Large Law Firms Capitalise on Internal Data in Push to Differentiate in AI Era

Large law firms are responding to the rise of artificial intelligence with a clear strategy: leveraging their vast internal repositories of legal knowledge to build proprietary AI tools that they hope will set them apart in an increasingly commoditised market, Bloomberg reports.

Rather than relying solely on external legal technology providers, firms are betting that their long-standing value will lie in the depth of expertise held by their lawyers and the ability to systematise that knowledge using AI. Industry leaders say this shift could redefine how legal services are delivered, moving the focus away from billable hours towards knowledge-driven output.

“The only thing that is going to be a competitive differentiator into the future—the only thing that is going to matter — is how you extract and leverage the knowledge of the people who work within the firm,” said Nicole Bradick, global head of innovation at legal services company Factor.

The approach is also seen as a way to counter the growing influence of legal technology companies such as Harvey and Legora, which are increasingly embedding themselves into legal workflows.

At the forefront of this shift is Kirkland & Ellis, which has committed around $500 million to developing its own AI capabilities for client-facing tools. The investment, which will be spread over several years, reflects a broader industry view that customised systems built on internal data could become a key differentiator.

Kirkland has already drawn on input from hundreds of lawyers to develop its tools and is reportedly expanding its AI and legal technology workforce. The firm recently launched a platform for private equity fundraising designed around what it describes as its institutional knowledge, workflows and legal judgment.

It is not alone. Clifford Chance and Crowell & Moring have built tools on top of OpenAI’s GPT models, while Freshfields is working with Anthropic on developing “novel AI legal workflows”. Fried Frank is also using its structured historical data to build AI systems aimed at improving efficiency for private funds clients.

The push towards in-house AI development reflects a broader strategic question facing law firms: whether to buy off-the-shelf tools, build their own systems, or pursue a hybrid approach. Many firms opting for customisation believe their proprietary data will give them a lasting edge in a market where underlying AI technology is increasingly accessible to all.

However, not all firms are pursuing full-scale development. Polsinelli, for example, has adopted tools such as Thomson Reuters’ CoCounsel and enterprise versions of ChatGPT, while building limited custom features around them rather than competing directly with technology providers.

“We’re a law firm. We’re not a tech shop,” said Regan Lemke, chief operating officer at Polsinelli.

‘Bets on the Future’

Kirkland’s investment is widely viewed as one of the most ambitious in the sector. The firm’s leadership has indicated that AI could enable new billing models beyond the traditional billable hour. It has also drawn on contributions from a large proportion of its lawyers in designing its systems.

Industry observers say the firm’s approach may not involve building its own large language model, but rather developing applications on top of existing models, as many competitors are doing.

“The level that Kirkland is investing at is unique, but they are not the only law firm investing millions in these bets on the future of the market,” said Dom Conte, co-founder of AI legal tech company Purple.

Others argue that bespoke tools will be essential for differentiation as AI becomes standardised across the sector.

“What sets us apart if everything we use AI for is on a third-party tool that’s available to everyone?” said Alma Asay, chief innovation officer at Crowell.

Buyer Perspective

Legal AI platforms such as Harvey and Legora are increasingly targeting corporate legal departments directly, raising concerns among some observers that law firms may be inadvertently strengthening future competitors by helping these platforms understand legal workflows, Bloomberg reports.

“Basically you are building the competitor of the future by buying technology off the shelf,” Conte said.

Both Harvey and Legora declined to comment.

Meanwhile, in-house legal teams have long criticised the billable hour model, and some believe AI adoption could accelerate a shift towards alternative pricing structures.

“It’s a few steps closer to killing the billable hour, which is where we all know we need to go,” said Wayfair general counsel Enrique Colbert. “It’s exciting.”

However, law firms will need to demonstrate that AI tools genuinely improve legal quality if they are to justify new pricing models, according to David Morris, chief legal officer at cybersecurity firm Darktrace.

“The firms that get this right can build platforms their clients recognise as genuinely unique and valuable, to give the firms a more credible path to value-based billing,” he said. “They will need that path, because AI tools are increasingly allowing firms to deliver more of the same work in fewer billable six-minute increments than they log today.”

Despite rapid investment, industry figures caution that the long-term impact of AI on the business of law remains uncertain.

“I look at this as an industry trend that we’re in the early stages of, and we’re all going to have to work our way through this,” said Timothy Fraser, chief legal officer of Toshiba America Group.

 

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