Law Firms Must Reassert AI Sovereignty to Protect Competitive Advantage
Legal professionals are increasingly recognising the need to maintain control over their artificial intelligence capabilities in the face of evolving market dynamics. As AI vendors expand their offerings, law firms must take proactive steps to safeguard their proprietary knowledge and ensure that their competitive edge is not compromised.
Recent developments in the AI landscape, particularly with the launch of Anthropic's Claude Cowork, have prompted significant shifts in the legal sector. Following this launch, major legal and software firms experienced substantial declines in market value, indicating a potential shift in client preferences towards AI solutions. Law firms are witnessing clients redirecting their business towards AI competitors, which poses a direct threat to their profitability.
In April 2026, Microsoft introduced its Legal Agent for Word, followed by Claude for Legal in May, which included numerous practice area plugins. OpenAI subsequently established a legal vertical, further intensifying competition within the sector. Notably, Anthropic's data indicated that legal professionals were among the most engaged users of its Cowork platform, highlighting the growing reliance on AI tools within the legal profession.
Despite the implementation of Zero Data Retention policies by many legal firms, concerns remain regarding the retention and utilisation of client data by AI vendors. While ZDR aims to protect client information, it does not fully address the risks associated with data extraction and capability absorption, which can lead to AI vendors gaining insights into a firm's operations without direct access to sensitive documents.
Some law firms are exploring the option of training their own AI models to mitigate these risks. However, this approach raises questions about model ownership and portability. If a firm relies on a vendor to train and host a model, it may find itself locked into a relationship that limits its ability to transfer knowledge and capabilities should it choose to switch vendors.
Kirkland & Ellis has taken a significant step by investing in an in house AI solution with Palantir, employing a dedicated team of engineers to develop a proprietary platform. While this approach may not be feasible for all firms, it underscores the importance of establishing a robust internal AI strategy that prioritises ownership and control over proprietary knowledge.
To effectively reclaim AI sovereignty, law firms should focus on developing a structured ontology that facilitates the organisation and representation of their unique legal knowledge. This ontology would enable firms to maintain control over their data while allowing for integration with AI models in a way that protects their competitive advantage. By capturing new negotiated outcomes within their own systems, firms can enhance the value of their solutions without relinquishing ownership to external vendors.
Building an ontology requires a clear understanding of its purpose and structure. It is essential to differentiate between documents, which serve as source material, and the ontology itself, which models the relationships and concepts within those documents. Firms should begin by focusing on specific areas of institutional knowledge, gradually expanding their ontology as their needs evolve.
Ultimately, law firms must prioritise the question of what they would retain if they were to part ways with their AI vendor. Achieving true AI sovereignty means ensuring that a firm's institutional knowledge and competitive advantages remain intact, regardless of the technology or vendor employed. By investing in the development of a proprietary ontology, firms can secure their place in an increasingly AI driven legal landscape.