For law firms, tech credentials are perhaps more important than ever before. The AI revolution has captured the imagination of all forward-thinking advisers, with its potential to improve process, save costs, and impress clients.
And when it comes to tech clients, it isn’t just about the Apples or Alphabets of this world – with the UK ranking third globally for venture capital investment and home to more than 150 unicorn companies worth more than $1bn, firms are also chasing the next big thing.
The proliferation of law firm tech incubators such as A&O Shearman’s Fuse and Slaughter and May’s Fast Forward underlines how recent years have seen firms truly catch on to the importance of first-mover advantage in the startup world, positioning themselves to work with tomorrow’s tech giants today.
The rise of the machines
David Cran, head of IP and tech at RPC, recalls how the shift to Covid lockdowns in 2020 acted as a catalyst for the tech sector. ‘Suddenly every part of our lives was reliant on tech – from virtual working to how we engaged and communicated with people – and this expectation that technology will influence and permeate everything remains.’
But while the prevalence of tech in all of our lives has only continued to grow, the sector itself has seen waves of layoffs over the past two years. According to data from industry tracker Layoffs.fyi, more than 350,000 tech workers have been laid off across 2023 and 2024 to date.
However, this may have been more a correction than a sign of significant problems. Ben Allgrove, partner and chief innovation officer at Baker McKenzie, outlines the most commonly cited factors behind this.
‘It is widely reported that the layoffs are partly a correction to overhiring in the pandemic,’ he says. ‘The boom was wrongly assumed to be a straight line. Growth in the sector is still remarkable, but not as remarkable [as during the pandemic].’
Ben Allgrove, Baker McKenzie
The second factor he references is that tech companies are ‘growing up’. ‘Speed to market used to be the only objective, whereas now they are also focused on efficiencies,’ he argues.
The third related factor is that tech companies are becoming more targeted in their spending: ‘There was a lot of throwing stuff at the wall to see what stuck,’ he says, ‘whereas now they are becoming more focused.’
This last point is echoed by Cran, who emphasises that recent layoffs were a sign of a new, more mature approach from companies, as opposed to a simplistic reaction to a market slowdown. ‘The market is not saying to cut the cost to the bone – it’s just that costs are being redirected. So, if you look at many of the major tech companies, they will have laid off headcount. And of course, that is incredibly tough for all those people, but what they’ve typically done is take that money and apply it into research and development, particularly into artificial intelligence, which is what the market wants to see.’
As for when the spate of layoffs might end, Bristows tech sector head Mark Watts says recent green shoots in the market could lead to a shift in policy from tech companies, with rehiring now more likely given recent share price recoveries. Linklaters global co-head of fintech Julian Cunningham-Day strikes a more circumspect note, however: ‘While 2024 is likely to be less severe than 2023, I would say recalibrate for 2025 in terms of optimism.’
The Davids taking on the tech Goliaths
Another significant development impacting the market of late has been the significant uptick in collective actions brought against tech companies. As Cunningham-Day observes: ‘After years of build-up in digital regulation, enforcement is increasing, leading to class actions off the back of high-profile breaches of privacy, consumer protection and competition law. Also, claimant firms are getting more imaginative in the ways that they are putting together class action style claims in new markets.’
Cran highlights that the ‘one-to-many’ business model of tech giants increases the likelihood of their becoming targets. ‘The amounts of money involved on a per capita or per individual basis can be low, but when you aggregate it up, it can be very significant,’ he notes. Prime examples of this include the high-profile Gormsen v Meta case, which encompasses as many as 45 million Facebook users, and is reportedly worth up to £3bn, as well as the collective claim brought by campaigner Nikki Stopford against Google, alleging abuse of dominance and seeking £7.3bn in damages. Both claims are being funded by global commercial litigation funders who see the UK as an increasingly attractive destination.
Another issue for tech giants is that the breakneck pace of change can mean that by the time new regulations are passed, they are no longer fully relevant, while there can also sometimes be a disconnect between regulators and big tech companies. As Linklaters TMT partner Georgina Kon puts it: ‘When I advise big tech clients, I don’t hear anyone say: “I want to break the law”, or “I don’t care” – but what I do hear people say is: “this will be really hard to operationalise”, or “I don’t understand what the regulators intended.”’
As an example of regulation that is hard to operationalise, Kon references recent guidance from the UK’s communications regulator. ‘Ofcom has promulgated about 1,700 pages of guidance, and it expects it to be ingested in a short amount of time. Now, I don’t criticise Ofcom necessarily for that – it is genuinely trying to be helpful, but equally that doesn’t mean the companies can ingest it so fast. Operations can be quite complex.’
Georgina Kon, Linklaters
And even if tech giants are able to effectively ingest such guidance and regulations, there are follow-on concerns. With the influence of tech now so pervasive in so many areas of life, companies face scrutiny from numerous regulators, all of which have competing priorities that can come into conflict with each other.
Kon uses an example which highlights such conflicts – age verification. ‘If we suspect we can see, for example, an adult account that we think is accessing or communicating with lots of children’s accounts – from an online safety perspective, should we be doing something about it? But from a privacy perspective – is that something that we should validly be tracking?’
Age verification becomes even more complicated when counselling on global product rollouts. Allgrove points out that it is necessary to be aware of cultural differences and tendencies. ‘If you take a US mindset: responsibility for protecting kids lies with parents, whereas in France, they say that the child has a right to privacy which may trump that.’
As if all of this wasn’t enough to keep tech companies busy, Kon highlights another issue – information requests. ‘At the same time that companies are dealing with all of this compliance, they’re getting requests for information, not only from UK regulators but from the EU Commission and various other regulators as well. It sucks up an enormous amount of time [for tech firms] to keep the wheels moving in the right direction, including time from the people whose day job it is to keep us safe online’.
Artificial intelligence, genuine expertise
One common feature of tech giants’ approach to the legal sector is to spread work around various law firms. There are numerous reasons for this, including that, as Kon puts it, ‘they like getting different viewpoints.’
And there is a clear difference in the way different firms approach the sector. Bristows’ Watts highlights the firm’s ‘strong sector focus on life sciences and tech,’ as giving the firm an edge in terms of expertise. This sector focus is underpinned by a non-traditional approach to recruitment, with non-law grads making up more than half of the lawyers at Bristows. ‘We hire a lot of people with tech and science backgrounds, including PhDs – people who really get the tech,’ Watts explains.
As a smaller, primarily UK-based firm operating in a global tech market, Bristows has dedicated much effort to establishing an informal network of what Watts describes as ‘uber-pragmatic firms with the same focus on tech that we do.’ The advantage of this approach, according to Watts, is that the firm is free to choose who to work with and not tied into working with anyone. He says that the arrangement works for the vast majority of clients who ‘don’t tend to look behind the curtain. They trust us to work with the right firms.’ However, he does acknowledge that that ‘there can be a complexity to the story for some deals’ and that some clients prefer the ‘simplicity of a global brand firm.’
David Cran, RPC
Linklaters’ Cunningham-Day is unsurprisingly a proponent of the global brand firm model, arguing that the magic circle firm offers tech companies ‘an effective global approach to managing risk and compliance issues’, adding that the firm’s wide reach allows it to assist companies ‘to respond effectively and comprehensively to challenging regulatory issues, litigation, cyber breaches, with local specialists across our 31 offices making sure that clients cover all the angles.’
Kon adds that Linklaters combines the reach and breadth of practice with ‘a hugely deep tech specialism’ – she claims other firms may be ‘great at finance, great at litigation’ but do not have ‘experienced tech practitioners’ of the calibre of those at her firm. Some even trumpet their lack of tech specialisation as a selling point. ‘Clients tell us that one major firm describes itself as proudly non-specialist – they like to think of themselves as generalists that can do a bit of everything.’
The idea, however, that a generalist approach to tech can be an advantage in the tech space is given short shrift by Allgrove: ‘My view is that there isn’t an advantage to being a sector generalist – it’s a specific set of firms advising on product counselling and regulatory. Only a few firms are able to do it.’
Cran comes at the issue from another perspective – the idea that tech companies will seek out individuals rather than firms – ‘The phrase you often hear is “we just want the best people in the room”,’ he says. ‘In the tech industry you are frequently on calls with lots of people from other firms, and the traditional way to look at them is as competitors. But they’re not – they are just people that you work with.’ Cran believes tech companies value lawyers’ ability to work collaboratively – ‘As soon as you stop playing nicely, start trying to make the work smaller, put your arms around it and say “I just want to hold on to what I’ve got”, you won’t be involved for very long.’
A future not so far, far away
So what next for the tech industry, from the legal perspective? The short answer is that nobody knows, but everyone is excited.
‘Goodness knows what tech will be capable of in five years time,’ Watts states, adding that he believes that AI has the possibility to create completely new, not-yet-conceptualised industries and sectors.
Allgrove, meanwhile, predicts that another hot area will be robotic personal assistants. ‘Once you have the independent ability to be an agent in the physical world; that’s going to freak people out. Do we end up in a world like Star Wars with little robots roaming beneath our feet?’
As technology continues to develop and expand at breakneck speed, the question is whether it will still be possible for tech lawyers to advise across the industry, or will they have to become hyperspecialised?
ChatGPT’s response to that question? ‘A hybrid model is likely, where lawyers develop deep knowledge in niche areas while maintaining a broad understanding to address interdisciplinary and multifaceted tech law issues. This balance allows for specialised advice while catering to the diverse needs of the tech industry.’ Whether that does in fact turns out to be accurate will perhaps demonstrate how far tech and AI have come.