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www.canadianlawyermag.com 5 particularly well suited for tasks involving a limited scope of content, such as document review and due diligence, where it can significantly enhance efficiency and accuracy. However, he cautions the misapplication of AI can lead to suboptimal results. "There are some specific things that generative AI is very good at, and that's where we need to focus the technology for now," he says. Chris Bentley, managing director of the Legal Innovation Zone, says regulation is the "biggest barrier" to innovation in the legal sector, noting that the profession has been slow to embrace technology. Despite these challenges, Canada has developed a strong tech ecosystem, particularly in cities like Vancouver, Toronto, and Montreal, where companies like Clio have thrived by leveraging access to both the Canadian and US markets. Yet Bentley says restrictions on outside investment in Canadian law firms are hampering innovation. This limitation, according to Bentley, means Canadian companies can't innovate and scale as fast as they can in jurisdictions like the UK, where the legal tech ecosystem is more integrated and supported by government and industry collaboration. "In Canada, we can't have outside investment which would leverage our smarts and the smarts of others," Bentley says. The legal tech sector in Canada is still evolving, with significant developments expected in the coming years. Lachance says the initial hype cycle for generative AI may be dying down, but real change is happening behind the scenes. He draws a parallel with the development of Boston Dynamics robots, where initial advancements appeared modest but later became revolutionary. "It's easy to giggle at a robot that you could push over with a hockey stick, [but] then you stop paying attention, and suddenly, the next time you look, the robot is doing parkour- like backflips." Moving forward, Hounsell also says the integration of AI into legal processes may lead to an increased volume of cases, which could put pressure on the existing court system. "The courts are going to have to reckon with that," he warns, referring to the legal system's fixed capacity to handle a growing caseload. LEGAL TECH IN CANADA AND US 6% Canadian software market as portion of US market ($21B vs. $363B) 5% Canadian legal market as portion of US market ($19B vs. $396B) 26% Canadian legal tech market as portion of US market ($2.56B vs. $10.21B) "These numbers are inescapable. Canada punches above its weight in [the legal tech] category" Al Hounsell, Norton Rose Fulbright Canada LLP Source: Starista, IBISWord, Precedence Research, courtesy of Al Hounsell, Norton Rose Fulbright Canada LLP