Litigation prediction pioneer, CourtQuant, is to close. The company told Artificial Lawyer the closure had been driven by two key factors: the conservative nature of the legal sector, including litigation funders, when it came to using predictive techniques; and the tough market for legal tech startup funding during the current pandemic.
Co-founder, Jozef Maruscak, told this site: ‘There is a place for predictive analytics in the litigation funding space, but the right business model and mindset needs to be adopted by the funders. I think that reaching the market of lower value, smaller claims is possible only through technology and some of our former clients, such as Apex, got it right.’
CourtQuant launched in 2018. Maruscak is now working as part of a software development group, while co-founder Ludwig Bull (see story) has created a new company, CourtCorrect, which helps people more easily see what is in a contract.
So, is litigation prediction dead? In the last few years several companies have built businesses based on helping lawyers to better understand the odds of what will happen in a certain case, often using NLP techniques to analyse similar past cases, whether by type, or with the same judge, for example, and then make a statistical estimate about elements of the upcoming case.
Some companies such as Solomonic have also used an experienced team of legal specialists to ‘sense check’ and add an extra dimension to the software’s results.
Other companies, such as Gavelytics have sought to provide more narrow, but less risky, insights by focusing on very specific data points, such as the past actions of a certain judge on certain types of motion in court – which is not really an overall case prediction as such, as the company only seeks to tell you what happened before and in a very specific area, rather than make a solid prognostication on what the outcome to a whole case might be.
Both of those companies are going strong still. In fact, Gavelytics is on an expansion drive and building out their product in the US. So, the conclusion has to be that litigation prediction – at least on the narrower analytics side – is doing fine.
So, what went against CourtQuant?
One central challenge was the company’s strategy of working with litigation funders, i.e. a business that pools capital to lend it out to lawyers so they can conduct litigation, with it then recouping a nice profit if the case wins.
CourtQuant had worked to develop techniques that would give funds, and lawyers in general, what they believed to be a solid estimate of the chances of winning a case outright, or estimating if the other party would settle.
In fact, Maruscak, said: ‘We could predict the big cases’ outcomes. I am certain we had the best accuracy on the market. Yet, we realised CourtQuant could never be a big business at this point in time.’
Why didn’t this work? Maruscak explained that the litigation funders working on these large cases simply didn’t want to base their funding decisions on the technology alone. That meant they then continued to use their large teams of legal experts to vet the cases in the old way as well.
If you’re spending a lot of money and time on the traditional approach, and also paying a litigation prediction company to analyse the case, it becomes expensive. The funders then opted for the more traditional method.
That killed their core business strategy, as the idea was that the funders would put their faith in the tech’s output, not re-do the whole exercise again with people.
The final nail in the coffin has been the pandemic’s impact, which has reduced interest from seed funders in young companies that may not be able to scale quickly.
This was shown recently with seed stage startup Legal Connection’s (see story) decision to seek crowdfunding because it also could not secure seed funding.
‘We were bootstrapping the company and lived off the generated revenue. This year we had started a funding round, but because of COVID the offers were not good enough to dedicate our next years to this project. That was when we decided to go our own ways,’ Maruscak said.
He added: ‘We overestimated the legal sector, it is very conservative.’
Maruscak noted that he expected the entire business to be formally shut in the coming months, but it was already in effect no longer operating.
Last question: how has the experience been? This legal tech founder remains upbeat.
‘I am very happy about how it went and I’m grateful for the experience,’ Maruscak concluded. ‘It’s a learning curve.’