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For a long time, the high transaction costs brought about by the monopoly of the legal profession have kept some issues that should have been brought to justice unresolved for a long time. A new breed of legal tech companies is working to address these issues and allow access to justice, bringing about improvements in access to justice. The combination of artificial intelligence, machine learning, encryption technology, cloud services, etc., is considered to be able to solve more legal problems that are traditionally considered difficult to solve. The outstanding legal technology startups that emerged during the new crown epidemic either use the platform to better match ordinary people with legal experts, or use automated systems to reduce the need for lawyers in general business activities to save costs. And traditional large law firms with large human and material resources continue to embrace technology trends to better adapt to the ever-changing needs of their corporate clients. This article summarizes several trends in the legal technology industry in the post-epidemic era, in order to help readers make a basic prediction of possible outlets in the legal technology industry in 2023.
A leap forward for chatbot lawyers
As the first batch of products of artificial intelligence + law, robot judges were once an important topic in the industry. And since the advent of ChatGPT, AI-based legal advisors will play a role closer to lawyers in the dispute resolution process. A few days ago, the chatbot launched by artificial intelligence company DoNotPay uses dialogue templates to help users solve public affairs and legal issues. This chatbot has been very successful. Initially used in speeding cases, the chatbot can guide defendants through a headset through their court defenses to escape the fines and consequences associated with speeding charges. In less than two years, the company has successfully eliminated 160,000 parking tickets in New York and London. The company further claims that it has solved millions of related cases in total since its inception. Recently, DoNotPay told the media that this robot lawyer will participate in a speeding ticket hearing in a court in the United States in February this year, achieving a breakthrough from 0 to 1 for robot lawyers in court. Although DoNotPay did not provide further information on the case and the parties involved, the company plans to be responsible for any fines incurred in these two cases, in order to compensate the two defendants for participating in the company’s “experiment”. The CEO of DoNotPay explained that the company has undergone extensive training and learning on its chatbot so that it does not lie or deviate from the facts presented, hoping to eliminate the possibility of being charged with perjury in court.
Chatbot lawyer technology seems to have taken a leap forward with the release of ChatGPT. Companies like DoNotPay already offer some AI tools on their website that can script written communications to assist those looking to avoid or minimize fines. Of course, it is not ruled out that there will be companies that come from behind to optimize these services in 2023, but at least for now, robots appearing in court seem to be just an ideal concept. These startups are trying to encourage courts to embrace technology and allow more people in need access to justice.
Dispute resolution goes virtual
Just as the birth of the Internet brought new types of disputes—the Metaverse will provide fertile ground for new types of disputes to flourish. No matter how watery the mainstream Metaverse line of products is currently on the market, the Metaverse still involves new mediums and methods of interacting with other individuals and companies. At present, some metaverse companies have developed platforms that are internally oriented and do not involve users in conducting business transactions (such as enterprise conference platforms, etc.), but a large part of metaverse-related controversies stem from the fact that their derivative platforms allow users to participate in the ever-growing virtual world economy, For example, the thriving game-like Metaverse product has always attracted investment and consumption of different sizes: consumers invest their fiat/crypto currencies into the platform’s native currency so that they can trade on the relevant game platform. Businesses can purchase virtual real estate to secure their presence in virtual environments, or use their intellectual property to create new types of digital items that can be purchased on the platform. Users within the platform can use the platform currency to trade with each other, exchanging goods and services, which will also lead to new types of disputes.
In addition, the rules and governance systems of different platforms in the metaverse overlap, bringing more legal conflicts. In some cases, where a company has ultimate control over everything that happens on a platform, users of that platform may have grounds to bring claims against the platform provider itself, for example, if they believe the platform has taken actions that interfere with users’ investments. Likewise, disputes may arise between users – for example if they disagree with the outcome of a transaction taking place on the platform. In other cases, decisions about what happens in the platform are made by a decentralized autonomous organization (DAO), a type of decision-making body into which users can input. The dispute resolution structure of such a decentralized organization is usually decided by votes of members located around the world to reflect the participatory and democratic nature of the decentralized dispute resolution organization. The outcome of this dispute resolution is usually automatically enforced by electronic smart contracts signed by members. Legal startup Kleros offers a blockchain-based decentralized dispute resolution platform. Since the platforms can only give participants a small amount of economic incentives, the disputes caused by these platforms are mainly resolved by the voluntary labor of their members. To be more successful, emerging metaverse dispute resolution start-ups must be able to give their adjudicators or arbitrators more financial incentives to operate more sustainably.
Cryptocurrencies Applied to Litigation Funding
Litigation financing generally refers to a mechanism whereby a third party independent of the case provides funds to a plaintiff to pursue a claim through arbitration or court. Funds raised through litigation financing will typically be used to pay attorneys’ fees and other litigation-related costs. In return, the financier will take a portion of the damages that the plaintiff wins if it wins the lawsuit. Since litigation financing is seen as enabling more legally resolved disputes to be brought to justice, laws around the world are actively amending litigation financing to encourage likely plaintiffs to raise litigation costs and attorneys’ fees in this way , to promote the realization of justice. For parties involved in litigation financing, although the percentage drawn usually depends on the specific circumstances, in most cases, the rate of return is often three or four times that of the funds provided by the financing party. The start-up company Legalist, which attracted the attention of the investment community before the epidemic, is a successful startup in this type of litigation financing. The company introduced algorithms to better match investors with the litigation or arbitration procedures they are interested in.
2022 sees the marriage of litigation financing and cryptocurrencies. The first initial litigation product (Initial Litigation Offering, referred to as ILO) token Apothio has been launched on the crowdfunding platform Republic to seek litigation financing of US$5 million (minimum funding of US$250,000) from users, thereby providing civil services through tokenized products. The lawsuit is partially funded. At the same time, this financing is in cooperation with the American law firm Roche Cyrulnik Freedman LLP, and the Avalanche development team Ava Labs provides technical support. Users need to create an Avalanche wallet to receive tokens. The Apothio token itself is not a governance token, has no voting rights on the platform, and does not give investors any rights, everything depends on the judgment of the case. Investors get back 80% of their money if the court dismisses the lawsuit; lose their investment money if the plaintiff loses; or get a 2x to 3.5x return on investment depending on the timeline of the settlement or judgment. Although this kind of fundraising is still considered to face many possible compliance challenges under the current legal system, it is still attracting attention as the first intimate marriage between the cryptocurrency industry and the litigation world. As for how long this enthusiasm for investment can last in today’s endless stream of cryptocurrency financing scams, many people in the industry still hold a wait-and-see attitude.
Automated process management system is accepted by large law firms
While most of the change in the legal tech world is being led by startups, traditional big law firms are not willing to be left behind in this race. In 2022, more large international law firms will spend their money developing automated documentation and compliance management tools. These tools are underpinned by comprehensive contract management, data analytics, content security and electronic document discovery programs. The well-known law firm Cleary Gottlieb will launch the legal incubator ClearyX in 2022, which the law firm describes as an “experimental platform for efficient, artificial intelligence and data-driven legal services.” In line with the firm’s vision, for the first few years, Cleary X will focus on enabling and streamlining Cleary’s M&A due diligence work, before it will expand to other corporate workflows. Around the same time, UK law firm Linklaters launched its flagship technology product CreateiQ – a platform to speed up contract drafting, negotiation and execution, which is said to allow its clients to better manage valuable contract data. Other well-known law firms, including Allen & Overy, Eversheds Sutherland, Bryan Cave Leighton Paisner, etc., have also successively established subsidiaries as legal incubators or independent legal technology providers.
In general, the influx of technology into the judicial process and legal professional services is overwhelming. These legal technology tools try to find a new balance between better legal service quality and lower case costs. For investors looking for “cool companies,” the growth of legal tech companies depends on the extent to which they can consistently attract users and replace human labor. As for whether legal technology companies will subversively change the traditional paper-and-pencil-based legal industry, it does not entirely depend on technological progress itself, but depends more on the actual value considerations of individuals or commercial entities seeking legal services.
(Note: Shang Shu, professor of California State Polytechnic University, director of the Arbitration and Mediation Association of Silicon Valley. This article only represents the author’s personal opinion. The email address of the editor is email@example.com)