Waisberg said an important goal of Kira is to ultimately convince law firms that A.I. will lead to additional revenue opportunities. A typical M&A deal of $500 million might include review of 75 to 300 contracts. But those firms in total may have thousands of contracts between them. "Right now buyers only look at a small part. "They don't feel like paying fancy law firms thousands per contract to review all of them," Waisberg said. But A.I. holds out the possibility of increasing the scope of contract review. And increasing scope doesn't necessarily reduce the number of people, or the bill.
The law firms are reserving judgment on that. "There is no way of knowing whether Kira is right about the capacity to review more data," Parker said, because they do not know what would compel clients to ask for more data. But she does believe that the interaction between A.I. and lawyers creates opportunities for new types of premium pricing. Customizing the software — which the Kira system allows — to searching for the right terms has to be done by a qualified lawyer.
"That is a skill set that commands a premium. As a package, I can see how it will be more cost-effective to clients, but it's serious legal work and you can charge for it," Parker said.
Dolin noted that Google has a dashboard that allows its legal counsel to monitor the billing codes being generated by outside law firms.
"The leading indicator of change by far is data gathering and data acquisition. All the data is there and is increasingly enabling competition and pushback in a strong way. If you are charging me three times as much as someone else, can you tell me what is unique about this deposition? In-house corporate counsel has never had that power before but do now," Dolin said.
Dolin — who now teaches courses in legal technology and informatics at universities including Stanford and Notre Dame — said billable hours are only one problem within the larger problem of how legal partnerships think. They don't think like corporations, where a portion of revenue is paid out to shareholders in the form of dividends and the rest of the money put back into R&D and systems. Partners are both the corporate managers and shareholders.
"For some reason, partners think it's taking money out of their pocket to invest in new systems," Dolin said. In addition to his academic work, Dolin is an angel investor focused on legal technology start-ups.
Dolin does not worry about associates losing their jobs. It's not the model of a next generation of good attorneys that is breaking, he said. "But if you have a pyramid model, that's in trouble." He said firms are narrowing that model into a pipeline and continuing to make a profit that way, switching from pure billable hours as the dominant model to some fee structure that incentivizes efficiency and value.
A start-up like LegalZoom, which can now handle highly commoditized legal work, is not an immediate threat to elite law firms. But what happened within the U.S. market with e-discovery is cautionary. "That's an area where work has been disaggregated from the firm. That market has been taken, and it's hard for any law firm to compete there," Parker said. "We have to be alert that disaggregation can happen elsewhere."
Only one thing is certain. "Firms resting on their laurels will be completely gone," Parker said.
(Correction: Google created a dashboard to monitor the billing codes of outside law firms, but it is only for use within the legal departments of Google and parent company Alphabet.)