Lexpert Magazine

72 LEXPERT MAGAZINE | JUNE 2016 the most excited right now." When asked who at Air Canada is work- ing on the project, and whether they are using outside tech advisors, Headon says, "I am. I am working with our IT folks and our human resources folks here to see what we can do to automate that interaction, at least in the early stages of the file to free up some of our time." Would he eventually consider selling the program if he can get it running as hoped? "We'll have to see," he says laughing. "Inter- esting question." As for who would be able to invest in bringing something like that to market, "I expect that the law society rules are but one potential hoop to jump through." While in-house advisors without question want the benefits of innovation, few, like Headon, are willing to invest their business's time or money to develop some- thing for the use of one single client. What in-house lawyers want is for their law firms to make the investment in plat- forms that can be spread over multiple clients, allowing the in-house department to reap the benefits of doing tasks more ef- ficiently with no or little development cost. But law firms have a problem. Many don't have the cash or the buy-in from the partnership to spend millions creating a new technology. In Montréal, Alexandre ibault, a partner at errien Couture lawyers L.L.P., says the current structures of law firm actually discourage it. "ere's a lack of incentive for partners to want to inno- vate and the reason for that is we are in what we call a cash-and-carry business. Es- sentially you're pulling out all the working capital every year and splitting it amongst your partners, right? "at works as long as you still have clients who are willing to pay the billable hours and your business model works so it would be well and good if the clients were super happy about this. But the fact is the clients aren't. ey're asking for ways for firms to innovate." ibault's law firm – which was family owned – developed a stand-alone company called Edilex that offers lawyers and com- panies document-automation systems for things like RFPs. e program generates legal documents using intelligent clauses and rules once the client selects and fills in the relevant information. He says his law firm, which wholly owns Edilex, invested upwards of seven figures to develop it, something that might be dif- ficult in a traditional large firm structure. "It's really hard to get a 60-year-old lawyer who has a window of five years before re- tirement to agree on a seven-figure invest- ment on something that's going to be cash- flow negative for the first three to four years and start paying dividends five years down the road. "But that's what you're looking at for a tech project, your capex is going to be really significant and it's going to be up front, so your older partners are incen- tivized not to go down that road. And I can't fault them for that. I think the real innovation is going to come from smaller, more agile structures." Janis Criger, a Hamilton, Ont. lawyer, agrees. She told the Law Society of Upper Canada in a pointed comment letter on the ABS issue that "[y]ou don't need an alter- native business structure to provide legal services in an innovative way. "All you really need are a brain, ten fin- gers and a decent internet connection on an encrypted device [an iPad with a solar powered Bluetooth keyboard can be had for about $1,200.00]. Technology gets cheaper every day. … Large corporations are unlikely to deliver legal services in any innovative way in my view." Yet the large firms aren't all sitting on their hands. Many big names are getting around gambling big bucks on individual startups by supporting legal accelerators and incu- bators that work on multiple projects at the same time. Dentons, for example, owns NextLaw Labs, a business accelerator focused on de- veloping new legal technologies. rough partnerships with technology companies, startups, other business accelerators and legal vendors, NextLaw says it's already in- vesting in promising companies to develop a suite of new technologies. It points to investments in Apperio, which helps businesses track multiple le- gal projects at the same time, and in ROSS Intelligence Inc., which allows users to ask questions in plain language then have the computer read through the entire body of law and return a cited answer and topical readings from legislation, case law and sec- ondary sources. So some law firms are already getting directly involved in innovation and they don't need the law society's blessing on al- ternative structures for that. But other firms are doing what Gwyneth Paltrow famously called "conscious uncou- pling," removing themselves from the de- bate over alternative business structures by leaving the law firm structure entirely. When Joe Milstone co-founded Cog- nition LLP in 2005, it was an onshore out- sourcer structured as a law firm. It stayed that way for a decade. Over a year ago, Cognition wrote a scath- ing comment letter to the Law Society of Upper Canada on the issue of permitting outside investment in law firms, saying like other recent entrants and innovators in the | IN-HOUSE ADVISOR: FUNDING LEGAL INNOVATION | CHRIS BENTLEY > LEGAL INNOVATION ZONE Every corporation that wants to survive is in a race to the next innovative level. Every one. And I bet every corporation is going to be looking for innovative ways for their legal department either to support corporate innovation or to innovate their own services.

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