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Strange Bedfellows: Austrian Law Firms Join Forces for Innovation Hub

Strange Bedfellows: Austrian Law Firms Join Forces for Innovation Hub

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On October 29, 2018, leading Austrian law firms Dorda, Eisenberger & Herzog, Herbst Kinsky, PHH, Schoenherr, SCWP Schindhelm, and Wolf Theiss announced their joint launch of the “Legal Tech Hub Vienna”: a non-profit forum for LegalTech companies, start-ups, and other legal market participants to identify innovation potential and work together to implement technological tools appearing ever-more-rapidly on the legal market.

The LTHV represents a unique cooperation by seven prominent law firms in the market to encourage and promote the development and implementation of technology for the legal industry, often referred to as “LegalTech.” The organization’s website – lthv.eu – has already announced an open call for the first LTHV accelerator programs for startups and small and medium enterprises to kick off on January 28, 2019. Founders of the LTHV also plan to establish a physical office soon.

We spoke to the founding members of the LTHV to find out more about this unique project. 

Inspiration and Conception 

The LTHV was the brainchild of Karin Artner, the wife of Dorda Partner Stefan Artner. “Last December we were on a taxi ride from Linz,” Stefan Artner recalls, “where we visited a start-up accelerator.” In that northern Austrian city Artner and his wife had seen a variety of specialized hubs for FinTech, PropTech, and IndustryTech. “We were abuzz from the energy of the accelerator and greatly inspired with new ideas, and we thought, if there was no hub for the legal industry, we would have to make it happen. The rest is history.” Within a year, Artner had managed to develop the concept of the hub, pitch it to other major Austrian law firms, and get the budget approved. 

One of the very first to join the team was Sophie Martinetz, Managing Partner at Future-Law, an accelerator program open to early stage and growth start-ups who create products or services applicable to the legal and professional industry. Future-Law quickly signed up as “Implementing Partner.”

The Founding Partners came from both large and multi-service law firms and smaller firms experienced in working with start-ups. Herbst Kinsky, which works regularly with start-ups and advises established companies on innovation, falls into both categories. “We advise both sides and speak both languages,” says Phillip Kinsky, “therefore it was clear that this initiative – which focuses on bringing startups and corporates together – is something we had to join and support.” 

Many participants point to their firms’ institutional commitments to innovation and technology. Eisenberger & Herzog Partner Alric Ofenheimer points with pride to a “sort of think tank” in his firm, dedicated to reviewing and staying abreast of Legal Tech developments, and Schoenherr’s COO Gudrun Stangl mentions the Innovation Hub initiative Schoenherr launched in 2017 in explaining that “LTHV made sense to us because we all stand to benefit from the ideas that will emerge from the platform.”

Ultimately, Martinetz believes that the LTHV will serve as a useful conduit between the law firm industry in Austria and those tech start-ups developing products that may be useful to it. “We want to get the right mix of big companies together for the law firms, and give these startups access to law firms,” she says. This, she believes, should help those lawyers and law firms that are traditionally conservative and famously technology-averse. “Law firms are not start-up savvy. Although many companies are already digitalizing and collaborating with start-ups, the concept is new for lawyers.”

Kinsky echoes Martinetz’s analysis. “Usually law firms are quite conservative when it comes to innovation, due to internal reasons, administration, IT systems, data protection, and other issues,” he says. “We see law firms being reluctant to innovate, and we are trying to change that. I think it will be a great opportunity for start-ups.”

Artner, who is also a private investor in start-ups, knows that it can take a long time to get an idea to the market. “It takes the right team and values, spirit, and endless energy to be successful,” he says. “And of course, it is equally important to have a product which is at the right time in the right place.” The LTHV can play a major role in facilitating that process, both inside and even outside the country, he believes, noting that “Austria has historically been a hub for Central and Eastern Europe and Vienna is a great location for start-ups from the region, offering access to investors, funds, know-how, infrastructure, and a jumping-off point to the rest of Europe.”

How It Works

The LTHV’s three main activities are Acceleration, Research & Development, and Partnerships. The hub’s specific goal, Artner says, is to discover and develop new solutions and methods to improve the legal industry. And the LTHV’s large law firm membership provides a unique opportunity to potential start-ups, he says.  “With the LTHV we offer a market view on the product before start-ups enter the market. This can be done at a very early stage – even just evaluating ideas and visions.” 

The hub itself is divided into two groups: the democratically-elected Board, which is tasked with ensuring public awareness and interest and developing strategy and goals, and which consists of Philipp Kinsky, Gudrun Stangl, and Stefan Artner; and the Jury, which is charged with implementing ideas and developing criteria for startups and SMEs and for the scope of work and target technologies, and which consists of representatives of all seven founding partners. 

Martinetz herself is tasked with running the day-to-day operations of the LTHV. She explains that the accelerator program will be “the first big thing” the LTHV will work on, with applications being accepted as of the first day of 2019. According to her, the LTHV members plan to work closely with LegalTech companies on innovation and helping them move forward, as well as seeking other start-ups that focus on raising the efficiency of internal legal management and those that focus on AI and blockchain products. 

Artner describes the hub as facilitating a process, rather than merely providing a simple conduit for existing technology. “I think we are only at the beginning of the advancement of technology,” he says, “and we have yet to understand how this will change our profession. The capabilities of technology and process innovation will fundamentally change the way lawyers work and how they deliver legal services.” He notes that “less complex work or standardized procedures will be solved by technology one day,” so those lawyers who are most comfortable embracing modern technological tools will “always be in the game for solving complex legal issues and helping clients make decisions.”

Among the hub’s three core foci are Transaction Management – facilitating more intelligent reviews, better documentation, and processes automation – and Data Management. “Innovation has changed the entire way of handling these processes,” Martinetz claims. “What we can see is that the vast amount of data simply exceeds people’s time, because no human can look through three terabytes of data,” she says. “It really is about helping lawyers to review data more effectively and efficiently and therefore deliver better results.” The final core focus is Law Firm Management, involving improving both communication with clients and client-service-related processes, work, and cost management, and optimizing internal and external processes.

The hub is also open to working with interest groups and universities and plans on developing standards for the legal industry through academic partnerships, research, and other projects. Wolf Theiss Chief Business Development & Marketing Officer Andrea Miskolczi, an LTHV jury member, explains that involving universities is a critical component of the hub’s mission. “We invite universities to help us to understand how developed different technologies are, what can be expected from different machine learning or natural language processing tools. They are kind of our consultants, but they also can channel in.”

E Pluribus Unum 

Beyond keeping up with consistent technological leaps forward, the idea of law firm competitors working together in this manner is, if not unprecedented, at least decidedly rare. Stefan Artner explains that his decision to work with other law firms was based on his vision of reconstructing the whole legal industry. “LegalTech is taking up an important role in the legal consulting industry worldwide and will, to some extent, revolutionize legal advice. Hence, I deemed it important that this initiative not be driven by one single law firm, but that we find a platform for the whole legal consulting industry so that the LTHV can grow on a large basis.” A rising tide lifts all boats, he believes. “This is our common denominator – as different and as competitive as we are – we all know that pulling on the same rope is a major advantage for each of us. In the end it is very simple: Joining forces in this field enables better resources in time, money, and people, for more projects.” He smiles. “It’s a win-win for all parties.” 

Still, other LegalTech hubs in Europe are usually established and run by single law firms – one of the reasons ILFs like Allen & Overy, Baker McKenzie, and Freshfields opted out of the LTHV, according to its founding members. “In the UK, for example, you will see law firms such as Allen & Overy doing this individually,” Miskolczi concedes. “But of course A&O is large.” In any event, she insists, such collaboration is hardly unprecedented. “We also see banks cooperating on Fintech, and thus the idea of working together in regard to technology and digitalization is not completely new.” 

“It simply does not make sense to compete against each other in this changing area,” Steger adds, “where all of us will be affected.” For example, he notes, the compliance work each law firm does provides no real competitive advantage, yet requires a lot of time, human resources, effort, and cost. “If that could be optimized it would help us get our feet to the ground much faster.”

Stangl agrees. “There is a lot of buzz around artificial intelligence, LegalTech, and data management,” she says, “but few can see the forest for the trees or determine which LegalTech solution makes the most sense to them. In essence, we’re all in the same boat in terms of the challenges that digitalization poses, so it makes sense to join forces with our peers.” Besides, she notes, the LTHV does not affect individual law firm strategies and the development of competitive advantages in other areas. 

Instead, it contributes to the ability of strong local and regional law firms which otherwise would fall behind their international counterparts. As Eisenberger & Herzog’s Alric Ofenheimer explains, “in comparison to international law firms like Allen & Overy or Linklaters we are simply too small. We do not have sufficient funds to keep up with these international law firms, and therefore for us the only way not to stay behind is to cooperate with other law firms which have the same problems.”

As a result, Ofenheimer insists, there is a friendly atmosphere within the team. “I am happy to see that our ideas and needs can be shared with other law firms without having a barrier to prevent or hold something back to hide that maybe in some fields one firm is more developed and matured than the other. We should try to keep this good spirit.”

Prochaska agrees that the sharing of knowledge to provide faster and more efficient development is important, but he concedes with a smile that that the make-up of the group surprised him. “For me personally it is a little astonishing that Wolf Theiss and Schoenherr are willing to work together within the project, because they are really tough competitors and two of the tops of the market.” He laughs, joking that “we will see how it will work out.”  

Shaping the Future

There is little contesting the inevitable effects of technology on the legal market. Indeed, it is already resulting in significant competitive pressure in the industry, and Stangl points to its effects on fees. “As the technology boom progresses, our clients’ expectations have also changed,” she says. “In addition to obtaining the best possible legal service, clients are now also interested in how exactly we create and offer them.”

Miskolcz agrees that the legal industry will inevitably change and diversify, with new technologies reshaping the traditional law firm business model and non-lawyers coming into law firms. “We will see legal project managers, IT people, and legal engineers working alongside lawyers on transactions,” she says, “not only in the back office, but in client-facing roles. Of course clients will see that, and they will not tolerate paying an extra fee for the old-fashioned form of service delivery.”

Ultimately, Miskolcz believes that the result will be similar to other sectors, with technological tools taking over repetitive, easy, and automated tasks. She draws a parallel with the transformation of the automotive industry, where 50 years ago cars were built by a human workforce that today has to a large extent been replaced with robots. But in her telling this is a positive prediction, not a bleak one. “You still need people for creative and high level tasks in the car industry,” she says, “and the legal industry now faces something similar – simple repetitive and basic tasks will be taken over by software and software will support lawyers to an extent which is unimaginable today.”

This Article was originally published in Issue 5.12 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.

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