By Nicole Black
After one of the most challenging periods in recent history, 2022 was a year of reemergence. We once again entered public spaces, cautiously embracing a semblance of normalcy. At the same time, the painful memories of the incredibly challenging and tumultuous years of the pandemic were ever-present in our minds.
Law firms reopened, with some employees returning to the office. Despite a slow start, in-person conferences eventually resumed in full force. Business travel was once again part of our professional lives, and we relished the opportunity to once again connect in person and enjoy the company of our colleagues and friends.
Of course, not everyone was excited about the sudden shift from remote work back to the office. Many employees resisted the return to in-office work, while some law firm and legal technology leaders insisted that face-to-face interactions were the best way to get work done.
As we head into 2023, it’s difficult to predict how dominant market forces will affect the legal industry and the software companies that serve it. The first quarter of the year will be telling. In the meantime, looking back on the top legal technology news stories is a great way to identify key trends that hint at what’s to come for lawyers and their clients in 2023 and beyond.
In 2022, investment in the legal technology industry showed no sign of slowing down. There were continued consolidation and growth throughout the year, with significant funding rounds and many notable mergers and acquisitions announced in the legal technology space.
Below you’ll find some of the more notable acquisition examples:
• NetDocs acquired Worldox in October.
• Relativity acquired Heretik in August.
• Litera acquired Big Square and Micron Systems in August and PS/Ship and Prosperoware in January.
• AffiniPay acquired MyCase in June.
• MyCase acquired Docketwise in May.
• LexisNexis acquired ParleyPro in May.
• Paradigm acquired Lollylaw in April and Trustbooks in February.
• LEAP acquired WealthCounsel and ElderCounsel in April.
• Big Hand acquired Digitory Legal in August and Iridium Technology in February.
• Onit acquired SecureDocs in January.
• Alt Legal acquired Towergate Informatics’ §2(d) Citation Watch in January.
• Aderant acquired American LegalNet in January.
There were also continued investment rounds, some of which were notable for their size. Below are some of the standout examples:
• Case Status—$5 million Series B in December.
• Hello Divorce—$3.25 million seed round in October.
• JusticeText—$2.2 million seed round in September.
• Priori—$15 million Series A-1 in July.
• Paladin—$8 million Series A in May.
• SirionLabs—$85 million Series D in May.
• LinkSquares—$100 million in Series C in April.
• LexCheck—$17 million Series A in December and $5 million in seed funding in March.
• Zero Systems—$12 million in Series A in March.
• Time by Ping—$36.5 million in Series B in March.
• Casetext—$25 million in Series C in January.
• Ironclad—$150 million Series E in January.
It remains to be seen whether the increased acquisitions and funding rounds are a waning trend or the new normal. Will this pace continue well into the future, or will there be an abrupt slowdown in 2023?
It’s a tough call. As discussed in the next section, all eyes are on the looming recession predicted to occur in Q1 next year. It remains unclear whether it will come to fruition and how an economic slowdown will impact investment in the legal technology sector.
Despite the increased funding trend, some legal technology companies nevertheless experienced challenges in 2022. Several well-known companies closed their doors for good, while some pivoted their focus. Others laid off employees during the year’s second half in the face of economic headwinds that forecast a challenging road ahead during the first part of the new year.
For example, Gavelytics, a judicial analytics platform, announced it was shutting down in June, citing a lack of available financing. During that same month, Mighty, a company that had previously provided an online portal for personal injury lawyers that allowed them to interact with lien-holders such as medical providers, altered its focus. The company now provides a technology platform to deliver legal clients to the newly established Mighty Law, an independently owned law firm. Some legal technology pundits observed that the pivot effectively placed Mighty in competition with its former customers.
Also newsworthy was that several legal tech companies announced layoffs during the second half of 2022, including:
• Relativity—150 layoffs in December.
• Reynen Court—undisclosed number of layoffs in November.
• Lawgeex—30 layoffs in September.
• Notarize—110 layoffs in September.
While notable, these workforce reductions and pivots in the legal technology industry were not necessarily unexpected. Larger-scale layoffs from leading technology companies like Meta, Twitter and Lyft also occurred during the second half of 2022. As we head into an economically precarious new year, more industrywide layoffs may very well be on the horizon.
One positive outcome of the pandemic was the increased technology-related ethical guidance from bar associations across the country. In April 2020, the first pandemic-related ethics opinion was issued in Pennsylvania. Since then, advice related to technology issues has been handed down at a steady clip.
The topics covered range from how to ethically choose and use cloud computing and remote working tools in law firms to the unauthorized practice of law and advice on appearing in legal proceedings remotely. Technology competence was front and center in most opinions, and lawyers were repeatedly reminded that learning about and understanding the technology options available are a pivotal part of ensuring core competence.
Unfortunately, the increase in technology usage by legal professionals resulted in a rise in cyberattacks such as email phishing, email spoofing, malware, social engineering attacks and brute force hacking. Many lawyers were unprepared and did not fully understand the cybersecurity measures needed to sufficiently protect their firms’ data.
In June 2022, New York State addressed this knowledge-gap issue by requiring New York attorneys to complete one hour of cybersecurity continuing legal education as part of their biennial registration requirement, effective Jan. 1, 2023. In doing so, New York joined the ranks of a small minority of jurisdictions, including Florida and North Carolina, that mandate technology-related CLEs. However, New York was the first to specify a cybersecurity focus for the credits.
Finally, earlier this month, the threat of robot lawyers became more pressing with the release of the latest version of an impressively responsive AI chatbot. ChatGPT 3.5 is the brainchild of OpenAI and uses an advanced neural network machine-learning model to create written passages from simple text prompts.
The AI tool has the uncanny ability to generate incredibly detailed responses that even incorporate the requested tone or perspective, whether it’s drafting social media posts, a college essay or an oddly specific folk song. By all accounts, ChatGPT repeatedly provides fast, often relevant responses to requests large and small.
Of course, it’s one thing to create a blog post on a generic topic, but can ChatGPT draft legal documents? All signs point to yes! When asked to create a variety of documents regularly used in law offices, including an NDA, a demand letter and an employment agreement, ChatGPT’s output provided a decent starting point.
This tool undoubtedly offers great promise. However, the jury’s still out on whether its potential will be fully realized anytime soon, particularly in the legal industry. But as many have pointed out, AI technology is advancing so quickly that future versions will no doubt provide stunning—and very useful—results for legal professionals.
This year has been one of transition and transformation. While the pandemic isn’t yet behind us, it is no longer the primary driver of our decision-making process. The next year brings uncertainty in the face of a possible recession but also offers great promise. With that in mind, let’s enjoy the holidays, batten down the hatches and welcome the new year, with all of its possibilities.
Nicole Black is a Rochester, New York-based attorney, author and journalist, and she is Senior Director, SME and External Education at MyCase, a company that offers legal practice management software for small firms. She is the nationally recognized author of Cloud Computing for Lawyers and is co-author of Social Media for Lawyers: The Next Frontier, both published by the American Bar Association. She also is co-author of Criminal Law in New York, a Thomson Reuters treatise. She writes regular columns for ABAJournal.com and Above the Law; has authored hundreds of articles for other publications; and regularly speaks at conferences regarding the intersection of law and emerging technologies. Follow her on Twitter @nikiblack, or she can be reached at [email protected].
This column reflects the opinions of the author and not necessarily the views of the ABA Journal—or the American Bar Association.