International Guidelines for Ethical AI

In the last two months, i.e. in April and May 2019, both the EU Commission and the OECD published guidelines for trustworthy and ethical Artificial Intelligence (AI). In both cases, these are only guidelines and, as such, are not legally binding. Both sets of guidelines were compiled by experts in the field. Let’s have a closer look.

“Why do we need guidelines for trustworthy, ethical AI?” you may ask. Over the last years, there have been multiple calls, from experts, researchers, lawmakers and the judiciary to develop some kind of legal framework or guidelines for ethical AI.  Several cases have been in the news where the ethics of AI systems came into question. One of the problem areas is bias with regard to gender or race, etc. There was, e.g., the case of COMPAS, which is risk assessment software that is used to predict the likelihood of somebody being repeat offender. It turned out the system had a double racial bias, one in favour of white defendants, and one against black defendants. More recently, Amazon shelved its AI HR assistant because it systematically favoured male applicants. Another problem area is privacy, where there are concerns about deep learning / machine learning, and with technologies like, e.g., facial recognition.

In the case of the EU guidelines, another factor is at play as well. Both the US and China have a substantial lead over the EU when it comes to AI technologies. The EU saw its niche in trustworthy and ethical AI.

EU Guidelines

The EU guidelines were published by the EU Commission on 8 April 2019. (Before that, in December 2018, the European Parliament had already published a report in which it asked for a legal framework or guidelines for AI. The EU Parliament suggested AI systems should be broadly designed in accordance with The Three Laws of Robotics). The Commission stated that trustworthy AI should be:

  • lawful, i.e. respecting all applicable laws and regulations,
  • ethical, i.e. respecting ethical principles and values, and
  • robust, both from a technical perspective while taking into account its social environment.

To that end, the guidelines put forward a set of 7 key requirements:

  • Human agency and oversight: AI systems should empower human beings, allowing them to make informed decisions and fostering their fundamental rights. At the same time, proper oversight mechanisms need to be ensured, which can be achieved through human-in-the-loop, human-on-the-loop, and human-in-command approaches
  • Technical Robustness and safety: AI systems need to be resilient and secure. They need to be safe, ensuring a fall-back plan in case something goes wrong, as well as being accurate, reliable and reproducible. That is the only way to ensure that also unintentional harm can be minimized and prevented.
  • Privacy and data governance: besides ensuring full respect for privacy and data protection, adequate data governance mechanisms must also be ensured, taking into account the quality and integrity of the data, and ensuring legitimised access to data.
  • Transparency: the data, system and AI business models should be transparent. Traceability mechanisms can help achieving this. Moreover, AI systems and their decisions should be explained in a manner adapted to the stakeholder concerned. Humans need to be aware that they are interacting with an AI system, and must be informed of the system’s capabilities and limitations.
  • Diversity, non-discrimination and fairness: Unfair bias must be avoided, as it could have multiple negative implications, from the marginalization of vulnerable groups, to the exacerbation of prejudice and discrimination. Fostering diversity, AI systems should be accessible to all, regardless of any disability, and involve relevant stakeholders throughout their entire life circle.
  • Societal and environmental well-being: AI systems should benefit all human beings, including future generations. It must hence be ensured that they are sustainable and environmentally friendly. Moreover, they should consider the environment, including other living beings, and their social and societal impact should be carefully considered.
  • Accountability: Mechanisms should be put in place to ensure responsibility and accountability for AI systems and their outcomes. Auditability, which enables the assessment of algorithms, data and design processes plays a key role therein, especially in critical applications. Moreover, adequate an accessible redress should be ensured.

A pilot project will be launched later this year, involving the main stakeholders. It will review the proposal more thoroughly and provide feedback, upon which the guidelines can be finetuned. The EU also invites interested business to join the European AI Alliance.

OECD

The OECD consists of 36 members, approximately half of which are EU members. Non-EU members include the US, Japan, Australia, New Zealand, South-Korea, Mexico and others. On 22 May 2019, the OECD Member Countries adopted the OECD Council Recommendation on Artificial Intelligence. As is the case with the EU guidelines, these are recommendations that are not legally binding.

The OECD Recommendation identifies five complementary values-based principles for the responsible stewardship of trustworthy AI:

  1. AI should benefit people and the planet by driving inclusive growth, sustainable development and well-being.
  2. AI systems should be designed in a way that respects the rule of law, human rights, democratic values and diversity, and they should include appropriate safeguards – for example, enabling human intervention where necessary – to ensure a fair and just society.
  3. There should be transparency and responsible disclosure around AI systems to ensure that people understand AI-based outcomes and can challenge them.
  4. AI systems must function in a robust, secure and safe way throughout their life cycles and potential risks should be continually assessed and managed.
  5. Organisations and individuals developing, deploying or operating AI systems should be held accountable for their proper functioning in line with the above principles.

Consistent with these value-based principles, the OECD also provides five recommendations to governments:

  1. Facilitate public and private investment in research & development to spur innovation in trustworthy AI.
  2. Foster accessible AI ecosystems with digital infrastructure and technologies and mechanisms to share data and knowledge.
  3. Ensure a policy environment that will open the way to deployment of trustworthy AI systems.
  4. Empower people with the skills for AI and support workers for a fair transition.
  5. Co-operate across borders and sectors to progress on responsible stewardship of trustworthy AI.

As you can see, many of the fundamental principles are similar in both sets of guidelines. And, as mentioned before, these EU and OECD guidelines are merely recommendations that are not legally binding. As far as the EU is concerned, at some point in the future, it may push through actual legislation that is based on these principles. The US has already announced it will adhere to the OECD recommendations.

 

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On Content Strategies

In previous articles, we explained how legal consumers have become online consumers. We also explored how for that reason content marketing has become an essential part of the digital marketing campaigns that are designed to engage legal consumers. Content creation is a powerful marketing tool that contributes to generating business revenue. It also helps in establishing a good online reputation. In order to successfully market your content, you need a content strategy. In this article, you will find an introduction to content strategies.

What is a content strategy? Hannah Smith and Adria Saracino defined it as “the high-level vision that guides future content development to deliver against a specific business objective.” What they are saying is that you shouldn’t just provide content, but you need to first define a specific business objective. Once you have done this, you can start planning your content with this objective in mind.

So, how does one plan a content strategy? Where do you start? In essence, defining a content strategy consists of three phases: identifying your business objective, identifying your target audience, and identifying the content that your target audience needs. The first thing to do is to identify your business objective. What does your law firm stand for, and what do you want to achieve with the content you provide? Be as specific as possible. Then learn as much as possible about your target audience and what you have to offer them that sets you apart from the competition. Analyse what information your clients need. Researching all of this will provide you with the data that will show you what to write, for whom, how and where.

The article 11 Steps to create a Content Marketing Strategy to Grow Your Business provides an excellent approach that breaks the process down in 11 steps:

  1. Set your mission and your goals
  2. Establish your Key Performance Indexes (KPIs), i.e. establish what the measurable factors are that define your success and that will allow you measure that success
  3. Know your audience
  4. If you already have content available, assess your current position by doing a content audit: what do you have, how successful is it, what channels and content types are you using?
  5. Figure out the best content channels for the content you’re providing (which platforms, social media, etc.)
  6. Decide on content types: are you going for a text blog only, or will you provide videos and/or static visuals like infographics, etc.?
  7. Identify and allocate resources: define team roles, i.e. define who will write what, who will create graphic materials, who will create videos? What will the hosting cost?
  8. Create a content calendar: brainstorm your content ideas in advance, and plan when to publish what, so your campaigns stay on track.
  9. Create your content
  10. Distribute and market your content: use more than one channel, write guest articles, bring your content to the attention of ‘influencers’, etc.
  11. Measure the results. Checking the Key Performance Indexes to measure how successful your content is, is a step most law firms pay insufficient attention to.

In his articles, Jay Harrington from Attorney at work gives several practical suggestions. In the remainder of this article, we’ll have a cursory glance at them.

When it comes to defining the actual content you will be providing, Harrington suggests thinking in terms of “wisdom marketing.” The best way to get your audience’s attention, is to provide them with high quality content. By sharing your wisdom, you can build a foundation of trust, loyalty and respect. Harrington also suggests focusing on ‘Evergreens,’ i.e. on high quality content that has a timeless character, rather than paying attention to current affairs, which typically has a relevance that is limited in time. Evergreens include how-to lists, resource lists (i.e. compiling lists of other articles that are relevant to your audience), and FAQs.

Harrington also advises using a ‘divisible strategy.’ With a divisible content strategy, you strategically and intentionally blend written and visual storytelling for the purpose of more effectively spreading ideas to specific audiences. In this approach you first define a core idea and create a single content asset, typically an article or white paper, that then functions as the foundation from which you create multiple forms of visual storytelling content: infographics, animated videos, SlideShare decks, social media motion graphics, etc.

Finally, Harrington suggests repurposing existing content: “A substantive 1,500-word article can be repurposed to a white paper or e-book or repurposed down to a series of blog posts or infographics. A presentation can be given as a webinar. A blog post can be made into a podcast.”

 

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A chatbot, a robot prosecutor and a robot judge

No, this is not the first line of a joke about three robots that walked into a bar. It refers to three items that were in the news recently. We already were familiar with chatbots and robot lawyers. Now the Order of Flemish Bar Associations have launched their own chatbot; San Francisco is running a pilot project with a robot district attorney; and Estonia plans a robot judge to handle small damages claims. Let’s have a closer look at each.

The chatbot of the ‘Orde van Vlaamse Balies’ (Order of Flemish Bar Associations)

On 10 April 2019, the ‘Orde van Vlaamse Balies’ announced the launch of its new chatbot, called Victor. The initiative was taken by some bar associations, and the chatbot is meant to facilitate access to legal assistance. It does this in two ways. On the one hand, like its British counterpart Billybot, Victor helps you find a lawyer. He asks some questions to determine what area of practice your legal issue relates to. He then suggests some nearby specialist lawyers, based on the topic and the region you live in.

But Victor does more than that. The chatbot can also check whether you are eligible for a pro bono lawyer or for other types of legal assistance like reduced fees. He will ask the relevant questions, and if you are eligible, he will let you know what documents are required. If you have further questions he can’t answer, Victor will give you the contact details of the bar association that can provide you with additional answers.

Victor can be found at www.advocaat.be, as well as on the sites of the bar associations that were involved in its development: www.baliewestvlaanderen.be, www.balieprovincieantwerpen.be, and www.balielimburg.be. Victor is only available in Dutch.

The Robot District Attorney in San Francisco

About a year ago, in May 2018, the office of the District Attorney in San Francisco decided to launch a pilot project to clear convictions using algorithmic justice. Let’s give some background information first. In November 2016, recreational use of marijuana was legalized in California. For decades before the legalization of marijuana, thousands of people had received convictions for marijuana use. And now that it had become legal, the idea was to clear those preexisting convictions, and to use an algorithm to determine which cases were eligible for record clearance. As such, the algorithm is a triage algorithm. Once it determines a case is eligible, it automatically fills out the required forms. The San Francisco District Attorney then files the motion with the court.

Since the pilot project started, it has reviewed 43 years of eligible convictions. This has led to 3 038 marijuana misdemeanors being dismissed and sealed, and to recalling and re-sentencing up to 4 940 other felony marijuana convictions.

Given the success of the project, the plan is now to expand it, to eventually clear around 250 000 convictions.

The Robot Judge in Estonia

Finally, inspired by the success of the DoNotPay chatbot that offers free legal assistance in 1 000 legal areas, the Estonian government decided some weeks ago to create its own robot judge. The robot judge is meant to adjudicate small claims disputes of less than €7 000. Officials hope that the system would help clear a backlog of cases for judges and court clerks. At present the project is still in the earliest stages, but a pilot project that deals with contract disputes is scheduled for launch later this year. Parties are expected to upload the relevant information and documents, which the system will then analyze and come to a verdict. Parties will be given the option to appeal to a human judge. AI systems have been used before to assist in the triage of cases and to assist judges in their decision-making process. An autonomous robot judge, however, is a first.

So, we now have online courts, robot lawyers, prosecutors and judges. The idea that we might one day have cases handled without intervention of human lawyers suddenly has become a lot more real.

 

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The Two Faces of Legal Innovation

When legal innovation is mentioned, we typically think of legal technology and process automation, etc. Most articles on the Internet focus on how the practice of law can be further automated, which then leads to increased productivity and profitability. As such they focus on legal technology and on the legal market. Some articles take a wider view and talk about innovation in law enforcement and in the judiciary. There too, however, the emphasis is on technology, automation and productivity.

But legal innovation is more than that. In an interesting synchronicity, two authors, Carolyn Elefant and Bill Henderson, each published an article on the two types – or faces – of legal innovation, within days of one another. The examples mentioned above all fall in the category of what Elefant calls ‘Innovation of Form’, and what Henderson refers to as ‘Service Delivery Innovation’. There is a different, and equally important, type of legal innovation, which the authors call ‘Innovation of Substance’ and ‘Substantive Law Innovation’ respectively. This type of legal innovation focuses on finding new legal solutions.

Elefant uses the example of Henry Ford to explain the difference. On the one hand, he invented the Model T. On the other hand, he came up with the design for the assembly line. The invention of the Model T is an innovation of substance. The design of the assembly line is an innovation of form. The emphasis in Legal Innovation tends to be on the innovation of form, which probably explains why lawyers often struggle with legal innovation. As Elefant puts it, “‘I went to law school to build a more efficient client intake process….’ said no lawyer ever.” Lawyers are more interested in innovation in substance.

So, how do we define these two types of innovation? Henderson gives the following definitions:

  • Substantive Law Innovation (which he calls Type 0 Innovation) deals with adapting law to fit changing social, political, economic and technological conditions.
  • Service Delivery Innovation (which he calls Type 1 innovation) deals with improving the quality, cost and delivery of existing legal solutions.

Everybody is familiar with Service Delivery (Type 1) Innovation. As Henderson points out, the vast majority of Legal Evolution content is focused on service delivery improvements (data, process, technology, etc.) that aim to increase legal productivity. Let us have a closer look at its counterpart, Substantive Law (Type 0) Innovation.

Society is changing fast, and the law needs to adapt to be able to handle these new conditions. The rise of Artificial Intelligence and the emergence of different new technologies are clear examples that demand an innovation in substantive law. Think, e.g., of cyberbullying, or of Robot Law. Henderson gives the example of synthetic biology, which impacts intellectual property, regulatory law, consumer safety. There are many more such areas: Carolyn Elefant wrote a book on 41 Practice Areas that didn’t exist 15 years ago. (You can find the table of contents here: myshingle.com/wp-content/uploads/2018/08/TOC-from-41PracticeAreas.pdf). She compiled the list to prove the point that new practice niches are growing at an accelerating rate.

In such periods of disruption, “we also need lawyers who can take on the hard work of substantive innovation — devising the kinds of new case theories and arguments and perspectives — that will allow technology to progress while preserving our democracy and our freedom.” (Elefant).

Henderson explains that Substantive Law Innovation “happens organically when a lawyer has the opportunity to immerse herself in the business and legal complexities of a new or changing industry. Although it often produces the same economic benefits as a major R&D initiative, lawyers and law firms seldom frame it that way.  (…) Virtually any lawyer has the intellectual tools to do it.  It requires zero additional training. Yet it’s undertheorized almost to the point of being invisible to practicing lawyers.”

In his article, Henderson refers to a presentation by Patrick McKenna that connected the lifecycle of law firms to the different types of innovation. McKenna explained that successful new law firms typically find the source of their growth in type 0 innovation, i.e. in finding new legal solutions in niche markets. As the law firm matures it starts paying more attention to type 1 innovation. It is however important to continue focusing on type 0 innovation: if the firm doesn’t, it loses its edge because the market it was active in becomes saturated. Henderson gives the examples of securities or debt collection as market segments that are saturated.

Henderson concludes that it is obvious that Type 0 and Type 1 innovation are both distinct and interdependent, and that the legal profession’s tool box needs to include both types of innovation. He advises lawyers and legal professionals to specialize in one or the other, while retaining the ability to effectively collaborative across the two types.

Henderson: “Neither Type 0 nor Type 1 innovation are easy or costless.  Both require continuous learning and an investment of time and resources without a guaranteed financial return.  Yet both add immense value to clients and form the basis for challenging and rewarding careers.  Thus, for both lawyers and legal professionals, the future is bright.”

 

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Office 365 and SharePoint for Lawyers

The vast majority of lawyers use the Microsoft Office suite. It comes in different versions, and Microsoft encourages everyone to switch to Office 365. If you have not yet switched to Office 365, it may be useful to consider this. For law firms, it is advisable to switch to Office 365 Business Premium because SharePoint is also included. In this article we give some more explanation.

Office 365 is the subscription version of Microsoft’s Office suite. It is marketed as a service (rather than a product) that ensures you always have the most up-to-date modern productivity tools from Microsoft. It includes all the Office desktop apps that CICERO LawPack users are familiar with, like Word, Outlook, PowerPoint, and Excel. It also comes with extra online storage and cloud-connected features that let you collaborate on files in real time. With a subscription, you’ll always have the latest features, fixes, and security updates along with ongoing tech support at no extra cost.

Office 2016 and Office 2019 on the other hand are sold as a one-time purchase. They don’t have the level of cloud integration that offers all the real time collaboration features Office 365 does. When a new version is released, you have to buy the new version, and often that means there are many new features at once to get familiar with. With a subscription version like Office 365, you get smaller updates several times a year that are included in the subscription price. This subscription model clearly appeals to customers: as of October 2018, Office 365 has 155 million active users worldwide, and each month three million more are added.

One of the reasons CICERO LawPack is moving its customers to Office 365 Business Premium is that it comes with SharePoint. SharePoint is a web-based collaborative platform that integrates with Microsoft Office. It was launched in 2001 and is primarily sold as a document management and storage system. It has 190 million users across 200,000 customer organizations. SharePoint offers the following functionalities:

  • Enterprise content and document management: SharePoint allows for storage, retrieval, searching, archiving, tracking, management, and reporting on electronic documents and records. It also provides search and ‘graph’ functionality. SharePoint’s integration with Office 365 allows for collaborative real-time editing and encrypted/information rights managed synchronization.
  • Intranet: A SharePoint intranet (or intranet portal) is a way to centralize access to enterprise information and applications. It is a tool that helps an organization manage its internal communications, applications and information more easily (e.g. via tools such as wikis).
  • Collaborative software: SharePoint contains team collaboration groupware capabilities, including project scheduling (integrated with Outlook and Project), social collaboration, shared mailboxes, and project related document storage and collaboration. Groupware in SharePoint is based around the concept of a “Team Site”.
  • File hosting service (personal cloud): OneDrive for Business allows storage and synchronization of an individual’s personal documents, as well as public/private file sharing of those documents.
  • Custom web applications: SharePoint’s custom development capabilities provide an additional layer of services that allow rapid prototyping of integrated (typically line-of-business) web applications.

To structure and manage content, SharePoint works with:

  • Pages, which are free-form pages that can be edited in a browser.
  • Web parts and app parts are components (also known as portlets) that can be inserted into Pages. They are used to display information from both SharePoint and third-party applications.
  • Lists, libraries, and content: A SharePoint library stores and displays files and folders, while a SharePoint list stores and displays data items. Each item in a library or list is a content item. Content Types are definitions (or types) of items. SharePoint allows you to create your own definitions based on the built-in ones (like, e.g., Contacts, Appointments, Documents, and Folders).
  • Sites: A SharePoint Site is a collection of pages, lists, libraries, apps, configurations, features, content types, and sub-sites. Examples of Site templates in SharePoint include collaboration (team) sites, wikis, blank sites, and publishing sites.

If you use software for your office management, it is probably software based on Cloud technologies. In that case, it is possible that your data and documents are located on two different Cloud platforms: the software for your office management and the corresponding database are on your software provider’s Cloud solution, while all your documents are in a separate SharePoint DB instead of on a normal file server. This means that you can benefit from all the advantages of SharePoint: all documents are searchable; you can share documents instead of having to e-mail them (which is much safer), and once a document is shared you have access to all the real-time collaboration functionalities; it comes with access and version management, etc. The fact that the documents and data are on separate platforms also provides a safer and faster solution.

 

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An Introduction to LinkedIn for Lawyers

In previous articles, we mentioned how social media have become an essential part of online marketing strategies. A report, published in January 2019 by the Attorney at Work website, reveals that in 2018, 85 percent of responding lawyers use social media as part of their marketing strategy. More than two-thirds, 71 percent, of lawyers say social media contributed to bringing in new clients.

Generally speaking, LinkedIn is the network of choice for lawyers, with 77 percent saying it is their favoured marketing platform. This has to be nuanced, in that larger law firms whose clients mainly consist of companies tend to focus more on LinkedIn, while lawyers who deal with individual clients tend to slightly favour Facebook. In this article, we will give you a first introduction to LinkedIn.

LinkedIn is a professional social network, which is mainly used for professional networking. It is a business and employment-oriented service that operates via websites and mobile apps. It was founded on 28 December 2002, and launched on 5 May 2003. Since December 2016 it has been a wholly owned subsidiary of Microsoft. As of October 2018, LinkedIn had 590 million registered members in 200 countries, of which more than 250 million are active. Signing up to LinkedIn is free, but some premium features are only available with a subscription one has to be pay for.

The main reason people use LinkedIn is to help grow their business or career. It is a tool for networking (which includes a system of introductions), for recruitment (where people can list their skills and experience), for marketing (e.g. to display endorsements and recommendations), advertising, and for research. It also is a publishing platform, and it offers discussion forums, called groups. These can be important to lawyers, as LinkedIn promotes certain authors as influencers (or thought leaders).

LinkedIn offers a package that includes:

  • Profiles
  • Networking Tools / Connections
  • Company Pages
  • Groups
  • Messaging
  • Notifications
  • As well as some other services, some of which can be useful for lawyers.

Let’s go over these in some more detail, knowing that we can only scratch the surface, and that each of them could easily warrant one or more articles by themselves.

Profiles: when one signs up to LinkedIn, the first thing to do is to create your profile. This is a profile for you as an individual. Think of it as a standardized bio or résumé. In it, you can give a summary of who you are, and provide more information about your background: your education, experience, skills, endorsements, accomplishments and interests. For each of these categories of information, LinkedIn offers a separate section in your profile. You can also make posts from your profile, and publish articles. Your profile contains an activity section that lists those. If you want to start a blog on LinkedIn, you can do so from your profile. Profile sections can be added in more than one language.

Networking Tools / Connections: LinkedIn not only allows members to create profiles but also connections to each other in an online social network. These connections may represent real-world professional relationships, but don’t necessarily do so. Members can invite anyone (whether an existing member or not) to become a connection. Members can also ask other members to introduce them to their connections. When looking for someone on LinkedIn, it will show you how many connections you may have in common, and if there are none, how many degrees you are separated from them.

LinkedIn also offers Company Pages, where you can provide information about your law firm. Here the rule is that each company only has one main page, for which a custom URL can be created. It consists of several sections, and each section can be entered in more than one language. Linked to the company pages are showcase pages. If your law firm, e.g., has offices in several locations, each one could get its own showcase page. Showcase pages can also be dedicated to services or products you offer. For showcase pages, too, it is possible to have them in more than one language.

Company pages can post updates, but can’t publish articles. It is therefore not possible to set up a company blog on LinkedIn. It is possible for individuals (profiles) to publish articles, and to provide links to those articles as company updates. Also good to know is that company pages can be linked to a LinkedIn Group.

Groups in essence are discussion forums. Anybody can create a group, and invite people to become members. These groups can either be public (anybody can join) or private (upon invitation or approval). As mentioned above, companies can create a group that will be linked to their company page. Often, these are used, e.g., by the customer care and / or the support department. Interesting for lawyers is that groups can be dedicated to specific topics, and that there are plenty of groups that deal with legal matters (as well as legal technology). Taking part in discussions in such groups can help build your online reputation.

Like other social media, LinkedIn also offers messaging and notification services. For lawyers, LinkedIn also is an important advertising platform (cf. the statistics quoted in the introduction to this article).

Apart from the services mentioned above, LinkedIn also offers a series of other services. These focus on learning and on insights; they allow you to post job offers, etc. In this context (of recruitment) it is worth mentioning a new service that at present is only available in the US and within specific service categories, and is called ProFinder. “LinkedIn ProFinder is LinkedIn’s professional services marketplace that helps you find the best freelance or independent professionals in your area.” It already does include certain legal services, and is expected to include more services, and to become available internationally.

Also worth mentioning is Slideshare. It is a hosting service for professional content including presentations, infographics, documents, and videos. Users can upload files privately or publicly in PowerPoint, Word, PDF, or OpenDocument format. Content can then be viewed on the site itself, on hand held devices or embedded on other sites.

 

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More on Value Pricing

In a previous article, we talked about flat fees, and how they have become the favourite alternative to billable hours for both lawyers and their clients. There are many benefits to flat fees: they are something clients want and like. They eliminate surprises: clients knows in advance how much they will have to pay, and you know how much you will make. And because flat fees usually are (at least partially) paid up-front, lawyers don’t have to worry about getting paid. Knowing in advance how much something will cost also lowers the threshold for clients to hire a lawyer, which means lawyers get access to more clients.

We also pointed out that fixed fees are not always the ideal solution for the services you offer. A prerequisite is that you can determine in advance what services you’ll offer and estimate how much time those will take. Typically, cases that involve opposing parties (litigation, arbitration, mediation, …) may be less suited for value pricing.

We also discussed how there two ways to calculate flat fees. In both cases, your profits consist of your revenue minus your expenses. So, you always have to calculate your expenses in advance. Where they differ, is in how to calculate your revenue. You either use a cost plus model, or value pricing. In the cost plus model, the price is set by calculating the costs and adding a fair profit margin, which can be based on the average time you anticipate you will spend on the case. With value pricing on the other hand, you determine your price based on what the service you offer is worth to the client.

So, how do you set your price? Mark Wickersham is an accountant who wrote a booklet on “Using value pricing to grow your business” that is available for free online. (It can be downloaded here: quickbooks.intuit.com/uk/accountants/value-pricing/). And while it is written for accountants, much of what he writes is relevant for lawyers, too. Here is his take on it.

Before you can actually set a price, you have to determine what it is that you’ll be putting a price on. In other words you have to determine the scope of services that will be covered by your price. This also means you first have to determine what your clients expectations are. In his book, Wickersham dedicated a chapter to five types of questions you must ask to understand a) the scope of the work and b) what your client values. These questions deal with:

  1. Scope
  2. Tangible Preferences
  3. Intangible Preferences
  4. Outcome Preferences
  5. Enhancement Questions

Scope questions have to do with what your client needs or wants from you, and with what the client values. Scope questions help us understand the client’s circumstances, which in turn helps us to estimate the amount of work we will need to do. Scope questions also help to establish what the client values. As you get more proficient with value pricing you’ll get better at asking great questions that help to uncover what a client really values.

Tangible Preferences have to do with the list of services you could offer your client that he might want or value. Basically, you offer a menu of services that you go over with the client, and that are relevant to his or her situation. When clients say “Yes” to these things, they indicate they would value them. So you add them into your price, even if the time to deliver these extra things is zero.

Intangible Preferences have to do with the user experience of the client. These are questions that help establish the modalities of cooperation, and look at how to best work together. These include questions, e.g., like “who is contact point?”, “what are the preferred modes and preferred frequency of communication (when does the client want a phone call, a mail, a letter or a meeting)?” Does the client want any evaluation meetings during or after, etc?

Outcome preferences focus on what outcome the client wants. This is where we look at the end result. We discuss desired as well as possible alternative outcomes and how to respond.

Enhancement Questions deal with how we can further enhance the client’s experience. This is an advanced and optional step that focuses on additional services that are not necessary but which the client may value.

Once we have the answers to these questions, we can start determining our optimal price. To do this, Wickersham says that we must forget the timesheet. Instead, we must focus on four factors or benefits that help determine what our services are worth to the client. These factors are:

  1. The direct financial gains for the client, which typically means increased wealth or income.
  2. Reduced risks
  3. Decreased liabilities
  4. Enhanced reputation

Wickersham: “By effectively communicating these forms of value to your clients, you can maximize your prices, while still creating a win-win scenario where your clients are able to profit from the relationship as well. And that is the key to both satisfied clients, and a healthy business. (…) Once you understand what they value (the pain they are trying to avoid and the gain they are trying to achieve) you present a high price, not because you expect them to say ‘Yes’ (if they do, you’re too cheap!), but to create a reference price. This is called anchoring.”

Wickersham also offers additional suggestions. He advises to present the client with options to choose from. “When your first price is too high, this is where all those preference questions come in. When you give clients choices they often say ‘Yes’ because they haven’t yet seen the price. If the price is too high, you can now ask the client the following: ‘The reason this is the price is because you’ve said you want all of these things. Looking at this list of things you’ve said you’d like, are there any here that on reflection you don’t really need (value)?’ ”

In short, value pricing optimizes profits, but it is not easy. Some call it an art, and with practice, one becomes more proficient at finding the correct win/win price to charge.

 

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Legal Technology Predictions for 2019

The beginning of a new year is traditionally a time when the experts make their predictions for the year to come. The field of legal technology is no exception. Most of the predictions focus on Artificial Intelligence (AI), blockchain and security, but there also are predictions with regard to the legal market in general, the cloud, and eDiscovery. Let’s have a closer look.

Legal Market

The American Bar Association’s 2018 Legal Technology Report revealed that in 2018 fewer law firms invested in legal technology than in 2017. Because of this, experts expect a stagnation in the amount of law firms who are investing in legal technology. The amount of money being invested by law firms still is increasing, as is the amount of money being invested by legal technology solution providers. The legal technology market itself is therefore expected to keep on expanding.

Experts do not anticipate significant changes in the software and services that the lawyers are using, nor in how law firms are charging their clients. The market of Alternative Legal Services Providers (ALSPs) will keep on growing, and some of these Alternative Legal Services Providers will come into their own as major players.

Artificial Intelligence (AI)

IBM predicts three major breakthroughs in the field of AI which will lead enterprises to increasingly advance, scale, and trust artificial intelligence. These three breakthroughs are:

  1. Causality will increasingly replace correlations: at present Machine Learning algorithms discovers patterns, i.e. correlations, but the nature of those correlations still hasn’t been qualified. The breakthrough will consist in qualifying those correlations and determine what is cause and effect.
  2. Trusted AI will take centre stage: methodologies are being developed for a better cooperation between humans and AI, where humans can trust the output generated by AI systems.
  3. Quantum computing could give AI an assist: technologies like Deep Learning require serious computing power. Quantum computing has the potential to dramatically increase computing power.

The experts that Forbes Magazine consulted make five predictions:

  1. AI increasingly becomes a matter of international politics
  2. A Move Towards “Transparent AI” (i.e. where AI systems can reveal how they draw their conclusions. This ties in with the concept of “trusted AI”, mentioned above).
  3. AI and automation are drilling deeper into every business
  4. More jobs will be created by AI than will be lost to it.
  5. AI assistants will become truly useful

In a separate article, other experts predict a rise in applications that combine video, voice and AI to improve human interactions, sales, customer service, and meetings.

More specific to the field of Legal AI, experts predict an increase in smart contracts, as well as an increased use of blockchain based solutions. Law firms are becoming smarter in what technologies to use, which leads to a higher adoption of legal AI: AI will augment existing solutions. AI is also expected to play a more important role in the design of legal software and its interfaces. One expert predicts that the increased usage of AI will lead to lower fees, thus facilitating access to justice. One of the fields that is expected to grow is legal analytics (including judicial analytics). As a result of this the roles of Chief Analytics Officer (CAO) or Chief Data Officer (CDO) will become more prevalent in law firms.

Cybersecurity

A lot of the predictions have to do with cybersecurity. Law firms have a lot of valuable data and are prime targets for cybercriminals.

One of the world’s foremost experts in building AI systems to detect malware points out that cybercriminals have started using what he calls “offensive AI”, i.e. AI systems that are specifically designed to attack computer systems. As a result, malware, e.g., gets smarter and better at evading protection against it. In turn, cybersecurity companies are increasingly using AI as well to ward off cyberattacks and to detect those technologies that are aimed at evading protection.

All experts anticipate cybercrime will rise in 2019. They expect increases in:

  • Data breaches and data leaks, with an emphasis on the latter
  • Browser crypto-mining, or crypto-jacking, i.e. where your browser is hijacked to mine cryptocurrencies
  • Web skimmers: just like you have hardware to illegally clone credit cards, web skimmers use websites to illegally get your credit card details
  • Expert specifically expect an increase in botnets that use “Internet of Things” devices
  • Dedicated Denial of Service (DDos) Attacks
  • Ransomware
  • Financial crime, i.e. cyberattacks on banks and other financial institutions
  • Email social engineering attacks, also known as BECs, or Business Email Compromises
  • Exploit kits, i.e. web-based applications that redirect users to malicious sites where they attempt to exploit a browser vulnerability to infect the user with malware.

Cloud servers, too, are in trouble in 2019. Cloud servers have slowly become the favourite target of cryptocurrency mining trojans.

As more and more hacking tools are becoming available, experts foresee an increase in underground communities of hackers and cybercriminals.

Malvertising will continue to gain sophistication in 2019.

Cloud

Over the last years, law firms have increasingly started using cloud technologies. That growth is expected to continue, as law firms have largely overcome their hesitance to use cloud-based solutions.

eDiscovery

The GDPR has had a great impact on legal eDiscovery. As more and more countries (and States within the US) are implementing similar legislation, experts believe we are reaching a tipping point for the protection of personal data privacy in legal discovery.

2019 will also see new ways to exploit the power of analytics across the entire e-discovery workflow. ‘Active learning’ will be used as a supplemental tool to support traditional reviews. And as eDiscovery requires data transfers to service providers, those transfers will increasingly become targets for hackers and cybercriminals.

We are also witnessing an increasingly globalized eDiscovery, and as a result there will be an increase in demand for translations.

Blockchain

In 2019, we will approach Blockchain more realistically. Many fantastic visions of 2017 and 2018 were a little ahead of schedule, and many projects have failed to deliver. With a more realistic approach, Blockchain will finally move past the hype into reality and Blockchain adoption is expected to spike across sectors, and to start converging with the Internet of Things (IoT).

Security experts anticipate that Blockchain will help prevent unauthorized access. They also see advancements in privacy-preserving techniques for blockchain: these techniques combined with blockchain can enable new decentralized applications that protect data while providing users with transparency and control over how data is used.

To address the issue of energy consumption costs, which are skyrocketing because of the computing power needed, in 2019 we will also see hardware-based acceleration of cryptographic techniques.

 

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On flat fees and value pricing

The market of legal services is changing, and so is the legal business model. Largely upon the request of their clients, law firms are shifting from billable hours to alternative fee arrangements (AFAs). The most commonly used alternative fee arrangement is charging flat fees. In this article we’ll have a closer look at what they are, what types there are, what the benefits and risks are, when and when not to use flat fees, and lastly how to set the price for the flat fees you’ll be charging. That last item will be continued in a follow-up article.

Peggy Gruenke, from www.attorneyatwork.com, defines a flat fee as follows: “A flat fee is simply a prearranged, agreed-on total fee that is paid up-front, or at least a portion of it is, to complete all work required for a particular matter.”

There typically are two kinds of flat fees, which has to do with how the fee is calculated. The first type is referred to as “cost plus” pricing, where the price is set by calculating the costs and adding a fair profit margin. For law firms, if they have certain types of cases that they do on a regular basis, they could, e.g., calculate the average time and cost of previous cases, and use that. The alternative is referred to as value pricing where you set the price based on what the service you offer is worth for the client. We’ll come back to how to set the price for flat fees later on.

There are both benefits and risks to using flat fees. The benefits include:

  • Flat fees are something clients want and like.
  • Flat fees eliminate surprises: clients knows in advance how much they will have to pay, and you know how much you will make.
  • Knowing in advance how much something will cost lowers the threshold for clients to hire a lawyer, which means you get access to more clients.
  • Since flat fees usually are (at least partially) paid up-front, you have no problems getting paid: you just don’t start work until you get paid.
  • Using value pricing to set your fee, where the fees is calculated on the value your services bring to the client, typically results in a higher profit margin for the lawyer.

There also are risks:

  • It can be hard to calculate the total fee beforehand, especially when opposing parties are involved. (See below).
  • If additional hours are incurred, those may be passed on to the lawyer.
  • There’s a potential for reduced profit margins or even losses, if the matter takes substantially more time than expected.

What these risks show is that flat fees have limited uses. They aren’t suited for all cases or all law firms. You’ll have to determine when and when not to charge flat fees. Flat fees are not advised when it’s hard to estimate in advance how much time and effort will be needed. Ruth Carter, e.g., avoids using flat feels in cases where there is an opposing party, like settlements or litigation, because you usually cannot anticipate what all they will come up with. There are exceptions of course in scenarios that are common and/or simple like, e.g., handling traffic fines. Typically, flat fees are well suited when the time that is needed is predictable. It works well, e.g., for transactions like copyrights, trademarks, and contract drafting and reviews.

Sometimes, lawyers charge a hybrid fee (or a “flat fee plus”, as Ruth Carter calls them) where flat fees and hourly billing are combined. This usually involves charging a flat fee for a project with a limited scope and then charging the client your hourly rate for any work performed beyond that. Billie Tarascio, e.g., a divorce lawyer, uses a hybrid model of hourly fees for certain work and combines those with flat fee charges for predictable items like drafting pleadings, attending hearings, etc.

So, before you start charging flat fees, there are some questions you have to ask yourself. The first questions is whether your clients are asking for flat-fee options. If they’re not, do you have a good reason to switch? When introducing your flat fees to your clients, have you clearly defined expectations, fees and scope? Have you thought about your overhead? How many flat-fee cases do you need per month to cover expenses and pay yourself?

Once those questions are answered, you can determine how to set your flat fees. As mentioned above, you can use either value pricing or “cost plus” pricing. If you want to charge flat fees for a service you have already been offering for a while, the “cost plus” model is fairly easy to implement as you already have all the necessary information with regard to scope, time needed, costs involved, etc. (If you are using law firm management software, it is easy retrieve all of this information).

Most authors, however, suggest using value pricing instead because it is better suited for optimizing your profit margins. Now, and especially when you are new to it, value pricing is not easy, since you have to know how to measure value and identify the factors that determine what brings value to your clients. Mark Wickersham, who wrote a book on “Using value pricing to grow your business” (that is available for free online), rightfully points out that value pricing is hard because of three reasons: 1) Value is subjective; it can’t be touched, felt or measured. 2) Everybody values things differently. And 3) because every client has unique requirements.

In a follow-up article we’ll go into how to set your price when using value pricing.

 

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What did 2018 bring on the Legal Technology front?

As we are taking our first steps into 2019, it may be useful to evaluate what 2018 brought us on the Legal Technology front. Robert Ambrogi, from lawsitesblog.com, published an article on the 20 most important Legal Technology developments in 2018. And, as usual, the American Bar Association (ABA) also published its annual Legal Technology Survey Report in December 2018, which offers great insights as well. Let us start with the latter.

The Full ABA Legal Techology Survey Report consists of six volumes:

  1. Technology Basics and Security
  2. Law Office Technology
  3. Online Research
  4. Marketing and Communication Technology
  5. Litigation Technology and E-Discovery
  6. Mobile Lawyers

These six volumes can be bought either separately, or combined, here. A summary of the survey in five separate reports can be read online for free here. These reports deal with:

  1. Budgeting and planning
  2. Solo and small firm
  3. Practice management
  4. Technology Training
  5. Litigation and TAR (Technology Assisted Review)

Here are the highlights.

One of the most surprising findings of the report is that the percentage of firms that budget for technology has undergone a slight decrease compared to last year. Where in 2017, 60 percent of law firms had a legal tech budget, that number is down to 57% in 2018. As was the case in the past, the percentage of law firms that have a technology budget increases with the firm’s size. The report found that 34 percent of solo respondents, 53 percent of firms of two to nine attorneys, 77 percent of firms of 10 to 49 attorneys, 83 percent of firms with 100 to 499 attorneys, and 87 percent of firms of 500 or more attorneys had technology budgets.

Another surprising finding is that while telecommuting or remote working overall is on the rise (as expected), it has decreased in larger firms. Among solo practitioners and law firms with 2-9 attorneys, the percentage of people who telecommute has gone up from 38% in 2015 to 46% in 2018, and from 58% in 2015 to 68% in 2018, respectively. In larger firms, however, the percentage has dropped from a high of 87% in 2015 to a low of 79% in 2018 in firms with 10-49 attorneys, and from a high of 94% in 2016 to a low of 88% in 2018 for the bigger ones.

Attorneys continue to use practice management software at a steady rate at firms of all sizes. The functionality of the software that is available to them hasn’t really changed in that managing clients and conflicts still is at the core of all of them. The amount of law firms using practice management software has remained steady over the last years (with the exception of some spikes in 2016).

Most attorneys are satisfied with the practice management software they use, as 32% reported “very satisfied” with the features and functions therein and 61% reporting “somewhat satisfied,” for a total of 93% that were somewhat or more satisfied.

Not much has changed with regard to the software law firms are using, and there is still plenty of room for improvement, especially when it comes to integration with other applications.

The GDPR has had an important impact which resulted in the removal of quite a lot of metadata. The usage of software that focuses on the removal of metadata is rising, which benefits privacy and confidentiality.

Another finding of the report is that the line between tablets and laptops is blurring. In solo and small law firms, the percentage of tablet users dropped from 57% in 2016 to 47% in 2018. In larger firms, however, the number of tablet users has increased: in firms with 100-499 attorneys, the percentage has increased from 32% in 2015 to 53% in 2018. In firms with more than 500 attorneys, 39% of attorneys use tablets.

There is virtually no change in how lawyers charged in 2018, compared to 2017. Hourly fees remain the most popular (at 69%), followed by fixed fees (15%), contingency fees (11%, which depend on the result achieved), retainer fees (4%, where the client pays an advance on a regular basis, typically monthly), and other (1%).

In his article on The 20 Most Important Legal Technology Developments Of 2018, Robert Ambrogi mentions several developments that are relevant worldwide:

 

  • Analytics become essential: in 2018 more and more law firms started analysing the data they collect.
  • Legal tech goes global: until recently legal tech largely consisted of national playing fields, but now we are seeing more and more legal technology services that are being offered internationally.
  • Because of AI, Legal research gets smarter and more comprehensive.
  • Investment are increasing. In the US alone, $1 billion USD was invested in legal technology.
  • The cloud no longer looms ominous. More and more law firms have dropped their reservations and are now effectively using cloud services.
  • Tech competence gets real.
  • AI gets an MBA.
  • Startups continue to proliferate.

In conclusion: the legal technology market keeps evolving, but the use of legal technology in law firms has not taken any large steps in recent years.

 

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