News

09/26/2017

Legal technology and the digitalization of the legal market

Legal technology is becoming more and more important in law firms and for lawyers. We spoke with two experts at Bucerius Law School about the topic of the year, Markus Hartung, Director of the Bucerius Center on the Legal Profession; and Dirk Hartung, Bucerius alum and the Executive Director of Legal Technology since January 2017 who prepares students for the digital world. What can we expect in the future?

Can you explain what “legal tech” means exactly in the legal market?

Markus Hartung: Legal tech is a collective concept for everything technological. It comprises all of the software that complements and supports lawyers’ work. There are three categories: Legal Tech 1.0 is everything that improves the everyday workflow within the law firm such as legal databases, language recognition programs and time recording. Category 2.0 includes software controls for certain automatisms and creates automated workflows by administrating facts or obtaining specific approvals. It registers and automates regularly recurring processes. Once we get to 3.0, it becomes more difficult. These tools examine, read, and understand documents. The software is not only looking for terms, but puts them in context to give them meaning. Software programs like E-Discovery and Document Review check large amounts of data and extract information.

Can you give an example?

Markus Hartung: When investment properties are sold, the buyer wants to know how profitable they are. It used to be that someone would need to sit down and painstakingly go through all of the contracts to sort that out. Today, there is software that does the initial phase for you. It recognizes certain words in a context and creates an excerpt with financial data that an attorney can use. The advantages: the software is faster and makes fewer mistakes.

Sounds like big changes ahead in the legal market.

Markus Hartung: It does. Software technology is particularly helpful in the development and structuring of large-scale issues and it can also identify correlations between data, patterns and deviations. When analyzing tens of thousands of court cases, for example, it’s possible to identify decision-making patterns that may in turn predict future decisions. Usually when it comes to forecasting the successful outcome of a lawsuit, an attorney has only a gut feeling to go on. Software analysis, however, makes an accurate prediction much more likely.

How do things look in legal consulting for the general public?

Markus Hartung: Since consumer claims are usually small (and generally financially uninteresting for lawyers), it doesn’t look that good in Germany. According to an investigation by the Gesamtverband der Deutschen Versicherungswirtschaft (GDV), or German Insurance Association, 70 percent of Germans do not hire lawyers because they are afraid of the cost. In the last few years, relatively inexpensive technological alternatives have been developed that can process high volumes of standardized consumer claims. For example, websites like wenigermiete.de or flightright.de. These are risk free options for the consumer and the advice provided by these sites is simpler and more effective for them. Flightright, for example, helps to enforce compensation claims when a flight has more than a two-hour delay. The average claim is 250 Euros, and the highest is around 600 Euros. For many years, the claims were never enforced. Airlines blamed delays on circumstances beyond their control and refused to pay. Flightright took on these claims itself or assigned lawyers to the cases. In the end, the passenger receives compensation, minus a commission fee. If Flightright loses the claim, the passenger is not charged a legal fee. Normally, hiring a lawyer is always potentially expensive.

Why is legal tech so important? Why is there so much hype about it right now?

Markus Hartung: Because it exists. Clients in the field of business law are advancing legal tech. It’s developed at a rapid pace. Three years ago it wasn’t really on the agenda. But in the last few years and especially this year, it’s all anyone can talk about. It is a topic in every publication and at every conference.

Dirk Hartung: About two or three years ago, during the research for our joint study "How Legal Technology Will Change the Business of Law", there was practically no one to discuss this with in Europe. Perhaps a few stakeholders but no real legal technology scene. Today everyone wants to talk to us about it. Of course we are thrilled about all of this enthusiasm. At the same time, it leads to lofty expectations and we don’t want the development to disappoint. We need to be realistic. Digitization in the legal context is only beginning to be explored. The fundamentals are being established by what is happening at the moment. The timing depends on the technology itself. The necessary hardware has become less expensive and the software is simpler and more affordable than it was ten years ago. This factor is driving the current technological development. And there is much more data to work with than ever before.

Are lawyers excited about the trend?

Markus Hartung: On the contrary, 40 percent of lawyers are rather worried. The majority does not see the positive aspects and they aren’t thinking, “Finally! We can get rid of these standardized things.” The legal profession is a snail that needs to adapt to the extremely high pace of digitization.

How are universities reacting to the trend?

Dirk Hartung: Some institutions are making efforts to integrate this development into the curriculum. But it will take time. At Bucerius Law School, we were fortunate enough to be at the forefront of this development and have played a significant role in it. That’s why we already have an extensive course offering which we will expand considerably by the end of the year and beyond. We can anticipate these trends because we are an innovative institution and are well connected to the legal practice - through the Center on the Legal Profession and our sponsors, for example. We have an edge here because we already have experience with these concepts, while others are still working on them. As far as I know, Bucerius is the only institution offering something like this in Germany.

What is Bucerius Law School offering its students?

Dirk Hartung: I visited every American university with a focus on Legal Tech. I spoke to professors, students and administrators. And I took my impressions back to Bucerius Law School. Our approach is holistic. We have been working on small pilot projects for a while now. We started our Legal Tech lectures series in 2015. On our own. We invite innovative entrepreneurs and academics to give lectures in typical informal Bucerius style – with pretzels and wine and conversation. Together with IBM, we are offering a course where our students join computer science students to get to know the Watson tools and give feedback on the program.

Next, we will need to incorporate basic technology training into the Bachelors curriculum. We will also continue the discussion with our American partners. One possible format may be a summer school program. Our goal is to create a good four or five-year academic experience and nowadays this includes a strong understanding of technology. Our students expect our curriculum to hit the right notes. We always plan five to seven years ahead because that is when students enter the labor market and our training is put to the test.

Will technological knowledge enhance a student’s career chances?

Dirk Hartung: Of course. Students should have a fundamental understanding of technology. They don’t have to be able to do advanced programming but they should know and be able to use the terminology correctly. They should have a feel for programming and for technological background. We want to provide them insight into when using technology is useful and to critically assess its limitations.

Will there be new professional opportunities in the legal field?

Dirk Hartung: Yes, the legal profession will diversify and become more exciting. We have never had any legal data analysts, for example, but we will need them in the future. In the transitional phase, law firms can hire attorneys specialized in technology as advisors and innovation consultants. At the same time, we still have a great need for excellent legal counselors. But even classical careers in law will differentiate themselves. Those who understand how to make money with technology will have an easier time making partner.

Additionally, lawyers who understand this will be needed to regulate technology and think about the effects of digitalization on the law and its role in society. In short: in the future, lawyers, judges and corporate and administrative lawyers will need to understand technology. The more they know, the better they will be able to perform.

Bucerius Law School includes legal tech in its curriculum and created the Bucerius Center on the Legal Profession. How does it work?

Markus Hartung: We teach the basics, explain what’s out there, where legal tech is used or how the digitalization process works in a law firm. We cover completely new topics that we have not seen before and that have never before been included in the curriculum. The next seminar, entitled, “Legal Tech Strategy for Business Lawyers”, will take place on September 28. To my knowledge, there is no other German-speaking institution aside from us right now offering such courses.

We hold lectures, produce publications and are currently working on a book that will come out at the end of the year. It is the first one of its kind that will focus on legal tech. We also support law firms and legal departments on the path to digitalization by evaluating their workflow and figuring out what can be standardized and automated. Through this process, we also examine new consulting opportunities that may develop as a result.  

In the meantime, there is now a legal “chatbot” online. Will technology soon replace lawyers all together?

Dirk Hartung: That is just a myth to scare people. I believe, rather, in the “augmented lawyer”, who is assisted by technology, not threatened by it. A chatbot is first of all just a particular sort of user interface. It replies based on machine learning or a predetermined set of rules and reacts to the user’s input. The program has a very limited capacity when answering open questions – one shouldn’t expect a personal answer. The degree to which a lawyer will be affected depends on what that lawyer does. The innovative lawyer will not be replaced in ten years.

In your opinion, what will the legal market look like in the future?

Markus Hartung: Computers will not replace lawyers, rather they will take care of some of, or many of a lawyer’s regular tasks. And lawyers must ask themselves what they need to do that cannot be done by an algorithm. Technology is here to stay. And it is constantly improving.

The work that can be assumed by technology will be. And this will affect the traditional lawyer’s role. Lawyers will not be made redundant, however their daily workload will look very different from that of today.

Dirk Hartung: On the whole, the legal market will be better in ten years. Clients will find it easier to use the legal system and businesses will find it less expensive. There will be alternative providers and the legal profession will become more diverse and interesting. Large law firms will shift their focus and cooperate more effectively and transparently with their clients. In order to achieve this, we need to deal with technology and topics like project management and process optimization constantly – and not only, but especially in training lawyers.

Text: Anja Reinbothe-Occhipinti, Translation: Jiffer Bourguignon