Legal Services Under Assault or Under Innovation?
by: Tom Hochstatter, President
In September, I wrote about the Arizona State Supreme Court ruling in favor of dropping Rule 5.4 - allowing non-lawyers to have ownership in law firms in Arizona. That new ruling goes into effect on January 1, 2021 and we’ll be right there - as an IP sector observer, and possibly more ;)
That ruling along with Utah’s “sandbox concept” and other states threatening similar moves, legal services are due for a major metamorphosis. There’s so much going on in the legal services section, I spend quite a bit of time researching it to keep up on the latest trends, challenges and opportunities. Just this week I reviewed multiple reports, surveys and articles that illuminate this all-out “assault” - well at least assault on the status quo. Here’s what is trending.
Litigation Financing
Burford Capital released their 2020 Legal Finance Report this week with tons of great highlights from their research and interviews with in-house counsel and outside counsel. I encourage you all to read it and see where you and your company or law firm stack up with the marketplace. There is no question that more firms will take advantage of creative investment and financing and recommend that their clients participate as well. In addition to the many new entrants and new funds that have recently announced I believe you’ll also see new cost of capital models - thankfully driving that cost down due to so much new competition.
Legal Firm Adoption of AI-Tools
Laggard - that’s the summary for law firms’ adoption of AI-based tool sets to further automate their respective practices, according to ABA’s 2020 Legal Technology Survey Report.
“Just 7% of respondents to the ABA Legal Technology Resource Center’s survey reported that their firms use AI tech tools, a decrease of one percentage point from a year ago.”
Now, in fairness to this adoption, or lack thereof it appears many of the tools that promised results were still wanting and that based on their costs aren’t meeting their value proposition. Here at Techson we created Limestone|Report our first foray into legal services AI-tools. Our approach was to create a transaction based patent research offering to allow lawyers and inventors to use and pay for results only when they needed them instead of buying them in anticipation of use. If law firms cannot find seamless ways to pass costs onto clients then there are serious headwinds to adoption especially while we are all dealing with this lingering global pandemic. Pay for performance will be the new rate card.
Billable Hour Under Assault Too
Fixed rate! Flat fee! Contingency only! Pay on success! It’s hitting us all, on all sides. Much like the headline of this Law.com article “Why Time is Up for the Billable Hour” billable hours are also under assault in favor of new and creative billing models. Dovetailing off the ABA’s AI survey above, law firms can’t just offer new billing models with their current expense models. Couple that with the investor crowd intent on disrupting, I mean, investing in law firms and we’re moving towards the perfect storm. So firms need to look at solutions that automate the most tedious and time consuming aspects of their practice that use to be billable and embrace their customers’ new expectations of services and cost-effective legal results.
Another way Techson is helping in the practice of Intellectual Property is our recent announcement of Patent Research as a Subscription (PRaaS). It allows our clients to subscribe to a set level of research - so no more tedious quotes, fixed (and fast) turn around times, consistent researchers, and known quality of results. Just one less variable in the equation; so, everybody wins.
Bottom Line: Legal services models are under assault. No question there. The real question is how are you planning and designing your practice or your engagement with law firms to embrace the change to maximize your ROI and positive outcomes in 2021? If you want some guidance, message me here and I’ll provide you with a roadmap on how we are going to make heros out of our clients in 2021.