Intellectual Property Institute of Canada Annual Meeting October 15, 2015 In Motion: Reimagining the Ways We Practise Janet M. Fuhrer, Partner

OVERVIEW Legal Profession is in transition Profession must embrace innovation in nature of legal services offered and means of delivery Innovation takes many forms and some Canadian firms are leading the way These new ways of practice benefit profession and clients

THE OLD WAY Limited number of law firm structures  Sole Practitioner  Partnerships  Limited Liability Partnerships  Professional Corporations

THE OLD WAY Inflexible fee arrangements One way Lawyer-Client relationship New technology rarely embraced

BUT...TIMES ARE CHANGING

TRANSITIONS... Pressure on profession from multiple sources Landscape of legal services is rapidly changing Increasing cost-consciousness by clients Increasing dissatisfaction by lawyers working in current “pyramid” structure Firms and lawyers need to re-think how they offer legal services

LAWYERS WANT... Greater work-life balance Entrepreneurial opportunities More engagement with clients

CLIENTS WANT... More services for less cost  Alternative Fee arrangements  Cost certainty Standardization of routine tasks Greater efficiency in services provided More involvement and transparency; AND Results

WHAT IS DRIVING THIS CHANGE? Globalization Technology Changing client expectations Economy

TECHNOLOGY Technology can both sustain the legal profession and disrupt it by completely transforming how a market functions Disruptive technology includes: cloud computing, artificial intelligence, big data, virtual offices, legal referral services

GLOBALIZATION Regulatory uncertainty Lawyers increasingly assist clients globally Lawyers have to compete with foreign-based legal service providers including alternative business structures (ABS)

ECONOMY Pressure to manage costs Alternative fee arrangements increasingly attractive to clients Alternative business structures may be more attractive means of providing services

CHANGING CLIENT EXPECTATIONS Balance of power is shifting – clients expect more involvement in decision making More flexible fee arrangements Greater efficiency and professionalism Expect law firms to be run like businesses

INNOVATION TO THE RESCUE? Time is ripe for innovation Lawyers must innovate to remain relevant Profession must support lawyer-entrepeneurs Services must be offered more flexibly Rapid technological advancements create new entry points for new and competing legal services

INNOVATION TO THE RESCUE Both positive and negative effects More accessible and reliable legal services Increased competition Young Lawyers may be adversely affected Work commonly done by lawyers may be done increasingly by others Profession cannot afford to ignore

INNOVATION CAN TAKE MANY FORMS Rise of alternative business models Phasing out of time-based billing in favour of value-based billing and alternative billing arrangements

INNOVATION CAN TAKE MANY FORMS E-Discovery Outsourced E-Discovery providers may be law firms “Technology-assisted review” or “TAR”  Predictive coding allows lawyers to use machine learning algorithms to find complex patterns in data and statistically rank a document’s relevance

INNOVATION CAN TAKE MANY FORMS… Lawyer Referral Services Alternative fee arrangements  Flat/Fixed fees, partial contingency Focus on value-based billing rather than time- based billing (reward good work, not inefficiency) Online/Cloud-based delivery of services

INNOVATION AROUND THE WORLD... UK Legal Services Act, 2007 Liberalized legal services market to allow Alternative Business Structures (ABS):  Ownership and management of law firms by non-lawyers; External investment in law firms ABS can raise capital more effectively than partnerships Can provide bundled legal and non-legal services to clients

INNOVATION AROUND THE WORLD... Australia Legal Profession Act, 2004 allows law firms to form multi-disciplinary partnerships with non-lawyers, have non- lawyer ownership, and seek external investment Led to the first publicly-traded law firm Slater & Gordon Allows law “firm” to raise capital more easily, invest in technology, enter new practice areas Clients may become shareholders

INNOVATION IN CANADA

NEW MODELS OF PRACTICE Secondment Firms Law Firm Accordion Companies Virtual Law Firms Law and Business Companies Innovative Law Firms

SECONDMENT FIRMS May be law firms or companies Lawyers can be either independent contractors or employees Place senior lawyers with clients to work as General Counsel Place junior lawyers to do overflow work generated by in-house counsel

CANADIAN EXAMPLES

Provide Virtual General Counsel who act as dedicated part-time legal executives Also provide counsel on an as-needed basis for special problems or specific tasks IP and Litigation popular practice areas for secondment firms Typically fixed-fee pricing with lawyers only paid for time worked

LAW AND BUSINESS COMPANIES Help clients with both law and business needs Essentially Multi Disciplinary Practices Multi service firms providing bundled financial, business and legal advice could provide greater value and efficiency to clients

LAW FIRM ACCORDION COMPANIES Provide law firms/clients with lawyers for short term projects Either offer specialists they may not have or extra lawyers when there is a surge of work Match makers for small & medium sized firms Lawyers more like independent contractors

CANADIAN EXAMPLES Act essentially as a referring company for clients not lawyers, but process is same Match up clients with lawyers for quick discrete transactions – allows SMEs access to lawyers at reasonable prices Lawggle – allows users to search for lawyers quickly and easily

VIRTUAL COMPANIES OR LAW FIRMS Most still law firms, but with minimal overhead Can pass on cost savings to clients Fewer lawyers – only get paid when they work or collect Particularly attractive for niche areas – IP, tax, but viable for any practice area

CANADIAN EXAMPLES Can be organized as law firm or company No billable hours - lawyers are independent contractors Attorneys work full time either from home or at client sites Clients tend to be smaller companies

INNOVATIVE LAW FIRMS/COMPANIES Vary – often include elements of all the above and the characteristics of innovation described above New Legal Services or new ways of offering legal services

CANADIAN EXAMPLES Machine learning contract analysis Can review contracts and flag critical provisions Enables more effective and efficient Due Diligence

BENEFITS OF INNOVATION FOR LAWYERS Address work-life balance and eliminates the flexibility stigma Better working conditions Elimination of pressure to bring in new clients – clients brought in by company (see Lawyer Linx) Ability to set own rate

BENEFITS OF INNOVATION FOR LAWYERS Job security – less reward, but less risk than traditional law firm Able to combine law with entrepreneurship Effect on junior lawyers uncertain – may reduce opportunities for junior associates Lawyers can develop business acumen

BENEFITS FOR CLIENTS Affordability Predictability in fees and quality of service Access to more senior lawyers More integrated services – lawyer as trusted adviser

LAW FIRMS MUST EMBRACE INNOVATION No more business as usual Small changes can make big difference Focus on customer service and quality of legal service Incorporate technology advances – meet clients where they are

LAW FIRMS MUST EMBRACE INNOVATION Technological training for employees and lawyers Predictable costs for clients Online presence – Twitter, Facebook, etc Take advantage of Cloud computing Leverage non-law personnel – data analytics, project management, etc)

WHAT THE FUTURE HOLDS... Lawyers practising in business structures allowing some ownership of law firms by non- lawyers MDPs and fee sharing with non-lawyers More effective regulation that supports innovation

WHAT THE FUTURE HOLDS... Innovation in provision of legal services presents an opportunity for all stakeholders Profession must seize this opportunity Clients will be the drivers but lawyers also can direct

REFERENCES Joan C Williams et al., Disruptive Innovation: New models of Legal Practice, 2015 CBA Legal Futures Initiative, Futures: Transforming the Delivery of Legal Services in Canada, August 2014 Rick Kathuria, The role of ‘non-lawyers’ in delivering exceptional client experiences, Canadian Lawyer, April 2015 Sandeep Sacheti, The legal industry’s new reality, Global Legal Post, August 2013

Thank you Janet M. Fuhrer Direct: