document creation and processing: AI for attorneys can understand the context behind legal documentation, determine where and when to add boilerplate statements and the names of parties, and perform grammar and spelling checks.
- Database classification of a law firm’s matters for easier retrieval later, as well as knowledge management: the research process for a case could involve hours of sifting through previous case documentation to gather insight on potential risks, resources needed to complete the case, and to predict the probability of a positive outcome. Time is added to this legal research process if the documentation isn’t appropriately stored and labeled. With artificial intelligence for lawyers, natural language processing (NLP) algorithms can sift through hundreds of legal documents, statutes, regulatory information, and more with just a few inputted keywords. The resulting information is then presented as comprehensive and objective insights, allowing the attorney to see relevant information they can apply to their project or case at a glance.
- Strengthening due diligence and document and contract review: Reviewing and analyzing contracts and legal documentation is important but extremely time-consuming. Human error can also easily allow typos, grammatical errors, spelling errors, and more to be overlooked. AI for attorneys can not only streamline the document review process by 75%, but it’s also able to capture inconsistencies, extract key provisions, and highlight potential legal issues with 100% accuracy.
- More efficient contract management and deal analysis: AI helps streamline the contract management lifecycle by cutting human errors and oversights, which results in speeding up contract negotiations with different stakeholders. This means that instead of your firm or legal department being seen as a bottleneck, they will be seen as an efficient business ally that is able to get the job done accurately and consistently every time.
Industry Shifts Caused by AI in Law Firms
One of the biggest conversations regarding AI in law firms and by association, lawyers is the significant increase in efficiency the technology brings. Considering that lawyers have traditionally been beholden to work long hours, contributing to lawyer burnout, and have to constantly negotiate between billable and non-billable tasks, it’s no surprise that any technology that can make the mundane parts of the job easier without sacrificing quality is welcome.
The conversation about better work-life balance for lawyers is important here, as continued burnout and stress for these professionals is unsustainable, especially with new generations of lawyers entering the industry and questioning the need to embrace a workaholic framework for survival in the industry.
To address the issues of work-life balance and potential burnout, many firms are looking away from the billable hour and toward other solutions that reward efficiency. As a result, many law firms, large and small, have already switched to providing alternative fee arrangements (AFAs), a value-based pricing system, either completely in place of or alongside the billable hour. However, AFA pricing, like billable time, needs to be managed effectively to be profitable.
- Tools like AltFee allow law firms to break free from hourly pricing and effectively manage and collaborate on their AFAs using one comprehensive tool.
- Firms are also switching to an AFA model because of client demand. According to the 2022 Legal Trends Report by Clio, clients are more conscious of what they’ll have to pay and want lawyers to offer more billing options over and above the billable hour. The bottom line is that clients care about results, not hours.
Although AFAs are not a new concept for the legal industry, this pricing model has often fallen by the wayside in favour of the billable hour. This is because billing by the hour has long been seen as a simple and effective way to charge for legal services—simply give your clients an hourly rate and a general estimate of how long it will take to complete the work and off you go.
But it’s no secret that the billable hour doesn’t encourage efficiency. In fact, it hates it. The more efficient an attorney is at performing their work, the less money they make. Or, looked at another way, the more efficient a law firm becomes the more work they have to take on to earn the same amount—which isn’t exactly helping the burnout situation, or work-life balance, for that matter.
Another point to add to the “efficiency versus the billable hour” conversation is that firms and solo practitioners can’t simply ignore legal technology advancements like AI anymore. While in the past, firms and lawyers may have been able to get away with hanging on to the pen and paper longer than they perhaps should have, the clients of today are more tech-savvy and want options like online billing and payments, and look favorably on better options to communicate with their lawyer, such as video chat, online portals where they can upload their documents and see their case progress, and of course email and instant messaging.
In short, we’ve outlined how AI is contributing to or helping specific situations in the table below:
Legal Industry Fact
How AI is Contributing or Helping
Too much workload is causing lawyer burnout, with newer lawyers questioning whether this has to be the reality for the profession
Law firms are responding to increased shifts in efficiency by moving to value-based pricing models
Law firms and solo lawyers can’t simply ignore the technological advancements in the legal industry
AI for lawyers and the discussion surrounding it is underlining conversations about efficiency, work-life balance, and the pricing changes that need to happen throughout the industry to support those two initiatives. AI may prove to be the catalyst that will finally push firms and lawyers to embrace the changes that need to be made to improve the industry as a whole, from how work is performed to how clients are charged.
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Benefits vs. Challenges of AI in Law Industry
Implementing AI for law firms and solo practitioners gives them back the one thing they need most—time. By streamlining work and making certain processes and procedures more efficient and effective, attorneys can dedicate more of their time to building attorney client relationships, as well as actually practicing the law, instead of being bogged down by administrative work.
But as with any new technology, due diligence needs to be done to ensure that it's implemented into the work environment properly. This requires understanding the challenges of the technology and working to address them.
Benefits of AI in Law Firms
The use of AI in legal services has many benefits, including:
1. Increased Efficiency in Legal Work
By streamlining workflows in essentially every area of the firm, including contract and document drafting and review, as well as being able to research past cases and gain insights faster, the efficiency that AI brings to a standard workday for an attorney cannot be ignored:
- An older study suggested that lawyers spend up to 2.24 hours out of an 8-hour workday on non-billable work, while a more recent thought-leadership piece from Bloomberg reveals that lawyers reported an average of 200 non-billable hours over a 6-month period.
- The number of non-billable hours can be significantly reduced with the help of AI. In fact, by utilizing the correct prompts and giving the right context, it’s suggested that ChatGPT, a popular AI program that you likely have already heard about, can reduce the time spent on common legal tasks, like preparing for an introduction call with a client, preparing a proposal, or sending a request to a legal partner.
2. Increase Access to Justice
While this may not seem like a direct benefit to the law firm on the surface, the fact that firms that use AI are more streamlined and efficient allows them to take on more work for more types of clients. For example, a family law firm could potentially create a pleading document that typically takes three hours to draft in only 20 minutes. In addition, legal professionals who were once overburdened with work may be able to take on additional clients with the help of AI without getting to the same level of workload that they were at before.
3. Reduced Costs
From the firm’s perspective, AI for lawyers allows firms to stretch their budget more by being able to do more with less. If typical time-consuming tasks suddenly become tasks that can be completed in minutes or hours rather than days, it opens up many opportunities for the firm to recalibrate its workflows. Plus, it may also mean that certain tools in the firm’s tech stack may no longer be needed due to AI.
4. Case Outcome Forecasting
Legal AI tools often include machine learning capabilities, which can help lawyers make better decisions regarding case outcomes and enable more accurate predictions. For example, the Toronto-based startup Blue J Legal created an AI-based legal prediction engine to help lawyers in tax law better predict and understand the potential outcomes of tax-related cases through more effective and efficient research.
5. Boost Client Perception
A perhaps overlooked benefit of implementing AI for law firms is the fact that the technology can be used as a way to promote the firm’s commitment to client relationships by streamlining services and showcasing to the client that the firm is using every available tool, including the latest technology, to determine the best way forward for the client’s case or project. For the firm or lawyer themselves, AI technology can also be used as leverage to better communicate the value of the legal service or services being provided to the client.
Challenges of AI in Law Firms
Although the benefits of AI in law firms are undeniable, there are some challenges that you should be aware of. Meeting these challenges head-on and developing ways to mitigate them is essential for law firms to take advantage of the potential of AI in legal services.
1. Integrating AI into Established Workflows
AI for lawyers can unlock a new level of efficiency for legal professionals and law firms, but bringing that reality to life requires implementing the technology properly into already established workflows in the firm. It’s not a technology that can be implemented quickly and then forgotten about—it requires significant thought and planning to get right. In addition, once AI tools are implemented, they need access to data to be able to utilize machine learning and work properly.
2. Creating a Two-Tiered System of Legal Services
Legal AI is often touted as a way to increase access to justice. Aside from it potentially freeing up the time of lawyers to take on more cases, there’s also the strong possibility that lawyers may have to somewhat compete with it. On one hand, legal AI democratizes access to legal information and can help consumers solve their own legal problems through DIY approaches like simple document drafting (e.g. Last Will and Testament) or even providing basic legal information to deal with a case themselves.
However, this inevitably leads to a two-tiered system of legal services. Like Googling your symptoms and trying to diagnose yourself with an illness rather than consulting a doctor, the legal advice found online may be solid, but only for specific cases or in specific circumstances. Navigating the plethora of legal information and being able to interpret it correctly is why people go to school for years to become lawyers. What this means for practicing lawyers and firms is that they may have to contend with clients who think they know the best course of action and think they can do it themselves, which inevitably leads to more complex messes for lawyers to clean up when the client finally enlists the help of a lawyer, or having to develop more robust ways to convince clients that the DIY route isn’t the right solution.
3. Meeting the Requirements of Regulatory Bodies
Many jurisdictions have specific data handling requirements that law firms must adhere to, or face hefty fines and penalties. For instance, the BC Law Society provides due diligence guidelines for law firms and lawyers to follow to ensure they store data properly. This involves ensuring that reasonable security measures are applied to the technology to ensure data is secure in transit and at rest. Further, the law firm should seriously consider potential security risks if data is stored or hosted in foreign jurisdictions. For the United States, the ABA provides similar recommendations.
At the same time, law firms should be questioning where the data that some of these AI tools is coming from. For example, ChatGPT uses a vast array of data that the company, Open AI, gathers from a wide variety of sources. This generative AI tool is not directly connected to the internet, so the answers it provides may not be current or relevant. It’s important to always review and vet any AI tool's answers to ensure accuracy.
Summary of Benefits and Challenges of AI for Lawyers
When the benefits and challenges of AI for law firms are examined, it’s clear that the benefits of AI for lawyers outweigh the potential challenges.
Let’s look at these benefits and challenges side by side for easy reference:
Benefits of AI for Attorneys
Challenges of AI for Attorneys
Implementing Artificial Intelligence for Law Firms
To implement artificial intelligence in your law firm, it’s important to create an effective implementation plan in advance. This plan should include the following:
- Determining what you need the AI to do for your firm. This is a high-level and open-ended question, but it’s meant to get you to list tasks, processes, and procedures causing bottlenecks across different firm operations. Consulting with all stakeholders is important in creating this list.
- Research legal AI tools. This step is needed to determine which solutions will work best for your firm and what your budget will allow. A wide variety of emergent AI tools are coming to the marketplace every day, so it’s important to consult with colleagues and others in your network during your research process.
- Determining how the AI tool will fit in your current tech stack. The average law firm will have a variety of different tools in its tech stack, and it’s important that these tools are unified so that information isn’t isolated in one tool. Ensuring that the legal AI tool that you’re choosing integrates with your existing tools (e.g., through a Rest API or otherwise) is important for business continuity.
Will AI Replace Lawyers?
Generative AI tools like ChatGPT are starting to be used in many different ways in the legal industry, including law firms. The use of generative AI for legal can be as simple as asking a legal question to jog the lawyer’s memory to more complex tasks like assisting with drafting entire legal documents.
While AI can provide legal analysis and suggest possible solutions based on data, it doesn’t have the ability to empathize with a client or demonstrate care and compassion. Instead, it simply looks at the data that’s available to it and provides insights—which can be anything from probabilities, percentages of positive or negative outcomes, and isolating data points that it believes are useful based on the case information it has to work with.
Based on this information, it’s clear so far that legal AI tools are unlikely to ever fully replace the human touch that law needs; specifically the ability to make moral judgments through conscious reasoning rather than connecting data points to spit out an outcome.
AI for lawyers is changing the legal industry big time—and at a rate that’s unprecedented compared to how technology has changed the industry in the past. It’s clear that firms and lawyers that work to take advantage of the potential of AI tools, while at the same time recognizing that it’s not a flawless technology will be the most successful in the years ahead.
Efficiency is the new word of the decade for the legal industry. And it’s clear that efficient law firms don’t bill by the hour; they bill based on value. To effectively manage and maintain your alternative fee arrangements, you need a systemized approach to pricing supported by powerful software.
AltFee is the legal pricing software you need. With a built-in library of customizable pricing templates to get you started, plus the ability to collaborate with those in your firm on specific matters, you have what you need to create or optimize your firm’s AFA pricing.
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