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Big data: changing the way we work

The use of data in a legal environment

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27 April 2017

Law firms will routinely tap into valuable data that is currently unstructured. The speed at which data is being created and how it is analysed are changing the legal world. Some 90% of data in the world today was created in the last two years.

Law firms only account for a small fraction of the world’s data creation, but it is no surprise that firms already store a large amount of data. A buzz term of the moment – ‘big data’ – is one that is evolving, frequently not fully understood and often used to encompass machine-learning, analytics and artificial intelligence. An early model – the ‘3Vs’ – defines big data as high-volume, high-velocity and with a high degree of variety.

Big data is widely considered to refer to extremely large and complex datasets that can be analysed computationally to reveal patterns, trends and associations. How is this whole field applicable in practice to large law firms?

Volume of data

Large law firms hold significant quantities of data, including documentation from past deals and transactions, email correspondence and phone records. Data is usually only useful in so far as it is leveraged by people asking the right questions.  

Using various analytical tools, law firms may soon tap into their huge and often largely unstructured deal records. These could, for example, be used to automatically provide lawyers drafting documents with deal-specific precedents and language already used in similar transactions. This would be a significant departure from the dynamic templates many law firms currently use, which construct an initial document from answers to a questionnaire, which the lawyer then tailors as appropriate.

Deep analysis of existing data patterns stored in historic documentation using data mining techniques would mean that looking for precedent documents may no longer involve lengthy ‘keyword’ searches. Highly relevant past transaction documents may be presented in much the same way as Amazon or Netflix currently target what customers or viewers are likely to want.

Research

Legal research, like many other research fields, has been changed significantly (but slowly) by the internet. Big data, combined with natural language processing, will dramatically speed up developments. Put simply, the field of natural language processing is concerned with the ability of computers to understand and derive meaning from human communication. This is already being applied in a legal context – for example, Ross Intelligence, which uses the IBM Watson (pictured) supercomputer, has developed an artificial intelligence legal research system that is able to keep track of the most up-to-date changes in millions of cases.  

The difference in this approach from traditional databases structured around ‘keywords’ is that Ross Intelligence uses natural language processing to find relevant information from large amounts of unstructured data. In transactional work natural language processing can, for example, enable large-scale analysis of loan facility agreements or derivative contracts which are presented in different formats and the subsequent automatic extraction of key information to determine precisely what a market standard is at a given point in time.

Predicting the future

Crunching data can be useful in helping to accurately predict the outcome of litigation or other legal decisions. The Californian start-up Lex Machina, which specialises in IP litigation research and counts Google and Nike among its clients, creates structured datasets from publicly available data (for example, hundreds of thousands of court documents) and helps lawyers predict the outcomes of different legal strategies.

Lex Machina can even be used to establish the most favourable jurisdictions to bring cases. Quantitative legal predictions based on big data and analytics are becoming increasingly accurate, with Daniel Katz’s team at Michigan State University able to accurately predict 70% of the Supreme Court’s overall decisions based on the last 60 years of Supreme Court data. This technology can be applied on a smaller scale to gain some indication of which litigation lawyers win in front of which judges and which arguments work better in front of particular judges.

Clients will increasingly demand computer modelling and analysis of their relevant claim or transaction alongside expert human advice before embarking on potentially costly work.

Legal spend and choice

Improved analytics are already helping law firms offer clients enhanced services at better prices. However, uncomfortably for law firms that are slow to adapt, this will also work the other way around: clients are increasingly analytical in the selection of advisers and the fees that they pay.

Big clients, especially insurers and banks, are developing and using tools to run thorough analysis of legal spending. Clients usually keep records of legal spending, but improved analytics enable large organisations to have relevant information at their fingertips when negotiating fees. Moreover, legal analytic software can already undertake performance assessments on individual lawyers and firms so that the most effective and cost-efficient legal advisers are instructed.

Relationship-based selection of legal counsel by in-house legal departments is and will continue to be disrupted in a meaningful way. In the short-term this may put pressure on less-competitive law firms in a similar way to the effect TripAdvisor has had on some restaurants and hotels, but in the long-term this will surely lead to better legal services delivered to the client.

Law firms as businesses

Big data-driven improvements in business operations are already well under way and these will trickle down to change the way in which law firms operate. This is recognised at a management level. A recent survey of more than 1,000 companies headquartered in 19 countries showed that 85% of respondents believe big data will dramatically change the way we do business in future.

These developments include, for example, enhanced targeted marketing, improved recruitment and better allocation of internal resources, which can lead to better strategic and operational decisions.  

A particularly interesting example of improved data-driven business practices, which combines natural language processing and legal spend, is the way in which invoices are delivered. The wording of letters or emails attaching invoices can affect the time clients take to pay the invoice. By analysing the whole billing process, including all historic invoice wording, times between issuing an invoice and payment, and invoice amounts, law firms will be able to optimise billing processes and even automatically adjust them for particular clients.

The pace of change in the legal world is often seen from the outside as slow in comparison with other professions and industries. It is perhaps unsurprising therefore that a recent study of how 45 companies have been using big data to deliver better results did not feature a single law firm. However, big data will have an impact on both the practice and the business of law. Big data and advances in analytics have created opportunities that some law firms and clients are already capitalising on, with many more opportunities emerging.

Clear strategies using big data will soon become essential for large international firms that do not want to be left behind by their competitors and clients.

This article was written by Clifford Chance trainee Peter Hanton. It was originally published by Law Gazette and is available here.