UK-based legal AI company RAVN Systems has commenced development of an algorithm-driven cost management prediction system.
The company, which is best known for its AI document review system, is exploring this new area given the growing importance of cost management to the legal industry, especially in relation to litigation.
As the company points out: ‘The cost of getting fee estimates wrong can be considerable. In litigation a judge can make the law firm carry the burden of the excess.’
While it adds that ‘in relation to other types of matters the value of much of the extra time [above and beyond a fixed fee estimate that has been presented to a client] is often simply written off and thus [there is a] reduction in the overall profit margin’.
The proposed system, to be called ‘AI Matters’, is designed to use AI techniques to increase the ability to cost matters by reference to previous similar cases.
To some degree this appears to be similar to some case prediction software that looks to base predicted litigation outcomes on past cases. However, in this application the focus is on the costs of the matter in terms of law firm billable output.
RAVN says that the system will use heuristic algorithms* to predict whether a new matter is likely to use more resources and cost more than other similar cases that the firm may have conducted before.
Examples of factors in, say, an M&A transaction might include such things as:
- the expected duration of the transaction
- the number of third parties involved
- the number of subsidiaries involved
- the overall value of the acquisition
- the likely volume of documents in the deal room
How the company will encourage law firms to input the data from past cases, if they have all of it at hand, is not known. But, clearly, those law firms wishing to make use of the system will presumably have to commit to support it with inputting a sufficient level of previous deal and dispute data to give the software something to make comparisons from. How barristers fees are included in these calculations, in the case of litigation costs, is also not yet know.
However, it certainly sounds like an important step that will be of value to all involved. Costs lawyers and judges will no doubt also be intrigued.
[Editorial note: Nope, I don’t know what they are either…But here is an explanation Artificial Lawyer found: ‘The term heuristic is used for algorithms which find solutions among all possible ones, but they do not guarantee that the best will be found,therefore they may be considered as approximately and not accurate algorithms.These algorithms usually find a solution close to the best one and they find it fast and easily. Sometimes these algorithms can be accurate, that is they actually find the best solution, but the algorithm is still called heuristic until this best solution is proven to be the best.’ Hope that helps.]
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