The Law Firm of the Future

Interview with Joseph Raczynski, written by Michelle Worrall Tilton

Kanas City Metropolitan Bar Association

Attorneys look to precedent to solve today’s legal problems. “Steeped in tradition” is how we often describe the legal profession.  As result, it’s no surprise that there is inherent tension between emerging technology and the legal profession. The American Bar Association’s 2020 TechReport, which surveys firms and tracks attorney use of technology in their practices, reported that only 7% of attorneys are using tech tools, such as Artificial Intelligence (AI), for document review and research.  Firms with more than 100 attorneys are more likely to use AI, as well as firms that engage in mass tort litigation. Despite promises of increased efficiency, productivity, and profitability, a significant number of attorneys cite distrust of the technology and underlying algorithms.

Even though the legal services market is estimated to be a $1T industry globally, Forbes reports that it is also one of the least digitized:

– Joseph Raczynski

That is, until the COVID-19 pandemic forced the legal community to remote hearings, yoga pants, and dining room tables seemingly overnight.  Prior to the pandemic, the ABA’s 2019 TechReport estimated that the vast majority of law firms of all sizes – other than solos – worked in traditional law firm environments. Now, many managing partners are rethinking their office space needs because technology allows attorneys and staff to work from home.  Cloud-based document storage doesn’t demand the physical space once required for the paper detritus of the legal practice. 

According to commercial real estate brokers with expertise in law firm office space, firms have been downsizing for some time – and the trend is expected to intensify post-pandemic.  It’s anticipated that firms will increasingly implement a hybrid model where employees schedule the use of a community workspace or a conference room, but otherwise work remotely.  This provides the opportunity for collaboration and meetings with clients in a professional and inviting setting – think chic hotel lobby – while reducing the real estate footprint and attendant expense. 

Despite the occasional mishap of appearing in virtual court as a cute kitten, the legal profession has progressed in dog years with respect to the use of technology during the pandemic.   Remote hearings provide greater access for certain types of cases and hearings.  Litigants and their attorneys are saving time and money by not having the hassle of travelling back and forth to court. It’s easier for litigants to attend hearings remotely without having to take off as much time from work or to arrange for child care.  Corporate clients are now accustomed to remote environments and online meetings.  Many companies, such as Salesforce, American Express, and Microsoft, have reverted to permanent work-from-home arrangements for some employees.  A silver lining of the pandemic is that the legal industry has had no choice but to embrace technology.  So, what will the practice of law be like in the next twenty years?

-Joseph Raczynski

Fortunately, we don’t have to guess how technology will transform the legal profession in the years to come nor do we need to rely on a DeLorean time machine with a mad scientist sidekick.  Thomson Reuters Corporation has a forward-thinking technology specialist on the payroll with the title of “Futurist.”   Joseph Raczynski is a Technologist & Futurist, Manager of Technical Client Management for the cutting-edge legal products and services company. Raczynski, who is based in Washington, DC and focuses globally specializes in the future of technology and its impact on the legal profession. He has expertise in cybersecurity, blockchain, artificial intelligence, cryptocurrency, and drone technology.  Raczynski also hosts a popular podcast, The Hearing, which focuses on legal innovation.

After talking with this fascinating tech expert via halo-conferencing (not really, but made you wonder), it’s clear that technology will play a significant role in the future of the practice of law.  While firms were pushed to adapt and use new technology during the pandemic, some firms that have operated for decades with little change, may revert back to that mindset.  Firms, however, that buck the system and invest in technology will thrive in the long term. According to Raczynski:

-Joseph Raczynski

Firms that are willing to embrace technology will provide better services for their clients. They will be better able to quickly sift through and digest immense sums of information. “In the decades ahead, data and services to understand that data will reign supreme,” Raczynski predicts.  Facing pressure from corporate clients to cap rates and reduce billings, some firms are incubating legal tech companies to speed development of software and other products to facilitate the efficient delivery of client services. Those that are successful will license their internally developed tech services to other firms or sell the technology to companies. Either way, these entrepreneurial firms are generating new revenue streams while developing tools to better serve their clients. For example, national plaintiff personal injury firm, Parker Waichman, developed case management software, which it licenses to other firms to help them manage mass tort litigation. Not to be left out, smaller firms are banding together in collaborative settings to invest in technologies together that they wouldn’t be able to manage financially on their own.

With insight from Raczynski, let’s zoom ahead for a glimpse into the future. 

Raczynski predicts that current roles undertaken by attorneys will change significantly over the next twenty years. “Much of the rote work being performed now, will be gone,” he says. “That said, many new facets which we haven’t even conceived will likely supplant some of those activities.”  Certainly, AI imbued eDiscovery tools will be the norm for document review.  This technology eliminates the “amounts of eyes on pages,” he says.

AI and machine-learning will continue to facilitate and expedite research and trial practice.  Raczynski describes how attorneys will have computer applications at their .  Research platforms will have semantic and nuanced understanding of the actual meaning of legal opinions and will go well beyond key-word matching.  The applications will quickly access every case and ruling on point and “spit out decisions,” which will likely be “the final decision,” or at the very least be “augmented intelligence” to assist the judge or jury, he predicts.  Litigation will become less burdensome and more efficient for the majority of cases.  Perhaps, too, this will result in significant financial savings to clients.  Interestingly, Raczynski anticipates that technology will reduce courtroom drama as finders of fact will make decisions based on data – and be less influenced by attorney performance.  Courts will be virtualized with mixed reality 3D glasses for the judge and jury that will bring crime scenes, accident reconstruction, and other cases to life.

Outside of the courtroom, Raczynski anticipates that technology will automate transactional work.  While contract negotiations will still exist, “everything will be interactive, voice automated, templated, intuitive, and securely stored on a blockchain,” he says.  Blockchain creates an immutable, digital record of transactions. It eliminates human error, which is commonplace in contract drafting.  Retinal scans will be used to confirm the validity of executed documents.

-Joseph Raczynski

Blockchain technology, according to Raczynski, will be run so that triggering language on this platform will automatically negotiate deals or execute contractual obligations. “What we are talking about is fully codified contracts,” he predicts, “with the ability to interact with factual data and either negotiate on its own, based on Party A’s and B’s preferences, or even self-litigate when something in the code goes awry.”  While blockchain is still somewhat nascent and the stuff of computer scientists, it will transform global commerce and the practice of law.

Technology will also transform law practice management and allow attorneys to spend more time serving clients instead of handling administrative issues.  Thomson Reuters conducted a study on time management and reported that with smaller firms, approximately 61% of their time was spent practicing law.  The balance of their time was spent on the business of running the firm, which is crucial, but not a billable activity. The larger the firm, the less time spent on administrative work.  In the future, law practice management will be facilitated through the use of a decentralized autonomous organization or DAO.  This is a business model structured on self-executing smart contracts that function without the need for in-person decision-making.  Smart contract governance doesn’t require boards of directors or firm management committees to meet, analyze data, and make decisions.  Rather, a DAO outsources the analysis through smart contracts allowing for token-holder network consensus.  Voting attorneys would hold tokens based upon their seniority, billings or pecking order status.

Admittedly, much of this technology is difficult to explain let alone visualize in practice.  However, there are steps that law firms should be taking now to better position themselves to be able to leverage emerging technology. “Opportunity abounds in the legal market right now,” Raczynski says. He portends a golden age for the practice of law: the intersection of where the legal industry marries technology.  While firms of all sizes were once reluctant to spend disposable income on technology – even on network security – large firms, in particular, are starting to increase their IT spend and budget for the future. Planning and budgeting for the proactive use of technology are key first steps. 

There has been a significant shift in law firm operational budgets allowing for an increase in technology spending. As attorneys have become more technologically advanced, there has been less need for clerical staff to draft pleadings and correspondence, perform filings, mail letters, and other tasks.  Younger lawyers, who have never used a Dictaphone or fax machine, have long been drafting their own briefs. Since the recession in 2008, firms have been increasing attorney-to-clerical ratios and spending less on clerical support staff. A legal secretary, who once supported one or two attorneys, is now working with eight or more.  As described earlier, firms are spending less on their office leases by reducing square footage.  Technology has filled the void left by these drastic operational changes, while freeing up cash for reinvestment in IT products and infrastructure.

Importantly, technology also levels the playing field. Solo and small firms are poised to benefit as the cost of technology decreases.  “If they decide to embrace technology, Raczynski says, “it enables them to automate, find answers quickly, and respond to their clients with aplomb.” He recommends that solo and small firms connect with the growing LegalTech community to see how they can learn, interact, and leverage new ideas to benefit their practices.  Additionally, law schools are excellent sources for technology training and incubating new ideas.

In Tomorrowland, there will be significant opportunities for tech forward iGeneration attorneys.  Law school graduates, who grew up with mobile devices in their strollers, will have key leadership roles.  Attorneys with degrees in engineering, network security, computer science and coding will be valuable hires.  As technology is second nature for them, they can undertake important IT operations and reverse-mentor firm members who aren’t as tech savvy.  

Finally, corporate clients aren’t going to wait for their hometown attorneys to become comfortable with emerging technology – especially when some firms are deploying high tech tools in their practices.  Corporations are investing in their own technology infrastructures and expect the same commitment from their professional service providers. They also expect law firms to engage in vigorous network security to protect sensitive client data from malicious actors, which is a real threat.  Ideally, law firms will automate routine research, drafting, and discovery review, so that attorneys can focus on customer service, including responsive and timely communications, learning about their clients’ unique business needs so they can be proactive instead of reactive, and cultivating new client relationships.

There is no time like the present to prepare for the future.  Attorneys should attend technology conferences, network with legal service vendors, join cyber law committees, and connect with futurists like Raczynski to gain a better understanding of the technology that is already transforming the practice of law.  Learning something new will feel uncomfortable at first, but it will get easier. The DeLorean is idling out front and ready when you are.

Podcast: The Hearing – Andrew Fletcher, Director at Thomson Reuters Labs

Lots of fun this week on The Hearing Podcast with my colleague Andrew Fletcher, Director at the Thomson Reuters Labs.  If you enjoy uncovering what the future (and the now) of the legal industry might look like, take a listen.  We toss aside the fluff, and meet at the cross section of AI, APIs, Design Thinking, Innovation, and how it all impacts the legal industry. 

Listen here:

https://podcasts.apple.com/gb/podcast/ep-75-andrew-fletcher-thomson-reuters-labs/id1389813956?i=1000517742116

or

CodeX FutureLaw 2021: Computational contracts create a Big Bang in legal

Originally published on the Legal Executive Institute.

By Joseph Raczynski

The bleeding edge of the legal industry is now building interfaces at the intersection of code and law through computational contracts.

These computational contracts (sometime called smart contracts), according to Stanford University, are a universal Contract Definition Language that will allow terms and conditions to be represented in machine-understandable way. As a result, computers will be able to process and reason over the contracts automatically with a guaranteed degree of accuracy. The Stanford project sees this as not only a significant reduction of legal transaction costs, but it also opens a variety of new options to create better contracts.

With these building blocks taking shape, we can finally peer into how technology will guide legal into a fundamental paradigm shift around legal contracts. This idea, among others, were discussed and debated at the recent CodeX FutureLaw 2021 conference, held virtually.

Before the legal pyrotechnics on self-executing contracts, the conference began in more of a reflective state. Thomas Kim, Chief Legal Officer and Company Secretary at Thomson Reuters, spoke about the industry transformations ahead, emphasizing the intelligent, thoughtful adoption of new technologies. In crafting his message, Kim focused his attention on the compelling need to establish industry standards around technology, where companies must create global values. Pivoting to regulation, which he believes will ramp up, Kim explained that is vitally necessary for companies and their technology to weave a fair fabric of social consciousness and awareness.

Finally, Kim described the key principles around artificial intelligence which Thomson Reuters has offered to the industry, prioritizing safety, security, privacy, and humanity.

codex

In another session, Allen Kay, a preeminent American computer scientists and Turing Award Laureate, led an eccentric yet nuanced keynote on intellectual curiosity and bias. He purposefully quizzed the audience, asking: “With so many bright people on the Supreme Court, why do we have such different opinions?” Utilizing theatrical metaphor throughout, he unpacked a theory of human perspective, with the theater in our minds. “Humans are easily fooled, want to be fooled, pay to be fooled, fool ourselves, and we pay to fool others,” Kay said, adding that most of our mind is still operating on instinct from 200,000 years ago.

Kay’s incisive vision on the human condition laid out the inherent concerns surrounding the next era of computational power and the biases built into them. Our malleable minds can be shaped by those in power with their narrative, he surmised, and without the legal industry applying critical thought, the producer of the play will create a scene in their own vision, i.e. bias within the code for the legal industry.

Forming the law into computational contracts

The conference then shifted to the concept of computational contracts covered by two different panels, which both were in near uniform agreement that we are going to see serious disruption to the contractual components of legal agreements in the near future.

Harry Surden, Associate Professor of Law at the University of Colorado, moderated the panel and described the complexity of helping computers understand the English language, which is no easy feat. Michael Genesereth, professor in the Computer Science Department at Stanford University, then began with a premise that we need to rethink how contracts are written, stating that there’s a need to “form the law into computable contracts.”

To do so, however, first we have to create a domain ontology, which is the first vocabularies and vernacular that can be used to describe a universe of the legal discourse. In this instance, we are referring to dependencies between types of knowledge in legal reasoning. It sounds easy, right?

codex

One surprising theme the panel offered was the interstitial nature of using AI to convert contract language to a form of computational contracts. “We are currently trying to rebuild the horse out of metal and machines rather than progressing to the car,” said Oliver Goodenough, Law Research Professor, University of Vermont. Instead, he said, we will get to a point where we need to rethink the contract itself and then code around it.

What panelists proposed was a system that used the ontology of a legal system, coupled with interdependencies and outside data to build a dynamic contract. Eventually, this would be a no-code solution that would be akin to the WYSIWYG (What you see is what you get) web pages that people build today, rather than using HTML.

The second panel focused on computational contracts by using the insurance industry as a backdrop. Michael Pieciak, Commissioner of the Vermont Department of Financial Regulation, described what computational contracts look like, noting these contracts are so rich in technology that it took a 122-page report to describe the algorithm they use for insurance underwriting.

Roland Scharrer, Group Chief Data & Emerging Technology Officer at AXA, described the complexity of what his company has built and how it works, adding that contract creators can get insights from data within the industry and then write the contracts. “This technology is real and being used now,” Scharrer said.

Panelists also observed that in the not too distant future, the contracts will be more complex, and users will be able to leverage external data with the contract itself. Eventually, the contract will be able to execute itself. We also will see an increase in the use of decentralization components, which is being embraced by the FinTech, eCommerce and insurance industries.

While sessions touched on automation and disruption, the binding element which connected all of the day’s debate was a focus on creating a more equitable, open, and fair legal landscape imbued with thoughtful, unbiased technology. Reflecting on the keynote, it’s fair to surmise that the opportunity is immense — yet, we must commit to critical thinking, challenging traditional norms, and re-conceptualizing how technology can enable access to justice and better legal services for all.

Non-Fungible Tokens (NFTs): Asset ownership via blockchain rockets into legal

In a two-part series, we will look at Non-Fungible Tokens, explaining what they are and how they will impact numerous industries; and how decentralized finance (DeFi) is critical to understanding NFT’s importance within the legal industry.

Originally published on the Legal Executive Institute.

By Joseph Raczynski

Welcome to the early days of where blockchain goes mainstream, and the legal industry needs to take notice.

While Non-Fungible Tokens (NFTs) have been around for several years — remember CryptoKitties or even the original NFT, called CryptoPunks? Even if you don’t, NFTs have officially exploded into popular culture, begging the question: So, what are they?

A Non-Fungible Token is a token stored on the blockchain, which itself is a secure distributed database with redundancy, immutability, and clarity into tracking data or ownership. A token proves ownership of an asset. For example, a deed to your house is a sign of ownership to that plot of land and building. In the case of the first digital token, Bitcoin, a single Bitcoin is the title of ownership to the underlying value of the Bitcoin.

The best part about a token on the blockchain is the ability to track ownership and therefore authenticity, undeniably proving ownership.

CryptoPunk #7129 Sold for $90,000 recently

Fungible refers to an asset that is easily exchangeable. In the classic example, a dollar is very fungible — you can hand a dollar to me in exchange for some gum, and I can then re-use that dollar for a can of soda. The physical dollar maybe different because I swapped with another in my wallet, but it is easily replaceable and exchangeable, so it is fungible.

Now, it gets interesting. A non-fungible token is a unique token that is not easily exchangeable or replaceable with another. With the mania that is occurring with NFTs, the best example is with art. Recently, Mike Winkelmann, known as @Beeple, a renowned artist who has worked with Nike and Apple, sold 20 pieces of his own work on the digital marketplace Nifty Gateway for a total of $3.5 million. And in the latest eye-opener, he sold a collection of many of his works combined into a masterpiece, titled EVERYDAYS: THE FIRST 5000 DAYS at Christie’s for $69 million. These transactions occurred on Ethereum, the primary blockchain platform of record for storing value, but Winkelmann’s art itself was simply digital images.

With the NFTs, we are proving that rare and scarce representation of things can create value, and that value can be captured on the blockchain. Let your imagination run wild for a moment: What this means is that nearly anything and everything that is represented digitally could also carry provable value.

Would you pay 2.5 million for ownership of Jack Dorsey’s first Tweet?

For example, Jack Dorsey, CEO of Twitter, is in the process of selling his first Tweet, the original Tweet of Twitter. It is, as of this writing, estimated at a value of $2.5 million and projected to go higher. Why might you ask? Well, it is feasible to collect royalties on that tweet once you own it; or, you could hopefully resell it in the future. Lastly — and again, I beg your imagination for this thought — in the not too distant future, with people living in virtual reality, these pieces of art will have a home inside those worlds, too. Other examples, the NBA has now gotten in on the action by leveraging NBA Top Shot, selling limited edition, finite numbers of virtual basketball cards, including a short clip of a LeBron James dunk, which recently sold for more than $200,000.

In the past, I discussed asset tokenization, which is the simple idea that nearly anything could be represented on the blockchain as having value. It this is now happening. This could be a painting, your car, a house, or even a Tweet. Essentially, if you have something original, that you can then prove is yours, that item can derive value.

Through the lens of the legal kaleidoscope, we are entering a complicated but colorful place, and there are an incredible number of areas this will touch. As technology push us to rethink what we know, NFTs shall do the same. In this nascent area, contemplation about the impact on both the practice and business of law will hit multiple fronts. Here are just a few:

  1. Intellectual property — NFTs carry a huge target on their virtual backs from the IP angle. At the heart of these tokens is uniqueness and ownership, and that means that eventually, litigation will follow.
  2. Trust & estates — Possession comes in the form of a digital wallet. Access to the private and public keys will need to be accounted for and administered for these sorts of new assets.
  3. Anti-money laundering — One worry, at the moment, is that the buying and selling of these digital assets could be a way to disguise or launder dirty money. Although the underlining technology of the blockchain is leveraged, a general misunderstanding of its complexity makes it a temporary safe haven for the scofflaw.
  4. Tax & accounting — Millions of dollars are being transferred, soon to be billions; and those in the tax & accounting field will need to better understand this space to assist their clients. How are sales treated? What does appreciation impact? And how can we account for the transactions?

NTFs are likely here to stay. They will continue to evolve, however, representing nearly every assets class going forward. Law firms, corporations, tax & accounting firms, and government agencies will need to pay attention to this space in order to account for how this new technology impacts their individual [digital] pictures of the law.