A US federal appeals court has ruled that a law firm's use of artificial intelligence (AI) to support its work in a trade secrets lawsuit does not, by itself, justify reducing its legal fee award, rejecting arguments that the technology had resulted in excessive billing.
The Denver-based 10th US Circuit Court of Appeals ruled that a Colorado lower court judge had properly reviewed the billing records submitted by the defendants' law firm, Brownstein Hyatt Farber Schreck, and found the fee award of $115,000 to be reasonable.
"Plaintiffs have not shown that defense counsel’s use of AI rendered the hours that they actually expended unreasonable," Circuit Judge Carolyn McHugh wrote on behalf of the three-judge panel. The appeals court also upheld the dismissal of the lawsuit.
The court acknowledged that AI and other research tools could make lawyers more efficient but emphasised that legal professionals remain ethically responsible for verifying legal authorities and arguments, regardless of the technology they use.
The ruling comes as law firms and their clients assess how AI could reshape legal billing practices. Law firms have increasingly adopted AI tools to accelerate legal research, drafting and other tasks, prompting debate over whether efficiency gains should translate into lower legal fees and other costs.
Christopher Ottele, a partner at Brownstein Hyatt who represented the defendants, welcomed the ruling.
"AI is a powerful tool that sophisticated firms must embrace," Ottele said. "This decision confirms that the use of AI is not a substitute for the judgment and analysis that attorneys still must exercise in every filing with the court."
The lawsuit was filed in 2024 by Flux Drive, a manufacturer of industrial motor-efficiency equipment. The company alleged that one of its former engineers had helped steal proprietary information and transfer it to a Chinese manufacturer.
A judge dismissed the lawsuit and ordered Flux Drive to pay the defendants' legal fees.
In its appeal, Flux Drive challenged the fee award on several grounds, including allegations that the defendants' lawyers had billed for what it described as "ministerial tasks". The company also argued that the use of AI by the defence team should have reduced the number of hours charged and, consequently, the legal fees awarded.
The defendants rejected the arguments, maintaining that every aspect of legal research involving AI had been verified by the lawyers. They argued that Flux Drive had failed to identify "a single inflated time entry, a single redundant task, or a single unreasonable charge".
The case is Flux Drive Inc v Qiang Rong, 10th US Circuit Court of Appeals, No. 25-1308.
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