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How lawyers are mining the information mother lode for pricing, practice tips and predictions

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How lawyers are mining the information mother lode for pricing, practice tips and predictions

May 1, 2013, 10:20 am CDT

Related article: Your next job interviewer might be a computer program

The day is here: Big data, loosely defined as the computer analysis of torrents of information to find hidden gems of insight, is slowly transforming the way law is practiced in the U.S.

Law firms are using big data to identify which cases will be easy slam dunks and those that are air balls. They’re relying on the technology to get a read on what other law firms are charging, so they can adjust their rates accordingly. And big data is also popping up in law firm human resources departments, where tech-savvy department heads are crunching data on potential new hires in the hopes of coming up with recruits who are truly a good fit.

“I think analytics is the wave of the future,” says Mark A. Lemley, a Stanford Law School professor. “Lawyers and companies make decisions today based on ‘anecdata’. If the lawyer remembers winning a case on a particular issue in front of a particular judge, they instinctively assume they know how that judge thinks about that issue.

“But that’s not necessarily so. Data allows companies and firms to understand the real opportunities and risks they face so they can make intelligent business decisions.”

Still, while there’s a lot of feel-good buzz about big data’s promise for law firms, those most familiar with the technology know it’s a double-edged sword. The same big-data computers doing all that mining on behalf of law firms are also being tasked by corporations to quickly size up the legal services market so they can play hardball with law firms seeking legal business.

Granted, computers have been transforming the law for decades now. But the sheer firepower of the technology these days—coupled with the unprecedented access to seemingly endless amounts of raw data on virtually every aspect of everyday life—is re-engineering that transformation on a much more fundamental level.

SPEED AND STORAGE

“Apollo 11 ran on approximately 74 kilobytes of memory and did about 50 calculations per second,” says Ian Koenig, the New York City-based chief architect at LexisNexis. “Our content fabrication system—not including the search engine or any other technology—runs on a petabyte of storage and does between 5,000 and 10,000 calculations per second.” (A petabyte equals about 1 trillion kilobytes.)

Armed with that kind of digital artillery, the company can offer products designed to predict the outcomes of legal cases.

Its Lexis Advance MedMal Navigator, for example, offers predictions on potential medical-malpractice cases. The software, released at LegalTech New York 2013 and offered on a subscription basis, finds diamonds-in-the-rough opportunities by looking at how similar cases fared in the same jurisdiction and giving its take on how new cases will fare. MedMal Navigator also alerts medical-malpractice attorneys if their case may involve an issue related to standards of care. And it gives them analysis on available expert witnesses, including insight into the kinds of cases those witnesses have participated in and the type of testimony they offered.

In a LexisNexis press release, Darren W. Dummit, a Los Angeles-based associate at the four-office California firm of Dummit, Buchholz & Trapp, says, “This product allows you … to determine in 20 minutes—versus 20 days—if a case is worth taking on. This tool is a powerful, one-stop solution for malpractice attorneys.”

Another product, Verdict & Settlement Analyzer, forages through case law to offer attorneys advice on whether a motion will be approved or denied, or if a general counsel should handle a matter internally or take it to an outside counsel.

“We store every single case in the U.S. and in many countries as well, and we have the tools and analytics to look across this data in a way that helps attorneys glean insights into potential case outcomes,” says LexisNexis’ Koenig. “There are things law firms don’t know today simply because they’ve never stored and correlated all this data.”

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Photo of Ian Koenig, Chief architect for LexisNexis, by Arne Adler.

CASE PREDICTIONS

Meanwhile, Lex Machina, a Palo Alto, Calif.-based big-data firm, offers to do for patent lawyers what MedMal Navigator does for malpractice: Predict case outcomes. Every day the Web-based service crawls the Internet for data from all known, reliable sources of patent law information and auto-loads it into a master database. Once all the data is correlated, the service makes predictions on how a new patent case will fare by weighing a number of variables, including the kind of intellectual property involved and the ruling history of the judge the attorney will likely be facing. (The firm did not respond to calls seeking pricing information for this service.)

“To create the most powerful litigation strategy, we use both experience and big data,” says Lex Machina user Vicki Veenker, a Palo Alto solo practitioner. “Lex Machina allows a litigator to access a lot of data beyond what any team would likely know—for example, on a given judge or district or litigation history of a patent. But the litigator’s experience and skill dictates what to look for and how to interpret the data. Lex Machina is an unprecedented tool for litigators that informs a litigator’s decisions, but the litigator must make the decisions.”

Veenker says the tool comes in handy for other uses. “In licensing negotiations or when serving as a mediator, it is helpful to assess the litigation landscape—both the history of any previous assertions of the same patent and likely future activity.”

She consults Lex Machina to find out whether a plaintiff likes to sue in a given district, tends to settle or has already sued her competitors, suppliers or customers. “My prediction is that in the long term, others will join me and big data will bring more transparency to the IP marketplace,” Veenker says.

FEE FACTS

For law firms looking to get a much more informed take on what they should charge, there are big-data services like the TyMetrix LegalView data warehouse. The service aggregates the invoices of tens of billions of dollars of legal spending on an ongoing basis to maintain what it describes as the world’s largest permission-based contributory data warehouse.

Law firms sourcing the TyMetrix Legal Analytics service get an insider’s view into what corporate legal departments are willing to pay before they show up at the negotiating table. And they’re able to use the service to see how they can best position themselves in relation to competitors. (TyMetrix declined to provide specifics on pricing for its analytics.)

“Law firms have utilized TyMetrix analytics to benchmark themselves against the industry,” says Craig Raeburn, managing director of TyMetrix Legal Analytics in Hartford, Conn. “Many have used our LegalView data warehouse to compare their rates and understand the best way to position themselves with clients—low-cost provider or high-end value player.”

Other law firms have used the TyMetrix services to compare matter costs in relation to average industry costs, so they can demonstrate to clients that they are actually more efficient than competitors, even if their rates appear to be higher, Raeburn says.

“The most interesting use of our analytics was from a Midwest firm that wanted to understand its opportunity for market penetration based on the average ‘legal spend’ of corporations,” Raeburn says. “They compared a number of different benchmarks … and utilized this information to determine where they could get the largest ROI from a market-expansion play.”

“The ability to learn in real time and gain insights from meaningful, predictive data is increasingly important to delivering new levels of value to clients,” says Bill Turner, chief knowledge officer at Womble Carlyle Sandridge & Rice in Winston-Salem, N.C., and a TyMetrix user. “A strong analytical platform is essential.”

Adds Christian R. Lueth, director of finance and accounting at Dykema Gossett in Detroit: “Over the last five years, it has become increasingly clear that the legal industry has changed and will likely never return to the pre-recession state. … The most successful firms will be the ones that understand that their clients are already using benchmarking data to evaluate law firms, and that they need to get ahead of the curve and successfully leverage external competitive data to provide their clients the efficiency and cost competitiveness that they are demanding.”

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Photo of Caren Ulrich Stacy, President of Lawyer Metrics, by McCory James.

BIG DOWNER?

The potential downside of big data becomes clear for law firms when they realize their corporate clients are peering into the same aggregated data they are. Sky Analytics, based in Andover, Mass., offers corporations the ability to retrieve an unprecedented macro view into the costs of legal services, as well as specific advice on how to cut the best deal on legal services in any given location. In some cases, law firm clients are even using the service to strike tough deals through alternative fee arrangements, according to Chris Bullock, chief marketing officer.

Like TyMetrix, Sky Analytics is able to offer big-data macro- and microanalyses by voraciously compiling anonymized invoice data on legal spending. By last count, it had aggregated more than 60,000 invoices from more than 10,000 lawyers and timekeepers, 1,000 law firms and 16,000 matters from across North America. Pricing for all Sky Analytics services starts at $30,000.

Sometimes, corporate counsel attorneys work directly with firms like Sky Analytics. Other times, they bring in help from the IT department. “GCs are increasingly waking up to the idea that they have talented analysts within their organization that can predict outcomes of things,” says Daniel Martin Katz, a Michigan State University assistant professor of law who closely follows legal analytics. “They can take them on loan from other corporate divisions and set them loose on a legal problem.”

Adds Bullock: “The legal department budget is often seen as a major cost center for many corporations, and general counsel must demonstrate greater efficiencies in their legal spending. Legal analytics will become a significant competitive advantage for those companies that are early adopters.”

Serengeti Law, based in Bellevue, Wash., offers a similar product, Serengeti Tracker. It also sizes up the legal services market for corporate clients based on anonymized invoices it receives from more than 570 corporations and tens of thousands of law firms, according to Serengeti general manager Jeff Hodge. The fee for this service is approximately 1 percent of the face value of all invoices submitted by a corporate legal department. “The key with analytics from Serengeti Tracker is that they permit legal departments to compare their metrics with their peers,” Hodge says. “This allows them to quickly find areas where they can improve and where costs, staffing and new cases are different from other comparable legal departments.”

Speaking to the St. Louis Business Journal, Mark LaVigne—vice president, general counsel and secretary at Energizer Holdings of St. Louis—said, “By implementing Serengeti Tracker, we will improve our ability to see trends, analyze data and elevate our operating efficiency on a global scale.”

Energizer has legal operations in more than 60 countries and works with more than 250 law firms throughout the world. All of those outside law firms submit their invoices to Energizer through Serengeti, he says.

BILLING BUSTER

Meanwhile, Sky Analytics also offers in-house counsel the Right Rate Advisor tool, which combs through all its data to advise users on whether to approve, reject or reduce increases in hourly rates requested by outside law firms. The primary variables the tool analyzes are an attorney’s years of experience, his or her position in the firm, the law firm size and the cost of living where the attorney is based.

Right Rate Advisor also weighs the history an outside attorney has with the business doing the evaluation, as well as the extent of overtime billings the attorney with the candidate law firm has filed with the business. (Attorneys logging normal working hours are viewed more favorably.)

“It comes down to expenses and overbilling,” says Sky Analytics president Doug Ventola. “Right Rate Advisor is an example of how analytics are driving change in the legal industry.” Very busy in the big-data space, Sky Analytics has also partnered with Alan Gray Inc., a Boston-based, international insurance claims management and financial services firm, to offer a macro view of the legal services market for insurance companies. Customers can purchase a big-picture analysis of the legal market and line-by-line audit analysis of the legal expenses law firms bill to insurance carrier clients.

The service, which combines analytics technology and expertise from both companies, promises to generate alerts about excessive billing practices at specific law firms. And it offers report cards on law firms that enable insurance companies to play hardball when negotiating invoices and rate reductions.

“The power to instantly understand and benchmark millions of dollars of legal expenses comprehensively across all lines of litigation is incredible,” said Michael F. Ceppi, president of Alan Gray, in a January press release. “Working with Sky Analytics, our clients will easily identify the cost efficiencies of their outside law firms, as well as flag specific areas requiring further auditing.”

Armed with those insights, insurer subscribers to the service are able to put Sky Analytics personnel together with representatives at their outside law firms to objectively acknowledge any shortcomings and work together to reduce excess costs and improve efficiencies, according to Ceppi.

DATA DETECTION

“Right now, no one knows whether they pay their lawyers too much or too little, and they don’t have any sense other than word of mouth whether their lawyers are good or bad,” says Stanford’s Lemley. “Big data allows companies to benchmark how much they are spending on legal services, how their lawyers compare to others, what judges and districts are most favorable, and which lawyers do well in those districts.”

Once all this new computerized scrutiny goes mainstream, will increasing numbers of law firms be squirming uncomfortably as they realize their performance is suddenly under a big-data microscope?

Michael Lipps, a vice president at LexisNexis—which has its own law firm evaluation product, CounselLink Insight—says it doesn’t have to be that way.

“The traditional view is that every dollar saved by a GC on their outside legal spend means one dollar less in law firm profits,” Lipps says. “LexisNexis is working with both sides to pinpoint and analyze a wealth of data on fee structures and on predictive performance metrics and benchmarks in order to help them drive performance improvements in their organizations.”

Bottom line: With big data, virtually every aspect of the law is open to detailed analysis. The technology is already there. And the data is most certainly already there. It’s simply a matter of imagining what you want to look for and handing your desires over to your in-house IT or a third-party service for manifestation.

Big-data technology, for example, can be (and is being) used by Sky Analytics to enable corporations to quickly scour the country for law firms that meet their diversity requirements.

Says TyMetrix’s Raeburn: “Analytics will have the ability to help us transform how we manage our operations and think about business development for law firms and budgets. To leverage these analytics, we need to hire savvy business managers who have done this in other industries.” He adds: “The power of data plus expertise plus technology will change the landscape as we know it today.”

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Chart by Stephen Ravenscraft

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