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Law Firms’ Hidden Goldmine: Turning Existing Knowledge into a New Business

Freshfields is considering spinning off its technology division, but the real opportunity lies in transforming decades of experience, documents and internal processes into products that can be sold repeatedly.

For decades, law firms have accumulated an enormous amount of knowledge while handling matters for their clients: contract templates, document-review systems, risk-detection criteria, due diligence methods, litigation strategies and ways of managing complex transactions.

Clients paid the fees associated with that work. The firm remunerated its lawyers and covered the cost of developing its methods. Much of that investment has therefore already been economically amortised.

Until now, this knowledge has mainly helped firms provide the next legal service more efficiently. Artificial intelligence makes something different possible: turning it into a technological product that can be used thousands of times without a lawyer having to perform the entire task again.

That may be the real business opportunity Freshfields has now brought into view.

Freshfields considers turning its technology operation into an independent business

According to the Financial Times, senior partners at the firm have discussed separating Freshfields Lab, its legal technology division, and turning it into an independent company capable of attracting outside investment and potentially pursuing a future stock market listing.

The discussions remain at an early stage, but some participants reportedly believe the business could eventually achieve a multibillion-dollar valuation.

The opportunity does not simply lie in developing another artificial intelligence application. Many technology companies can do that. A law firm’s advantage lies in the invisible assets it has accumulated over many years: legal expertise, documents, working processes, decision-making criteria and an intimate understanding of the problems that major companies are prepared to pay to solve.

The real asset is not AI, but accumulated legal knowledge

A conventional technology company may employ excellent engineers, but it still needs to learn how lawyers work and what clients actually need.

A major law firm already possesses that knowledge. It has acquired it by participating in thousands of transactions and disputes and refined it through the work of generations of professionals.

This may constitute one of the strongest competitive advantages major law firms possess over technology companies seeking to enter the legal market.

The asset does not consist solely of documents. Knowledge is also embedded in processes: how to review a transaction, where particular risks are likely to appear, which clauses create problems, how an investigation should be organised and which information genuinely matters when making a legal decision.

From internal tool to commercial product

Freshfields explains that its Lab develops data-extraction, document-analysis and collaboration tools for investigations, mass claims and multi-jurisdictional transactions.

If those solutions are no longer used exclusively within the firm, they could be marketed to corporate legal departments and even to other law firms.

This creates a significant shift in the business model. A tool originally developed to increase internal productivity can later become an independent product.

Knowledge developed while serving a client may, where legally permissible and after removing confidential information, be transformed into a methodology capable of addressing similar problems for many other users.

From billable hours to recurring revenue

The economic change would be profound.

Legal services depend primarily on people and available time. To handle substantially more matters, a firm usually needs to hire more lawyers. Growth therefore remains closely tied to the number of professionals available and the hours they can devote to clients.

A software product, by contrast, can be used simultaneously by thousands of customers. Its initial development may be expensive, but every additional licence does not require the underlying work to be recreated.

Knowledge ceases to be billed only once and begins generating recurring revenue.

This distinction could transform the traditional economics of law firms. Instead of selling professional time alone, a firm may begin selling tools, licences, analytical systems or platforms built around its own expertise.

Knowledge that has already been financed

What makes the model particularly interesting is that much of the knowledge required to create these products already exists.

For years, clients have indirectly financed its development through the fees paid to law firms. Every transaction, investigation, dispute and review process has contributed to refining internal methodologies.

The firm has already paid its professionals, developed its processes and absorbed the cost required to acquire that expertise.

Technology now creates the possibility of reusing that investment in a different way.

This does not mean reselling work produced for a particular client. It means identifying the structures, methods and proprietary knowledge that can legitimately be converted into repeatable tools.

The essential boundary: client confidentiality

There is, of course, a boundary that no law firm may cross.

Confidential information, documents and data belonging to clients cannot simply be converted into commercial raw material.

The assets capable of legitimate exploitation must consist of the firm’s own knowledge: methodologies, structures, processes, properly refined templates and anonymised experience, whenever its use is legally permissible.

The distinction is essential. Transforming accumulated experience into a tool is one thing; commercialising the secrets of those who trusted the firm is quite another.

The new business will only be legitimate if confidentiality, data protection and professional independence remain fully protected.

Who actually owns a law firm’s accumulated knowledge?

It will also be necessary to determine who actually owns these assets.

Is it the international firm? The different entities within its structure? The partners who financed their development? The professionals who helped create them?

The answer may be particularly complex within large international firms whose legal structures can include different companies, partnerships and entities operating across multiple jurisdictions.

Separating a technology company will therefore raise corporate, tax and professional questions that are considerably more complex than they may first appear.

It may also be necessary to determine which technology belongs to the new company, which rights remain with the law firm, how future use of the knowledge should be compensated and what commercial relationship will exist between the two businesses.

Intellectual capital that rarely appears on the balance sheet

Nevertheless, the opportunity is extraordinary.

Major law firms possess intellectual capital that rarely appears on their balance sheets. For years, they have used it primarily to improve their services and justify their fees.

That capital consists of far more than a collection of documents. It includes experience, methodologies, processes, legal criteria, ways of organising information and accumulated knowledge about solving complex problems.

Technology now makes it possible to identify that capital, turn it into a product and give it an independent business value.

A new generation of legal businesses

If this model develops further, major law firms may begin operating two parallel businesses.

The first will remain the traditional model: personalised legal advice delivered by lawyers.

The second will be based on technological products built around knowledge developed by the firm itself.

The two models can complement one another. A platform may handle repetitive tasks, structure information or identify risks, while lawyers focus on complex decisions, negotiation, strategy and advice.

The difference is that the technological product can continue generating revenue even when no professional is devoting another billable hour to that customer.

Legal knowledge can become a scalable asset

The great business opportunity of the future may not be charging again to perform the same work.

It may be transforming knowledge that has already been created and amortised into a tool that can be sold repeatedly.

Freshfields may therefore be pointing towards something far more significant than the creation of another technology company. It is raising a question that many major law firms are likely to ask themselves: what is all the knowledge they have accumulated over decades actually worth?

Until now, that knowledge has primarily been used to deliver legal services.

Artificial intelligence and software make it possible for that knowledge to become a product as well.

And, for the first time, that product can generate revenue even when no lawyer is billing an hour.