The Early Days of Legal Analytics
There is an interesting story in Forbes on Lex Machina, a legal start-up that provides analytics for use in patent litigation. See Dan Fisher, Stanford-Bred Startup Uses Moneyball Stats to Handicap Judges, Forbes, Feb. 2, 2015. The company was created by faculty at Stanford Computer Science and Stanford Law. As the company emerged from the University, the reigns were handed to Josh Becker, a Stanford JD-MBA. To date, the company has raised $8 million in start-up funding. According to the Forbes article, the company’s clients include some of the nation’s large technology companies plus one-third of the AmLaw 100.
What makes Lex Machina so interesting is that the company is not a NewLaw service provider that’s trying to take marketshare. Instead, Lex Machina is a toolmaker. It is a true Big Data company that provides analytics to (a) value contested patents and (b) protect/maximize that value through a litigation strategy that is informed by data.
The impact of Lex Machina is hard to decipher, primarily because if it does provide an edge, the customers are unlikely to be too vocal. Just like a hedge fund with an effective trading strategy, why advertise the ingredients of your secret sauce? Indeed, compared to other toolmakers (e.g., predictive coding, expert systems) Lex Machina’s benefits are less about efficiency and more about affecting the outcomes of case — who wins and by how much. If Lex Machina is truly delivering, it will eventually touch-off a Big Data legal analytics arms race akin to the quant revolution on Wall Street. Dan Katz frequently makes this point, and I think he is right. The Forbes article makes the point that Lex Machina is already moving into adjacent areas of IP law and general commercial litigation.
The broader legal industry is unlikely to notice Lex Machina until it has a substantial liquidity event — i.e., it’s acquired or goes public, making if founders far richer than the BigLaw partners and in-house lawyers they currently serve.
If we are looking for early signs of a tipping point for legal analytics, one marker may be the number of Stanford Law grads who are turning down entry-level opportunities in BigLaw to pursue legal start-ups. In recent years, Stanford Law grads fresh out of law school have gone on to found other venture-based legal start-ups like Ravel Law, Judicata, and Law Gives. Back in 2013, The Stanford Lawyer (SLS alumni magazine) had an extensive write-up with several examples. See Sharon, Driscoll, A Positive Disruption, June 4, 2013. In 2014, Stanford’s CSO offered a program titled, An Alternative to BigLaw — Startups.
The legal world isn’t going away; it’s just changing.