By all accounts, 2017 was an explosive year for bitcoin, cryptocurrencies, and blockchain technology. Within the legal industry in particular, interest in these disruptive technologies has grown at an exponential rate, as exemplified by the enormous amount of buzz on the subject at ILTACON 2017. Amidst all the excitement, we’d like to take a moment to ring in the new year by chiming in with some of our reflections on the possibilities of blockchain technology for law firms.
Blockchain in Practice
Firms of varying sizes are striving to position themselves as leaders by demonstrating competency with blockchain and bitcoin. Various large law firms established blockchain practices in 2017, both in response to current interest levels and in anticipation of developments yet to come. Some firms, such as Perkins Coie LLP, have also begun accepting bitcoin as payment, immediately converting payments upon receipt given the cryptocurrency’s high volatility. Toby Brown, Chief Practice Management Officer at Perkins Coie, remarked that these measures are ways of “showing emerging clients that our firm is on the cutting edge.”
There is also a consensus that smart contracts supported on the platform of blockchain technology will be the first level of adoption at law firms. According to Brett Don, Chief Information Officer at Stradley Ronon Stevens & Young LLP, smart contracts have the potential to revolutionize the way transactions and contract negotiations operate in the legal sphere. Blockchain may reduce the amount of time, energy, and resources lawyers need to devote to such transactional work.
Some in the legal field express concern about smart contracts supplanting lawyers’ places in the legal system. Others view blockchain as an enhancement for lawyers rather than a replacement. Brett raised the example of the US Patent Trademark Office as one such context where, should the USPTO incorporate blockchain technology into the patent/trademark registration process, lawyers might expect to see a more efficient turnover of matters with shorter time frames and greater concentrations of high-level legal guidance comprising hours billed. “Once blockchain and smart contracts become the norm, there is still a need for lawyers during that transaction, in a different, advisory role. This is actually higher value work for attorneys to engage in,” Brett observed.
Blockchain and Information Governance
Beyond practices, smart contracts, and billing, there are many more avenues where blockchain technology might someday aid law firms in managing their internal operations. Max Welsh, Senior Risk Management Consultant at InOutsource and former Deputy General Counsel at Foley & Lardner, envisions a future where blockchain is harnessed to streamline information governance. While he and most industry experts caution that day-to-day adoption by law firms themselves likely won’t occur for some years, Max sees “amazing use case potential” from an information governance perspective.
A pervasive obstacle InOutsource’s clients confront is how to govern data across multiple repositories of record. According to Max: “One thing we’re always talking about in our client engagements is reducing duplication. Typically, everyone has their own version of a record, which exists as separate records that don’t always align. If there were only one version, that would be unbelievable.”
Theoretically, blockchain technology could be used to create a single, unified, and verifiable record for transactions relating to information governance, such as file tracking and destruction certifications. Such applications could significantly reduce uncertainty when they are tracked in multiple repositories, some of which may not be firm-approved or maintained consistently. While applications of blockchain in this capacity have a long way to go until they are fully formed, implemented, and enforced, possibilities abound for using this technology to enhance firms’ administrative functions.
Blockchain and Risk Management
Approaching blockchain technology from the perspective of risk management is also a vital consideration for law firms. Industry experts have already raised concerns from a data security standpoint, however there is much more at stake under the realm of risk. Many firms have yet to see mention of blockchain technology from clients in client-provided Outside Counsel Guidelines (OCGs) or technology questionnaires, but it is only a matter of time before such instances begin to crop up.
The financial sector is expressing significant interest in blockchain technology, a trend that will continue its upward trajectory in 2018. It’s also important to note that global banking institutions and other large corporations in the financial sector are often those with the most rigorous OCGs. Therefore, it seems highly likely that law firms wishing to engage such financial institutions on matters in the near future may find themselves seeing blockchain-related provisions in client-provided OCGs. Firms will need to be able to give an informed response to such provisions, both from a legal and an information technology perspective. If such provisions require firms to utilize blockchain technology such as smart contracts on certain types of matters, firms must ensure they have the appropriate technology and administrative solutions in place to comply.
Resolve to Be on Top of Blockchain in 2018
As the big picture on blockchain continues to come into focus, it looks increasingly likely that those who do not keep up with blockchain technology might risk losing business down the line. Though it may take some time, you will feel blockchain’s influence regardless of your firm’s readiness: “I don’t think lawyers are going to be able to avoid it,” Max stipulates. Lawyers, legal support staff, IT personnel, and law firm administrators who devote energy to becoming well versed in blockchain are apt to be the most nimble in adapting to client-driven demands involving the revolutionary technology. InOutsource looks forward to seeing how blockchain continues to influence legal across a range of operational, information governance, and risk management functions.