It
wasn’t
1929
for
the
legal
tech
industry,
but
it
wasn’t
great
either.
Thomson
Reuters
lost
around
15
percent
of
its
value.
LexisNexis’s
parent
company
dropped
about
14
percent.
DocuSign
fell
11
percent.
A
lot
of
the
industry
isn’t
publicly
traded,
so
we
didn’t
get
to
see
how
their
investors
responded
to
the
news,
but
it
probably
looked
similarly
grim
over
at
Harvey
HQ.
The
catalyst
for
this
carnage
—
which
the
Jefferies
Group
is
calling
the
“SaaSpocalypse”
—
had
nothing
to
do
with
the
ongoing
hallucination
and
slopification
problems
unleashed
by
artificial
intelligence.
We’ve
had
those
for
months
now
and
they’ve
only
succeeded
in
inflating
the
tech
bubble
further.
Instead,
the
precipitous
decline
arrived
because
Anthropic
released
a
plugin.
And
threatened
to
take
over
legal
tech
in
the
process.
The
company
behind
Claude
has
been
riding
high
recently
off
its
Claude
Code
buzz.
The
company
reportedly
used
their
fancy
coding
agent
to
write
up
Claude
Cowork,
offering
more
user-friendly
access
to
its
agentic
properties.
Yesterday,
they
dropped
a
legal
plugin
for
Cowork,
promising
to
automate
a
number
of
legal
workflows
from
contracts
to
briefings.
It’s
open
source
and
therefore
configurable
to
meet
whatever
shop
idiosyncrasies
a
firm
wants
to
include.
For
the
first
time,
a
foundation-model
company
is
packaging
a
legal
workflow
product
directly
into
its
platform,
rather
than
merely
supplying
an
API
to
legal-tech
vendors.
Therein
lies
the
problem
for
every
legal
AI
company
that’s
been
building
on
top
of
Anthropic
all
this
time.
For
years,
the
legal
tech
playbook
has
been
straightforward:
take
a
foundation
model
from
Anthropic
or
OpenAI,
wrap
it
in
legal-specific
prompts
and
guardrails,
add
some
integrations,
slap
a
subscription
fee
on
it,
and
call
yourself
a
legal
AI
company.
The
assumption
was
that
the
model
providers
would
stay
in
their
lane,
happy
to
collect
API
fees
while
legal
tech
startups
captured
enterprise
value.
Anthropic
just
announced
“I
can
haz
enterprise
value.”
What’s
legal
tech
going
to
do
now
that
their
supplier
is
their
competitor?
Personally,
I’d
prefer
tools
designed
by
professionals
with
industry
experience
as
opposed
to
a
plugin
built
by
a
robot
coder.
But
this
is
where
AI’s
persistent
limitations
work
against
companies
adding
value.
If
it’s
going
to
hallucinate
so
much
that
lawyers
need
to
review
it
with
a
fine-tooth
comb
either
way,
why
not
use
the
retail
solution?
Well,
a
lot
of
reasons.
As
Artificial
Lawyer
noted,
legal
data
titans
have
spent
decades
building
proprietary
datasets
and
customer
relationships
that
can’t
be
easily
replicated
by
a
plugin.
As
Prompt
Armor
notes,
Cowork
also
brings
serious
security
risks
that
everyone
seems
to
be
shrugging
off
at
their
peril.
That
said,
when
an
industry
is
built
on
a
“model
+
wrapper
+
workflow”
model
—
as
Ambrogi
calls
it
—
if
the
model
creator
can
cut
out
the
middle,
it
creates
a
crisis.
Even
if
most
lawyers
stick
with
the
old
standbys,
at
least
some
chunk
of
the
market
will
walk
away
from
high
fees
and
give
Claude
a
whirl.
Legal
tech
companies
have
been
hyping
“agentic
AI”
as
the
future
for
a
year
now
without
a
whole
lot
to
show
for
it.
Now
a
foundation
model
company
is
releasing
an
agentic
legal
tool,
and
suddenly
the
market
decides
that
democratizing
legal
AI
could
also
democratize
legal
tech’s
customer
base
into
oblivion.
But
major
law
firms
and
legal
departments
already
have
deals
with
sophisticated
vendors
they’re
not
going
to
abandon
overnight.
They
still
need
the
massive
datasets
offered
by
Thomson
Reuters
and
LexisNexis,
which
should
keep
most
customers
signed
up
for
now.
And,
as
someone
who
has
experimented
with
Claude
Cowork
a
lot
over
the
past
two
weeks,
there’s
also
the
way
that
it
screws
up
most
workflows
that
involve
more
than
a
couple
tasks.
That’s
not
to
say
there
aren’t
success
stories
floating
around
out
there,
but
to
the
extent
I’ve
been
able
to
put
it
through
its
paces,
the
results
have
been…
underwhelming.
Maybe
pump
the
brakes
before
putting
your
contract
workflow
in
there.
If
investors
think
lawyers
will
walk
away
from
Thomson
Reuters
and
put
their
faith
in
a
plugin
for
a
product
written
by
a
robot
coder
over
the
last
couple
weeks…
well,
then
the
market
may
be
the
one
with
the
problem.
Joe
Patrice is
a
senior
editor
at
Above
the
Law
and
co-host
of
Thinking
Like
A
Lawyer.
Feel
free
to email
any
tips,
questions,
or
comments.
Follow
him
on Twitter or
Bluesky
if
you’re
interested
in
law,
politics,
and
a
healthy
dose
of
college
sports
news.
Joe
also
serves
as
a
Managing
Director
at
RPN
Executive
Search.