Moving Forward

For legal research companies, there's no denying it: The market's changing. But unlike other areas of the legal tech industry, which have responded to the dour economic climate with layoffs and cutbacks, legal research companies, for now, are in staying the course.

While many are confident that robust demand for their products will continue, they do see the market becoming more competitive as clients rein in their spending. Who is best positioned to appeal more to these cost conscious buyers is a matter of some debate. But there's little question that some companies were well prepared from the get-go to weather months of COVID-19 disruptions. And that currently, the worst has not come to pass.

"We are not doing furloughs, we're not laying people off [and] we're not cutting salaries," said Fastcase CEO Ed Walters.

The situation was similar at Casetext. "We are in a really stable place, no furloughs, no layoffs, no pay cuts," added Casetext CEO Jake Heller.

Over at Lex Machina, CEO Karl Harris said the company also wasn't undertaking any staffing or salary changes.

Joe Breda, president of Bloomberg Law, noted that his company generally doesn't discuss personnel decisions, while Thompson Reuters, who owns the Westlaw suite of legal research platforms, declined to be interviewed for this article.

Still, while many legal research companies aren't making cuts, some are being more cautious with their spend or considering redirecting their resources.

"We're trying to be smart with our money," Heller said, adding that Casetext "may take advantage of the government programs available to make sure we can maintain stable operations."

At Fastcase, "the biggest things we are doing are really rebalancing," Walters added. "So if we were going to, for example, hire for sales and marking in the spring, we might shift that hiring into product development so that all of our products will be ready to help lawyers as much as possible."

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A Different Market

To be sure, the legal research market did fall into a temporary, but deep slump last month as COVID-19 shutdown courts across the U.S.

"In the first two weeks in March … we saw about a 25% decrease in the amount of usage of our system. But that bounced back already," Heller said.

However, going forward, Heller still thinks "the market overall will contract a bit" as some legal clients contend with less resources and some smaller law firms potentially go out of business.

But this doesn't mean clients won't need legal research tools. In fact, some believe they may need them now more than ever.

"I don't have a crystal ball, but everything I see leads me to believe that going into the future, the demand for legal services remains strong [because] the world is getting more and more complicated," Bloomberg Law's Breda said.

Lex Machina's Harris agreed. Because of COVID-19, "in particular you're going to see more insurance litigation, more employment litigation, more contract based litigation—there are going to be things that happen in our space that actually increase activity."

He added, "Now of course there are other areas that will be likely impacted with a slowdown, but I think big picture, in our particular space, litigation will increase in some regard and decrease in other areas. But we don't see a complete clip in terms of litigation activity."

Yet even with a strong increased demand for research tools, there is still the risk that a more budget conscious, potentially smaller market may not present equal opportunities for all legal research providers.

Heller expects client resources to shift to companies like his, Fastcase "and others who have figured out how to make technology more affordable than the old standard bearers. I think while the market may be shrinking, I think it's going to disproportionately hit the folks who are expensive, old, slow moving and slow to adjust to this."

Others, however, don't believe legal research buying decisions will change all that much. "What I would say is that customers are going to buy products that deliver the most value in the same way they always have, and I don't necessarily see how that changes," Harris said. "Obviously law firms and companies are going to be more cost-conscious, but as they have two months ago and will in the future, they will always try to buy stuff that delivers the most value."

Harris added that COVID-19 shutdowns hasn't forced Lex Machina to change its product plans this year. He noted the company had still "same number of product releases planned for the rest of this year that we did in January, which is before this thing really impacted our business.  And we're going to pursue that mission … We're going to push forward, that's what our plan is."

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Head Starts

Like Lex Machina, other legal research companies are also pushing forward as planned, and in some cases even looking to release new services in response to shifting demands. But some of these companies are able weather the storm because of the position they found themselves right before, or in the early days of, the economy heading into a downturn.

Heller said Casetext is lucky, for instance, because it launched automated legal brief-writing software Compose in February and closed on $8.2 million in funding in March.

Heller noted the Compose release was particularly fortuitous given how legal clients may be now even more inclined to elicit cost efficiencies through automation. "In some ways the release of Compose, which happened before all this, couldn't have been better timing for us in terms of coming out with the right offering for the right time," he said.

Going forward, Casetext is looking at expanding the briefs Compose can automate to address subject matter areas that of particular importance to lawyers in this current climate.

"We see an increase in bankruptcy filings, employment litigation and some products liability work and insurance, and those are going to be some of the primary areas, though they're not the only areas, that we'll be tackling with Compose," Heller added.

Similarly, Fastcase has also benefited from diversifying beyond legal research. The company replaced its bankruptcy solution last year after it acquired bankruptcy prep software NextChapter. Given the economic situation, Walters noted that subscriptions in NextChapter "are through the roof, I think they are up more than 100% over the same time last year."

However, given how the COVID-19 pandemic is bringing changes unseen before in modern times, it's difficult to know exactly what the market demands will be in the coming months. But whatever changes may come, one thing is certain: The legal research market has full confidence in their core offerings.

"Companies that are going to come out on the other side are not going to be the ones that are going to be able to predict exactly what is going to be able to happen," Harris said. "It's going to be the ones that are going to be able to continue to provide value to customers, and focus on what they do and not make any drastic decisions on what they don't know."