What is the Macro-Trend in LegalTech?
LegalTech is booming. As the recent multimillion dollar investments in companies like Kira and Atrium show, investors have woken up to the potential of LegalTech and founders have delivered amazing products with serious growth potential. But what is the macro-trend driving this growth? What is the fundamental shift that is enabling the market to grow so quickly?
The macro-trend is that technology is enabling direct enforcement of legal rights that would otherwise have no value. How often do we find ourselves in a situation where a legal right accrues but we do nothing? Whether it’s delayed flights, late payments or corporate data breaches, most of the time we are unable to enforce these rights, because we do not have sufficient time, money or know-how, or all of the above.
Innovation in law is now making those rights more enforceable. This organic innovation is by no means only technological. The explosive growth of litigation funding over the past decade is a clear example of how a legally innovative product has led to an increase in enforced rights because it makes it possible for businesses to pursue rights where the cost would otherwise be prohibitive. The monetary value of rights enforced via litigation funding every year is in the billions. Even without any technological innovation, litigation funding has become an innovative and highly profitable business based on the enforcement of rights that were previously unenforceable.
Still, technology will likely remain the main driver of this macro-trend. E-discovery tools allow for the efficient search through millions of documents that would otherwise remain hidden — leading to the discovery of new rights or the evidence required to enforce known rights. Airline claims companies enforce passenger rights where otherwise no action would have been taken. Case prediction tools allow for the risk assessment of the pursuit of rights so that the cost-benefit analysis becomes more transparent. The added value of all these tools is that they allow for the enforcement of rights that were not previously enforced. The legal market is growing.
This technological change will leak into the very fabric of society. In China, the enforcement of the criminal law is becoming much more strict because technology such as video surveillance with artificial intelligence is making an individual’s movement completely transparent. You can’t jaywalk in Shenzhen without being punished because the surveillance videos will tape you and the state will prosecute you.
This organic and technological innovation will lead us to reconsider how we want our laws to work. Right now we live in a society where it is entirely obvious that most enforceable rights are never actually enforced. Imagine if technology suddenly enabled a fully enforceable legal system. Every time you speed on a highway your car notifies the police. Every time you pay your rent a couple of days late your credit card is charged a small fee because the contract self-executes. Whenever you log a personal dinner as a business expense to get a tax rebate, the tax man gets a notification. Do we want to live in such a world?
I do not think we do. But that means we must reconsider how we want our legal system to operate. Do we want a fully enforceable legal system in practice or just in theory? If such a system is desirable in practice, do our laws need to change to reflect that reality? Would our approach to law change if it became more technocratic? We need innovative answers to these new questions.
Ludwig Bull is the CTO at CourtQuant, the premier litigation risk assessment platform for litigation funders and insurers in the UK. He has a background in Computer Science as well as Law (Cantab). Originally from Germany, Ludwig has spent most of his life abroad. He is a marathon runner and practices martial arts.
