Artificial intelligence (AI) software and legal services – take the very long view

During the late 80s and early 90s, I was enthralled by the prospects of artificial intelligence for lawyers. I even wrote for the ABA Law Practice Management Section’s newsletter on document assembly (See my post of March 24, 2005 doubting the spread of such software.). But that early promise never ripened into robustness, and I drifted away

A profile of one of the legal AI pioneers, Marc Lauritsen, carried me back to those years. The piece, in Law Practice, Vol. 33, Jan./Feb. 2007 at 27, mentions the International Conference on AI and Law, to be held at Stanford Law School in June 2007. http://iaail.org I wish the participants and their projects all the best.

Someday, forms of AI I will help law departments, but it may be about when we all go paperless, vendors understate the benefits of their wares, and the Internet calms down (See my posts of March 27, 2005 on artificial intelligence software; April 7, 2006 and its reference to neural networks; Feb. 23, 2006 on patented search software.).

Globalization and its discontents – the all-lawyer conference to meld an international team

Take note of one more practice of the law department of Cummins, a $9.9 billion manufacturer of engines. According to Counsel to Counsel, Jan. 2007 at 4-6, each year the 21-lawyer department holds a conference for all of its lawyers, many of which are based in four countries other than the US. Although the article characterizes the conference as a session to bring attendees up-to-date on the law, it undoubtedly serves an important additional purpose: bringing members of the law department together and helping them become more collegial (See my posts of Sept. 22, 2005 and March 25, 2005 on law department retreats and offsite conferences.).

Cottage industry: off-shore providers and intermediaries of legal services

Much of the ruckus about off shoring legal work has died down, but there is the occasional recrudescence. Two vendors were mentioned in the Nat’l L.J., Vol. 29, Jan. 15, 2007 at 16 as part of the legal process outsourcing industry: Pangea3 LLC and Lumen Legal. Others I am aware of include Office Tiger, Atlas Legal Research and Xansa (See my posts of Nov. 14, 2005 and references cited regarding off-shore resources; and Jan. 27, 2006 and Jan. 6, 2006 and references cited.). OffShoreXPerts listed 875 cites when I searched for “Legal/Law Outsourcing” on Jan. 27, 2007.

The article makes the distinction between fungible and non-fungible categories of legal work, including in the fungible categories such tasks as “review of electronic documents, contract review, patent application drafting and even legal research and writing.” The gamut of tasks that can be done is potentially huge (See my post of Jan. 25, 2007 with a different slant on commodity legal services.), the dollars (and rupees) and stake are huger, and the potential implications of offshore legal services over time are, well, hugest.

Allocation of time by a general counsel (JDS Uniphase)

In the Nat’l L.J., Vol. 29, Jan. 8, 2007 at 8, there is a profile of Matthew Fawcett, the general counsel of JDS Uniphase Corp. Fawcett describes how his time is distributed: “25% is devoted to management, 20% to corporate matters, 15% to intellectual property, 15% commercial concerns, another 15% to mergers and acquisitions and material deal issues, and 10% to ‘potpourri’.”

I presume that “management” has to do with running the law department, which comprises 30 lawyers and professionals in four countries. Maybe not, however. Most general counsel might describe a similar breakout, with some having less on intellectual property and others having a category for “participation as a member of executive management” and “board and senior executive advice” (See my post of Aug. 28, 2005 on the role and term “consiglieri.”). Possibly Fawcett includes this facet of a general counsel’s role in “management,” but then when does he lead and manage the law department?

Work done in-house compared to dollars spent outside (JDS Uniphase)

Legal metrics catch my eye and the Nat’l L.J., Vol. 29, Jan. 8, 2007 at 8, about to Matthew Fawcett, the general counsel of JDS Uniphase Corp., offered some eye-catchers. The profile says that the company’s “legal arm” – it does the legwork? – consists of 30 lawyers and that they perform nine-tenths of their total work in-house. That says to me that of all the legal services needed by JDS Uniphase, only one-tenth is done by external providers.

Now the eyes are caught: a paragraph later, the profile gives Fawcett’s estimate that “66% of the legal department’s annual spending goes to external providers.” Nothing unusual, since a median spending ratio is about 40 percent inside, 60 percent outside.

But, and I’m probably missing something and certainly being microscopic, if two-thirds of that large law department’s budget goes to pay for 10 percent of the company’s legal work, something is out of kilter.

Specialty litigation support firms – medical/nurse analysts

The era of specialization is upon us, so it should surprise no one that a laser-focus firm such as Medical Research Consultants (MRC) flourishes. MRC, according to Met. Corp. Counsel, Dec. 2006 at 18, provides nurses who are trained to support defendants in mass tort and personal injury litigation. MRC’s staff understand how to analyze the conditions alleged by plaintiffs, how to assemble pertinent medical evidence and records, and generally how to complement with medical knowledge the legal skills of law firms and the technology skills of lit support vendors.

MRC is but one of a large number, I am sure, of targeted litigation vendors. The existence of these satellite providers, revolving around law firms and law departments, allows for unbundling aspects of litigation. They also highlight the importance of litigation management: effectively bringing to bear in large cases a team of service providers (For more candidates for this team, see my posts of Oct. 20, 2005 on settlement counsel; of Nov. 14, 2005 and Sept. 18, 2006 on offshore document-review teams; Oct. 24, 2005 on decision analysis specialists such as Bruce Beron and Marc Victor; Feb. 9, 2006 on document discovery vendors; July 4, 2006 on litigation and trial consultants; July 11, 2006 on court reporters; and July 14, 2006 on class-action claims firms.).

Agency theory doesn’t translate from economics to law departments

Agency theory, one of the most influential economic theories according to Jeffrey Pfeffer and Robert I. Sutton, Hard Facts, Dangerous Half-Truths & Total Nonsense: Profiting from Evidence-Based Management (Harvard Bus. School Press 2006) at 65, “presumes that people at work seek self-interest with guile, deceit and cunning.” Moral hazard runs rampant. In economic theory, the term “moral hazard” refers to the possibility that the redistribution of risk changes people’s behavior. Accordingly, when a company agrees to pay one of its lawyer-employees a fixed salary, that decision transfers risk from the employee to the employer and changes the lawyer’s behavior. The lawyer may coast, freeload, and malinger unless there is constant supervision and control.

Pfeffer and Sutton maintain that there is much evidence to the contrary (See my posts of Jan. 16, 2006 on the principal-agent problem; Aug. 13, 2006 on moral hazard; and Dec. 23, 2005 on information asymmetries.). Lawyers may not want to sweat constantly over difficult and tricky legal conundrums (See my post of Oct. 18, 2005 on lawyers not wanting to think hard all the time.), but neither are they unscrupulous and conniving agents, shiftless gadabouts who shirk routinely.

In my experience, nearly all in-house counsel work steadily and try to do the right thing the right way.

Semiotics as a sign of things to come and things that have come

There is such a thing as a semiotic view of culture. Practitioners of semiotics sharpen their awareness of how people construe the world through what they refer to as “signs,” not merely by means of verbal and written clues but also by reference to objects from everyday life. These ideas came from a selection in the New York Review of Books, Jan. 11, 2007 at 32.

When a law department changes its dress code to casual, a semiotician would take note (See my post of Oct. 22, 2005 on dress codes.). When most lawyers are assigned offices of the same size, there is another sign, another reference to culture and values (See my post of Feb. 20 and Nov. 8, 2005 on cubicles in law departments.). People in law departments take note of who sits near whom at meetings. Posters and pictures in offices tell semiotic tales.

Lawyers love and rely on words, but semiotics teaches managers of law departments also to pay attention to artifacts and behaviors in the department. They are all signs and clues to its culture, morale, teamwork and productivity.

Business intelligence and data mining: all processes create data

All processes can produce data (See my posts of April 27, May 1, and Oct. 16, 2006 generally on law department processes.). Since processes happens repeatedly, someone can count input, elapsed time, participants, output or all of these. The contract review process comes to mind as an example. Any law department can quantify the number of contracts it handles, turnaround times, sources and kinds of contracts, time spent by lawyers and paralegals on the contracts and the varieties of work done on them, the dollar volume covered, number executed, issues arising, and many other quantifiable aspects. In fact, any process spawns an infinite amount of data.

Data, however, does not fully represent what happens during the process, because inherent in processes are many instances of lawyers drawing on tacit knowledge or experiential judgment. To stay with the contract review, it may be that the in-house lawyer has dealt with the other party before, or the combination of representations made in the agreement bodes ill. Data can’t do justice to the complexity of a legal process, but the data is always there. Where there’s the smoke of numbers there’s a smoldering process.

Let’s think again about “commodity” legal services

According to a piece in MIT’s Sloan Mgt. Rev., Vol. 48, Winter 2007 at 11, if you perceive a product or service as a commodity you will stunt your creativity about it. In the author’s words, “the fatal lure of the commodity ideology is that it becomes a self-fulfilling prophecy.” The economics of “good enough” innovation become good enough and the potential for change and improvement is consciously or unconsciously undervalued.

Sip and fall lawsuits may be high-volume and low challenge; workers comp issues seem to most people to be administrative and barely legal; nothing much new arises in a sea of bankruptcy claim filings – all of these services are perceived as legal child’s play, commodity work, except by practitioners.

Simply because a certain legal service is frequently done and many lawyers are competent to perform it does not at all mean that someone can’t provide that service much more effectively nor devise a breakthrough service proposition. To label work as commodity work is conclusory, dismissive, and not conducive to thoughtful and creative management.