For decades, academics have argued that the US system for regulating the practice of law inhibits innovation. Despite that academic consensus, we live in an age of unparalleled innovation in the way legal services are provided to clients in the United States. What gives? How can we live in a regulatory environment that prevents innovation, and have such an abundance of it? Where is this innovation coming from, and from whence might more innovation come? The answers are neither simple nor obvious. Understanding this changing landscape requires a close look both at how innovations take root and at the US system of legal regulation.
This article first looks – as no one else has – at legal services innovation in the light of current disruptive innovation theory. This article next looks at the US regulatory scheme. It finds creeping de facto deregulation on the corporate side, and a previously unreported spate of regulation by class actions on the individual consumer side. Finally, this article, taking into account both disruptive innovation theory and the regulation of lawyers, illustrates how these forces interact by analyzing the prospects for several possible innovations in the legal services market. The analysis helps illustrate how regulations can interact with market structures and business models to determine where innovation might flourish.