LexBeat #2: Microsoft enters, the courts draw the line

1LexBeat is the section in the German Legal Tech Summit magazine. It summarises the most important developments in the legal market concisely and puts them into context.

Microsoft moves into the law firm

2On 15 October, Microsoft unveiled Copilot for Legal: more than 20 legal skills for contract review, drafting and obligation tracking, directly in Word and in the agentic workspace Cowork, complemented by plugins from more than two dozen Legal Tech partners. According to LawSites' count, this makes Microsoft the fourth major AI company to build its own legal division within five months.¹ Partners include Harvey, Legora, Relativity and Everlaw. The rollout is to customers with a commercial licence for Microsoft 365 Copilot.²

3For law firms and legal departments, this means above all: legal AI is coming to where work is already being done. Anyone using Word no longer needs a new system for initial applications. This does not automatically mean the specialised providers lose significance, as they remain part of the offering as partners. Harvey CEO Winston Weinberg emphasised that Microsoft is both a customer and a partner for his company.³

4How much judgement the models bring is shown by a new benchmark from Ivo and the data lab micro1. Seven leading models were tested on 350 real contract review tasks. None achieved 60 per cent of the criteria defined by lawyers; the best managed 58.3 per cent.⁴ The tools are thus becoming more widely available, but human review remains the decisive step.

Check first, then sign

5The Federal Labour Court (Bundesarbeitsgericht) dismissed an AI-generated complaint against non-admission of appeal as inadmissible because the authorised representative had not checked the pleading.⁵ The pleading contained judgments that an AI had invented and was signed without being checked. Under the decision of 30 September 2026 (2 AZN 339/26), this meant there was no effective representation. The court referred to the guidance issued by the Federal Bar Association (Bundesrechtsanwaltskammer) on the use of AI.⁶ At almost the same time, the Aachen Regional Court ruled that Google is liable for false statements made by its AI.⁷

6This gives the debate from LexBeat #1 a first answer from a federal court: anyone who submits AI-generated pleadings without checking them risks not only an embarrassing moment but the validity of the procedural act. In the United Kingdom too, responsibility is centre stage. In a new practice guide, the Law Society makes clear that AI is not a legal person and that lawyers cannot transfer their professional responsibility to an AI tool.⁸

When the law firm becomes a tech company

7According to a report by the Financial Times, Freshfields is considering spinning off its AI unit, Freshfields Lab, into a standalone company and opening it up to external investors. A stock market listing is also being discussed. Global Managing Partner Alan Mason pointed to valuations in the Legal Tech market of 25 to 40 times revenue. The deliberations became known through an e-mail that was accidentally sent to a large internal distribution list. The discussions are said to still be at a very early stage.⁹

8Freshfields Lab develops applications for document analysis, due diligence reviews and complex litigation. In future, these could also be offered to legal departments and other law firms.¹⁰ Freshfields is not alone in such plans: Womble Bond Dickinson has set up its own AI lab, which is initially developing tools for, among other things, monitoring regulatory developments and legal analysis.¹¹

9Behind this lies the question of whether large law firms are themselves becoming technology providers. What remains unclear above all is whether the internally developed tools offer the same added value outside the firm itself.¹² Ultimately, this will also determine the valuation.

Legora draws level with Harvey

10Legora has raised 550 million dollars in a Series E round, at a valuation of 8.8 billion dollars. The round was led by Atreides Management, with new investors including Fidelity, Capital Group and J.P. Morgan.¹³ Annual revenue stands at more than 200 million dollars, less than six months after passing the 100 million mark.¹⁴ Legal departments accounted for more than 40 per cent of new customers in the third quarter. In the United States, now Legora's largest market, more than half of the AmLaw 50 law firms are customers.¹⁵

11The round came just six weeks after Harvey's funding round, which also raised 550 million dollars, at a valuation of 15.5 billion dollars.¹⁶ This is relevant for the German market because Legora has had an office in Munich since the end of September and has won BMW as a major corporate client.¹⁷

12With Microsoft on one side and two highly funded specialist providers on the other, the market is being reshaped: broad basic functions come from the Office world, deep legal workflows from specialists. This does not make the choice any easier for law firms and legal departments. But the question is less and less often whether AI is used, and increasingly which AI and how.

Outlook

13On 4 and 5 November, the industry meets at Legal Innovators UK in London, and on 17 and 18 November in New York.¹⁸ The EU Commission's consultation on the procedural rules under which the AI Office imposes fines also runs until 9 November.¹⁹

14On 3 December, the German Legal Tech Summit takes place at the HCC Hannover. All four developments in this issue are reflected in its topic areas: from AI agents to regulation and responsibility to new business models and the Legal Tech market.

15LexBeat #3 is expected to be published in two weeks.