There has been a 484 percent increase in the number of patents filed covering new legal services technology globally in the last five years, reveals an analysis from the legal business of Thomson Reuters, the world’s leading source of news and information for businesses and professionals.

According to Thomson Reuters, 579 patents relating to new legal services technology were filed worldwide in 2016, up from just 99 patents in 2012, citing data from The World Intellectual Property Organization.

The figures reflect the rise of alternative legal services – such as virtual law firms – and the rapid expansion of the online legal industry. This trend is in large part being driven by businesses and individuals looking beyond traditional channels for legal advice.

The statistics also indicate a rise in the use of technology and outsourcing by traditional law firms in the UK, the U.S. and East Asia. This comes as firms aim to increase efficiency and implement low-cost operating models in an increasingly competitive market.

Patents filed in the U.S. accounted for the highest proportion of the total. The top three countries by percentage of total patents filed in 2016 were:

 Country               % of total patents filed Globally 2016

United States             38%

China                         34%

South Korea              15%

“Technological innovation across the financial and professional services industries has grown rapidly over the last few years and the legal sector is investing to stay ahead of the curve,” said Charlotte Rushton, managing director of U.S. Large and Midsize Law Firms for Thomson Reuters.

“Most major law firms now operate on a global scale, managing deals and litigation across multiple jurisdictions and cross-borders, for which new technology is being specifically developed.”

“Traditional law firms are facing increased competition, so many are adopting cutting-edge technology to streamline processes and reduce operating costs, or are outsourcing to an external provider.”

“Systems such as matter management analytics allow law firms to coordinate live deals and business development programs throughout their global networks.”

New business models for law firms are driving innovation in the sector

Regulatory changes have opened up legal markets to new entrants with unconventional business models in many jurisdictions including the UK, Australia and Washington DC in the U.S. The Legal Services Act in the UK allows alternative business structures, whereby lawyers and non-lawyers unite to form a business.

Many of these new business models are technology-driven, focused on moving the industry online in order to boost efficiency and make services more accessible.

“Law firms expanding into sectors such as management consultancy are being exposed to new practices and implementing technology changes as a result,” added Rushton.

Thomson Reuters adds that many traditional law firms are using advanced technology, or are outsourcing a wide range of work to legal process outsourcing providers (LPOs). Typical activities being outsourced include mergers & acquisition (M&A) due diligence, litigation support, document review, and administrative tasks.

Rapid uptake of new legal tech has seen the number of global patents filings increase by 484% in five years (See graph)

*Patents filed under ‘Legal services and handling legal documents’. Source: World Intellectual Property Organisation. Data to year ending 31 December 2016.