LexBeat #3: New liability, new obligations, new law firms

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.

Software becomes a product

2On 8 October, the Bundestag passed the Act to Modernise Product Liability Law. It will enter into force on 9 December 2026 and transposes the European Product Liability Directive. It is the first comprehensive reform of German product liability law since 1989.¹

3The most important change for the industry: software will in future be explicitly classified as a product, regardless of whether it is installed, provided as an app or delivered from the cloud. AI systems are included. The new law applies to products placed on the market or put into service from 9 December onwards.²

4Manufacturers remain liable even afterwards if they retain control over the product through updates or upgrades. Open-source software developed or provided outside of a commercial activity is exempt.³ In addition, the previous liability cap of 85 million euros is abolished, and injured parties benefit from relief regarding the burden of proof.⁴

5This means that legal tech products also fall under the new law, from law firm software to cloud-based AI assistants. For providers, update processes and documentation are coming into sharper focus.

The judiciary is building its cloud

6The digitalisation of the judiciary is progressing at two speeds. Hamburg introduced the electronic file on schedule at all courts and public prosecutor's offices on 1 January 2026. Even at that point, more than 500,000 cases were being processed digitally there.⁵ Many other federal states are using the opt-out clause and have until 2027 to make the transition.⁶

7The bigger step is the infrastructure behind it. The federal government and the federal states have agreed to build a unified judiciary cloud. The first joint specialist procedures are expected to start this year and be rolled out nationwide from 2027. Fully digital online procedures are also to be tested. The congress president of the Digital Justice Summit takes a critical view of the fact that the nationwide introduction of the electronic file can be postponed again and that reliable data on digital progress is lacking, for example on the use of video hearings.⁷ The federal government intends to provide a total of 210 million euros for the digitalisation of the judiciary by 2029. A new Pact for the Rule of Law is in preparation.⁸

8How advanced these plans are will become apparent over the next two weeks. On 13 November, the first results of the Digital Justice Monitor will be presented. The study examines the transformation from the perspective of the judiciary, the legal profession, business, and Legal Tech and judicial IT.⁹ At the Digital Justice Summit on 23 and 24 November in Berlin, there will be an advance look at the state treaty on establishing a joint justice cloud unit of the federal government and the states.¹⁰

AI Act: What applies after the Omnibus

9The Digital Omnibus has been in effect since 27 July 2026, amending the AI Act in several places. For law firms and legal departments using AI, it is worth looking at what has been postponed and what has not.

10The obligation regarding AI competence in Article 4 has been weakened: companies no longer need to ensure it, but merely promote it. The transparency obligations under Article 50 remain unchanged, such as disclosure when using chatbots, as do the rules for general-purpose AI models. The Commission has been able to impose fines on their providers since 2 August 2026.¹¹ Above all, the rules for high-risk systems have been postponed and will now take effect at the earliest from December 2027.¹²

11Enforcement is getting under way. On 14 October, the Commission announced that the AI Office had sent initial formal requests for information to leading providers. As of early November, there had been no fine or formal finding. The consultation on procedural rules for fine proceedings ended on 9 November.¹³

12The next key date is 2 December 2026. From then, the obligation to use machine-readable labelling will also apply to generative AI systems that were already on the market before August. In addition, new bans will take effect for systems that generate depictions of child abuse or intimate images without consent.¹⁴

Law firms built around AI

13Over the past twelve months, a new type of law firm has become visible: law firms built around AI from the outset, automating work that used to be done by large teams of young lawyers. The best known include Crosby in the US, founded two years ago, as well as Scissero and Vetta in London. Scissero took over the managed services business of Robin AI in December 2025. Vetta was only founded in September by a former Latham lawyer.¹⁵

14They were thrust into the spotlight by the dissolution of the US law firm Weil Gotshal & Manges. Its demise had nothing to do with AI; it followed a failed merger and the departure of lawyers. However, all three AI-native law firms have expressed interest in the technology, the data and, in some cases, the remaining lawyers.¹⁶ Crosby is bidding, among other things, for internal data as well as for the firm's brand and name.¹⁷ This raises a new question: do internal law firm data such as playbooks and templates have monetary value, and may they be sold? Confidentiality towards clients could stand in the way of this.¹⁸

15The model is becoming more professional elsewhere too. Crosby has taken out its own insurance for its paralegal agents, which has been in effect since early November.¹⁹ Blackletter has raised 6 million dollars for a new law firm model in transactional business.²⁰ It remains to be seen how far such models can be transferred to the German market.

Dates and outlook

16The following dates are on the agenda before the next edition:

• 13 November: First results of the Digital Justice Monitor will be presented in a webinar.²¹
• 16 to 19 November: Six industry events will take place almost simultaneously, including ILTACON Europe in London, Thomson Reuters SYNERGY in Las Vegas and Legal Innovators New York on 17 and 18 November.²²
• 19 November: Autumn Conference of Ministers of Justice in Hamburg.²³
• 23 and 24 November: Digital Justice Summit in Berlin. Federal Minister of Justice Stefanie Hubig will speak on 23 November.²⁴

17On 3 December, the German Legal Tech Summit follows at the HCC Hannover.

18LexBeat #4 is expected to be published in two weeks.