US legal AI start-up, LegalSifter, is pioneering a ‘re-sale’ strategy of its automated contract review and advisory system with law firms buying in the AI tech and then re-selling its capabilities to clients.
In the most recent case LegalSifter has teamed up with respected Pittsburgh (pictured above) niche healthcare and medical law firm, Horty Springer, with the firm developing specific contract review ‘Sifters’ that are then re-sold to a wide number of healthcare sector clients, such as hospitals, on a subscription basis.
Each individual ‘Sifter’ is a natural language processing driven review of a certain type of contract, which also includes useful advice on what should and should not be in the contracts, which acts as a helpful guide.
The legal knowhow is built into the Sifter by the law firm, then with this ‘crystallised knowledge’ it is then sold on to corporate clients, which can then use its abilities inhouse to help review contracts at speed and with greater accuracy, thereby reducing risk.
The Sifters can also be sold onto other law firms, Dan Mulholland, Senior Partner at Horty Springer, told Artificial Lawyer, as several larger firms often sought out his niche firm’s expertise in healthcare matters.
‘This is also a good training tool for our junior lawyers, as the Sifter shows them what to do with a contract,’ he added.
‘It’s also a good system to have internally as we can use it too. Or, the client can make use of it themselves,’ Mulholland explained and said that one of the key factors here is that much of the review work they do is on a fixed fee, hence using an automated system like this is a big advantage.
When it comes to the relationship with the clients, they are expected to welcome the chance to use this AI technology themselves, which has been delivered via the law firm. And, when they have more complex legal questions then Horty Springer – it is hoped – will appear to be the firm to turn to, given that they have already been so helpful with the ‘process’ level work.
What is especially interesting here is that Horty Springer is clearly a small law firm, at just 17 lawyers. But, by developing a re-sale model they could potentially massively scale up their reach across the healthcare sector. This is because once a specific Sifter is made, in this case for a business associate agreement contract that is usually required by Federal law for all healthcare providers in the US, that Sifter can be sold to any and all healthcare providers to use as many times as they want.
Where before a small law firm may have been only able to service the contract review needs of a handful of clients per week, they can now – theoretically – provide a review service to hundreds at the same time across the country. While some of that revenue will have to go back to the tech company, a significant proportion remains with the niche firm. In short, using AI tech has allowed a smaller firm to reach and work with a far larger market group than previously would be possible and also to profit from it without having to increase their overheads.
The exact financial terms are still being finalised, but Mulholland said it was likely to operate via a subscription model with a volume metric, i.e. the more times you use a Sifter the more you pay.
While this is not the first time a law firm has white labelled and resold tech services to its clients, it is an interesting business model in the legal AI space. For example, some legal AI companies have been licensing their software to alternative legal services companies, which in turn have been providing this AI doc review capability to their corporate clients. This one is slightly different in that the law firm is handing over the actual tech to the client, rather than holding onto it.
Kevin Miller, CEO of LegalSifter, added: ‘In every contract negotiation in the world, at least one party works off the other party’s paper. It’s difficult to read someone else’s [legal] writing and apply your point of view without unnecessarily missing a critical term. Our partnership launches a product that makes that process faster and less risky.’