The Legal Innovation Defense (LID) Fund

§ October 16th, 2014 § Filed under Projects § 5 Comments

For some time, I’ve been talking to people about how to resolve a systemic issue in the legal technology industry, what you might call “The Uncertainty Loop.” It identifies at least one factor that inhibits the rise of innovative startups in the space, and contributes to the general state of inertia in modernizing legal practice.

“The Uncertainty Loop” is a simple idea – it works like this:

1. legal uncertainty in the doctrine around unauthorized practice of law (UPL) exists, mostly as a result of unclear regulations and sometimes even less clear judicial decisions,
2. this uncertainty creates risks for would-be entrepreneurs in the space, and also hinders the ability for those entrepreneurs to acquire capital to pursue innovative ideas,
3. this creates a relatively weak field of underdeveloped tools, which hinders adoption within the legal industry,
4. lack of adoption prevents momentum from gathering within the profession to clarify UPL rules and permit increased innovation activity, which starts the Uncertainty Loop again

The Uncertainty Loop is real: I’ve seen it hamper businesses built around amazing technology, block talent from entering the space, and suffocate in the crib numerous great ideas emerging in the community. While it doesn’t fully explain all of the systemic problems in cultivating a vibrant ecosystem of innovation in the legal industry, it is certainly an important part of it.

I was intrigued by a point made by LegalZoom co-founder Eddie Hartman at FutureLaw 2014 earlier this year. On a panel that largely centered around UPL issues, he noted that the landscape of legal technology is much better than what it was even a decade or so ago because successful legal technology companies have slowly gained the financial capital to challenge and fight UPL actions nationwide. The willingness to go into the ring on these cases has created a better balance of power between the bar associations and companies, and helped to force crystallization around the boundaries of UPL.

Everyone in legal technology interested in real change – companies, public interest activists, and lawyers themselves – have a collective interest in ensuring that UPL is not a barrier to continued innovation. UPL doctrines are intensely vague, and professional interest in keeping them that way drives the Uncertainty Loop. The issue is: how do we create effective shields that provide the critical balance of power with bar associations to all people working in legal technology, regardless of size or access to financial resources?

Today, I want to propose an idea I’ve been working on for awhile, and finally ready to push forwards. I call it The Legal Innovation Defense (LID) Fund. The idea is simple: the LID Fund will create a collective insurance program that provides a defense system against the low probability, high impact possibility that a new technology in the legal space will be later discovered to have engaged in UPL.

There are three components to this project. First, the money: LID would be funded by two main types of actors. There would be a set of smaller startups, non-profits, and other organizations experimenting in legal technology that would pay a small monthly fee for membership in the coalition. We also envision a group of larger institutional supporters and investors with interests in shaping the overall landscape of law around UPL.

Second, the shield: upon facing an UPL action, coalition members would be permitted to trigger the assistance of the LID Fund. The program would deploy not only a preset insurance payment to support the litigation effort, but also would supply legal experts well versed in the law around UPL to guide the challenge. The upshot of this is that the LID Fund would provide insulation to its members from the risks around UPL, and assurance to their stakeholders. Simultaneously, it would support impact litigation in the legal technology space.

Third, the research: LID would be the center of a network of organizations working in legal technology and would be an organization involved in UPL challenges nationally. To that end, it would be able to provide ongoing research and policy work on the evolving state of technological innovation in the legal industry and the landscape of law surrounding the use of those technologies. This has broad public benefit for innovators and regulators alike, since hard numbers and good research on this specific issue are difficult to come by.

LID would be focused on the existing pool of organizations in the space, but would be a forward-looking effort, as well. By breaking a key link in the chain of the Uncertainty Loop — the risk created by legal uncertainty around automation and technology in the profession — the Fund would be aimed at opening the doors to new entrants to come into the legal industry and create the dreamed-of tools that are often talked about, but rarely actually pursued. Our hope would be to create the safety to innovate, and advocate for the larger regulatory changes that must occur to make legal services more accessible, more democratized, and effective.

So with that, this blog post officially puts out the call for willing hands to help launch this initiative: Would you support an initiative like LID? Would you take advantage of the kind of insurance that LID would offer to pursue a legal technology project or business? Do you know of an institutional supporter that would join this effort?

RR&H is seeking any and all assistance and advice as we make a push to turn this into a reality. We also intend to convene a meeting of interested parties in the near future – so get in touch by dropping a line to tim@robotandhwang.com. Keep your eyes on this space!