How Artificial Intelligence (AI) is Transforming the Legal Industry?

Updated on Dec 18th, 2023

Artificial Intelligence transforming Legal Industry

Projected to become a market worth USD 2587.04 million by 2027, applications of Artificial Intelligence or AI in legal industry have become quite promising investments.  

Traditionally, legal sector has remained the slowest of all when it comes to adopting new technologies. This, however, is changing gradually in recent years, all thanks to the undeniable capabilities of artificial intelligence. Already the basic AI-based legal software are helping firms in making their processes more efficient, eventually improving their productivity. In this blog we will explore how the technology is transforming the legal landscapes, but before that let’s refresh our knowledge on the tech itself. 

  • AI is transforming the legal industry, projected to grow its market size by USD 2587.04 million by 2027. 
  • Solutions like GPT-3 and contract review solutions, are helping decrease the workload for legal firms. 
  • With predictive analytics, many negotiations are being expedited, reducing the number of trials. 
  • Cyber threats and implicit bias are the most formidable challenges associated with AI in legal sector. 

What Is Artificial Intelligence and Why Is It Everywhere All of a Sudden? 

In the simplest terms, AI or artificial intelligence refers to the branch of computer science that simulates human intelligence to perform tasks that require cognitive thinking. The computer program or the AI application responsible for behaving in human way uses advanced algorithms equipped with complex conditional statements to accomplish its job. A more evolved form of AI, Machine Learning or ML takes this process a step ahead and teaches itself those conditional statements to actually imitate a functioning human intelligence. ML does it by creating models on the basis of training data (data ingested to machine learning models to help it learn), and then refining the same until it begins performing as intelligently and accurately as possible. 

Organizations around the world and across industries are investing in AI-based software development to automate recurrent tasks, streamline their workflows, improve the accuracy, and turnaround time of their operations. All these have led to companies witnessing around 60% rise in their net profit post-adoption of AI applications, which is huge, considering the minimal investments the technology requires. No wonder, AI has become as ubiquitous as air, and legal firms, that had remained indifferent to the rest of the technological advancements are actively participating in this disruption. 

How Tech-advanced Law Firms Are Using AI? 

The AI in legal industry is being used in various ways. They are using it to help legal professionals offer their clients a better experience through quicker services, more extensive research, and predictive models. Let’s take a deeper dive into the various applications that legal firms are using AI through. 


a. Generative AI  

Generative AI is one of the more popular use cases of technology across various sectors. In the legal sector, it is being used to create legal drafts, contracts, and agreements. It is noteworthy that generative AI platforms for legal firms are much cheaper to produce than the more complex AI solutions. This is so because unlike solutions like autonomous cars, generative AI need not be perfect all the time. 

In fact, most organizations are using this tool of AI in legal industry only to develop the first draft. This helps editors create the final version of a legal document in a much shorter span of time. What’s interesting is that the artifacts prepared by these generative AI are more creatively inclined than the ones created by legal professionals. This results in a phenomenon known as emergent behavior, which can lead to new strategies to win cases in novel ways. 

GPT-3: The Generative AI Model for Legal Firms 

One of the more popular AI models that helps in creating such generative AI applications for legal firms is GPT-3. Created by OpenAI, is one such model. GPT-3 is a generative model that predicts the next token in a sequence. This token can either be a piece of audio or text. The model focuses on contexts, to create sequential data. The model is unlike others in the field, because it has already been trained on 200 billion parameters, and half a trillion words. This model has also been trained on legal documents, Making things yet easier for law firms. 

All that this model needs to get started is a short prompt. Thereafter, depending on the context set, it can create draft in multiple sections. Since there aren’t many parameters one can set with this model, there are certain drawbacks attached.  

The AI legal software, lacking human experience, can bring up random topics in the draft If it finds something ambiguous in its context.  Without a legal professional guiding its logical understanding, it can generate content with factual inaccuracies. Therefore, to ascertain maximum utilization of the tool, it is necessary that the model gets trained by a competent lawyer.  

The training would require data from multiple legal contracts and various versions of it, be they differ on the basis of varying jurisdictions or adapting to the change in law. After that the professional can manually test the model outputs for deviations and rectify the same for continuous learning and improvisation. 

b. Predictive Analysis  

Predictive analytics is yet another exciting application of AI in legal industry that can transform the way the firms function. Most of the times, pending cases’ analysis can lead to various outcomes, without any probability attached to them. This makes case evaluation difficult and inconclusive. However, with an AI-based litigation prediction system, creating outcomes on the basis of hard facts, much more data, and a stronger processing function the results can be deemed more reliable. 

Some startups are already working to build such predictive machine learning models. They’re using case fact files and relevant precedents as inputs to make data-driven predictions. As the model learns from more cases and feedbacks, the more accurate it tends to become. Eventually, these models can help firms to plan their litigation strategies and improve the settlement negotiations. This will lead to less number of cases actually going for trials which will add to huge cost savings and resource optimization. 

One of the startups investing in such solutions have already started seeing above mentioned advantages. The system they’re using, despite it being in it neoteric stage, is already making predictions with 90% accuracy. This is already more than what firms analyzing cases through mock trials have achieved so far. As such this algorithmic technology is already on the way of becoming the de-facto evaluation specialist when it comes to evaluating cases in pipeline or cases a firm should want to undertake. 

Also Read: How is AI Impacting Predictive Analysis?


c. Document Management and Automation 

Other than the core legal processes, AI in legal industry also has capabilities to effectively manage back-office processes. Firms that have been digitizing their records with electronic documents were facing all the same problems they had when they were doing so traditionally. Simple elimination of hard copy document storage wasn’t cutting the deal for firms that were looking for a more permanent solution for all their document management problems, one of which is searching for the right document in an efficient manner.  

Traditional documents management systems do not have effective tagging and indexing systems that can bring down the navigation time to a sufficient extent. However, with an AI-based system, the documents can be organized, tagged, filtered, sorted, and found in dramatically less time. 

With an AI-based document management system, one can automatically detect whether a document is an agreement, note, order, subpoena, case file, or a contract. It can then add proper tags to it for automated organization. The system can also automatically segregate files for profiling, making it easier for professionals to learn everything about a case without any document hunt. More advanced applications can also be developed to find case precedence.  

Other than retrieval, an AI-based document management system can also be used for version control. Often maintaining legal documents’ check-in and check-out privileges becomes a cumbersome task, stealing time away from professionals who should instead be focusing on developing newer strategies or conducting legal research. But with the digital legal solutions software they can manage these versions, track changes, and understand the gist in much less time. 

d. Contract Review 

Our economic system depends heavily on contracts; and this is something that’s not going to change in the foreseeable future. That being said, validating and finalizing a contract is one of the most tedious tasks in the legal world. All the parties involved need to check the contract with painstaking details, any ambiguity needs to be addressed with more minutiae, context needs to be verified and agreed upon multiple times. This can cause unnecessary delay and monotony in various deals and other legal cases. This is why an AI solution that can quickly review contracts with absolute reliability is considered one of the most promising use cases for law firms. 

Contract Review Solutions In Present 

Some startups like Klarity, LexCheck, and ClearLaw have successfully gauged the opportunity here and are currently working to fulfil this vision. They are building legal solutions software to segregate possible conflicts in contracts from the obvious and clear ones, as per the context given by a user. These tools would simply ingest the contract drafts run them through NLP analysis programs, highlight the possibility problematic sections. This way professionals only need to manually check some parts of contracts expediting closures and deals with greater reliance. 

What’s interesting about this use case of AI in legal industry is that once the models get trained on larger datasets with feedback loop in place, contract formation can eventually get completely automated making applications related with blockchain-based smart contracts more robust and efficient.  

While the end-to-end automation for contract reviews is something to look forward to, companies like Salesforce, HP, Home Depot, PepsiCo, and eBay are already using AI-powered contract review programs to finalize their more frequent contracts. Experts say that this adoption is about to go mainstream. One benefit of mainstream adoption is that more data will then become available for training via open-source medium; another is the myriad of investments the NLP model will then receive. This will eventually lead to advancements in the technology itself, with a quicker pace. 

Limitation Of AI/ML Applications in the Legal Sector 

Artificial intelligence and machine learning do not always have positive effects. Law firms may also see the negative consequences of implementing AI discussed below.  


a. Trust Issues 

Machines are rarely, if ever, completely trustworthy. Any minor damage can lead to huge chaos in the data, or worse, a leak in information. While an experienced AI developer can ensure that there is no vulnerability in the software, devices that run those AI legal services applications themselves may not be completely secure. Furthermore, the common image of AI as being emotion-less and robotic doesn’t help the case either. The apathetic nature of technology can quickly turn humans away who like having comfort of human understanding. As such, the lack of guarantee of data safety and empathy from AI in legal industry has led to distrust in technology for clients. With clients not supporting adoption of AI, legal firms have no choice but to postpone or scrap the ideas associated with AI implementation in their workflows. 

b. Cyber Threats 

Cybersecurity is yet another major concern for use of AI in legal industry. As recent research conducted by American Bar Association (ABA) report, 29% of law firms reported a security breach in last year alone.  This means data of lucrative targets like well-known figures and industry leaders is always at a risk whenever their data is uploaded on cloud for data analysis and AI application. ABA also reported that more than a third of small law businesses had been hacked at least once post the digitalization of their workflow. Now the trick is most of the AI applications require analysis of ton of data to derive any meaningful insight out of it. This analysis is also important for applications like generative AI. As such any loophole in the workflow can increase the probability of data leaks and ransom attacks. 

c. Implicit Bias  

One of the biggest risks of implementing AI in legal industry processes is the bias of the developers, data ingested, and ML models. AI/ML solutions have remained notorious for inheriting human biases in their results. While most of these issues can be resolved by evaluating the process to hire AI developers on bias-based tests, not all biases can be eliminated through this measure. No wonder, many AI software have been shown to have biases against minorities for their relatively lesser presence in the sample data. While this bias can be deemed harmless enough for other applications in the legal world it can lead to adverse complications. For example, a predictive AI application for quicker settlements faces a case where its biases can play out, it can lead to erroneous outcomes. 



While, like any other technology, the application of AI in legal industry for more advanced use cases remains in question, the present applications have already proven their worth. But whether you’re looking for an AI development services for your legal firm for old-school solutions or for avant-garde ones, one thing remains the same, you cannot do it without a reliable IT partner.  A partner who understands the cryptic details of the legal industry and how every detail can make a huge difference. In short, you need a partner who’s experienced in developing AI solutions but also applications for the law industry. Matellio is, of course, one such name that can help you on all the grounds.  

Having developed multiple law software solutions, we understand the accountability aspect of legal solutions and are capable of building regulatory frameworks to ensure that the intelligent machines work with the required obligations and liabilities. Our data security and management will perform due diligence in data collection, and other tasks for predictive analytics and the developers will create the comprehensive legal framework to control Artificial Intelligence and prevent it from any sort of exploitation.

All you need to do is fill in this form to book a free consultation call with our experts and then discuss your ideas with them. They will sign the NDA, create a project development plan, and share a free quote with you with no strings attached. That way you can start your legal AI app development process right away. 

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