University of Washington School of Law

The “Veto Power” of Fragments: Why A$AP Rocky’s “Don’t Be Dumb” Almost Didn’t Exist

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By: Francis Yoon

After an eight year hiatus and a chaotic three year rollout plagued by leaks and complex clearance battles, A$AP Rocky finally released his fourth studio album, Don’t Be Dumb, on January 16, 2026. The album’s success was immediate, debuting at number one on the Billboard 200 and breaking streaming records for the year. Yet, for many in the industry, the album’s protracted journey remains a sobering case study in intellectual property gridlock. Behind the scenes, the project was reportedly paralyzed for years by the administrative burden of sample clearances, a process that grants recording owners absolute discretionary authority to block a release. Rocky’s public admission that “sample clearances” were disrupting the album underscores a growing crisis in music law: the absolute “veto power” of sound recording owners and the conspicuous absence of a compulsory licensing system to protect transformative art in the digital age.

The “Two-Tiered” Trap of Music Copyright

To understand the bottleneck, one must examine the two distinct copyrights inherent in every recorded song. The first is the musical work, which encompasses the compositional “DNA” of the song, including melody, lyrics, and arrangement. Under Section 115 of the Copyright Act, musical works are subject to “compulsory license,” a vital safety valve that allows an artist to record a cover of a song without seeking original owner’s permission, provided they pay a government-set statutory rate. This system ensures creators receive compensation while preventing them from impeding the progress of science and useful arts by gatekeeping a melody.

The second copyright is the sound recording, often referred to as the “master.” Unlike the composition, sound recordings are governed by Section 114, which offers no such compulsory mechanism. The owner of a recording has absolute discretion to say “no” for any reason, demand 100% of a new song’s equity, or simply ignore a request indefinitely. In Rocky’s case, this discrepancy meant that while he could easily cover a song, his attempt to sample existing recordings turned his creative process into a multi-year hostage situation.

The Legacy of Bridgeport and the Death of De Minimis

The current “veto power” is not just a statutory quirk; it is the product of a rigid judicial history. In the 2005 case Bridgeport Music v. Dimension Films, the Sixth Circuit famously decreed, “Get a license or do not sample.” This ruling effectively killed the de minimis defense for sound recordings, which is the longstanding legal principle that the law does not concern itself with trifles. While a filmmaker might display a copyrighted logo in the background of a shot under “fair use,” a musician today cannot use a one-second audio fragment or a distorted snare hit without risking suppression, as exemplified by the injunction ordering Biz Markie’s album I Need a Haircut to be pulled from sale.

This creates a massive “holdout” problem. Because there is no legal “safe zone” for even the smallest snippets, legacy labels and rights holders are incentivized to extract “ransom” prices as seen in the dispute between The Verve and ABKCO Records over the song “Bittersweet Symphony.” The labels and right holders know that a global superstar’s entire rollout, including merchandise deals with Puma, film collaborations with Tim Burton, and worldwide tour dates, is at the mercy of a tiny audio fragment. This is an administrative nightmare that prioritizes legacy gatekeeping over modern market efficiency.

The Absolute Property Counterargument: Absolute Control vs. Cultural Ingredients

During the development of this analysis, a fundamental challenge arose: “If I own the rights to a theme as iconic as Star Wars, shouldn’t I have the absolute right to say no to anyone else using it?” This represents the strongest argument favoring the status quo. It is rooted in the “Moral Rights” tradition, the principle that creators should maintain complete control over how their “spiritual child” is presented to the world. Under this view, if A$AP Rocky wants to use someone else’s property, he must accept the owner’s rules, no matter how protracted the negotiation becomes.

However, this “absolute property” model ignores the unique way that music, and specifically sampling, functions as a conversation across time. When we treat a three-second audio fragment with the same legal weight as a full-length film or a symphony, we create an intellectual property “thicket” that makes new creation nearly impossible. A compulsory license wouldn’t constitute appropriation but rather would replace an absolute injunctive right with a remunerative right. Just as a homeowner can’t always prevent the city from building necessary infrastructure through their land, provided they are fairly compensated, the law should recognize that once a sound becomes a part of a genre, the original owner’s “veto power” should yield to a fair, standardized compensation system.

Market Failure in the Era of Perfect Enforcement

The problem has been exacerbated by the arrival of near-perfect enforcement technology. In the 1990s, artists could “flip,” pitch-shift, or bury samples so deep that they became unrecognizable to the human ear. Mobb Deep’s “Shook Ones Pt. II” (1995) remained one of hip-hop’s greatest mysteries for 16 years because the producer, Havoc, “buried” the sample so effectively that even the most dedicated crate-diggers couldn’t identify it until 2011. However, by 2026, AI powered digital fingerprinting has become a ubiquitous “digital dragnet“, catching even the most transformed audio textures. This combination of zero tolerance law and perfect detection technology has eliminated the “human” element of risk taking that built early hip-hop.

When transaction costs for clearing a brief sound exceed the value of the sound itself, the market has failed. The manual process of tracking down every sample owner, who may be spread across different labels and estates, creates a barrier to entry that disproportionately affects independent creators. For every superstar like Rocky who can eventually afford a three-year delay, thousands of independent artists see their projects simply die in an inbox.

Conclusion: A Compulsory Sampling License to Safeguard Innovation

The solution lies in creating a “Compulsory Sampling License” similar to the existing framework for cover songs. The law should provide a tiered statutory rate for sound recording fragments based on the length of the sample and the degree of transformation. By creating standardized pricing for samples below a certain threshold, the law would eliminate years of manual negotiation and prevent the “veto power” from being used as an anti-competitive weapon.

A$AP Rocky’s Don’t Be Dumb is a triumph of persistence, but its journey shows that our IP laws are currently built for protection at the expense of progress. By maintaining absolute veto over fragments, we are not just protecting property; we are stifling the next generation of masterpieces. It is time for the law to recognize that in a world where art is increasingly a “melting pot” of styles and sounds, a few seconds of audio should not be enough to stop the music.

Driving Change: Washington State Legislature Considers New Regulations for ALPRs

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By: Anusha Nasrulai

The Washington state legislature is currently considering the Driver Privacy Act, a bill regulating automated license plate readers (ALPRs). ALPRs are cameras that capture license plate information of a vehicle along with location and time information. Currently, many agencies’ retention and sharing of ALPR data is subject only to internal policy, if any exists. The surveillance capabilities of ALPR systems have profound consequences, such as chilling the exercise of civil liberties and invading the privacy of vulnerable individuals, including immigrants or people who come to Washington to access reproductive or gender-affirming health care. The Driver Privacy Act presents the opportunity to raise the floor of privacy protections afforded by the Federal and Washington State Constitutions.

The Driver Privacy Act limits authorized uses of ALPRs to law enforcement, parking and toll enforcement, and transportation agencies. The current bill also puts forth warrant thresholds, a 21-day data retention period, and auditing requirements for agencies. Additionally, the bill places restrictions on accessing and sharing ALPR data and creates civil and criminal liability for violations under the Act. The bill puts specific prohibition on ALPR use around protected activities, including exercising First Amendment rights and accessing healthcare.

Advocates are calling on lawmakers to strengthen the bill by further limiting the data retention period and prohibiting third party vendors and agencies from sharing ALPR data without a warrant.

Eyes on Washington

ALPRs have faced increased scrutiny in Washington state in the past year. In October 2025, the UW Center for Human Rights released a report exposing how immigration enforcement and other out-of-state law enforcement access data from ALPR systems operated by Washington agencies. This is despite the Keep Washington Working Act and Shield Law that are intended to limit local law enforcement assisting federal immigration enforcement and “protect[] people in Washington from civil and criminal actions in other states that restrict or criminalize reproductive and gender-affirming care.” Many municipalities have halted their use or procurement of ALPRs, at least till the state passes guidance. Washington now is at a turning point, to either implement guardrails that protect individuals’ privacy from undue government surveillance, or pass legislation that sanctions expanded use of ALPRs across Washington state.

Flock Safety, a widely-adopted ALPR vendor in Washington, has faced “growing controversy” for enabling ALPR data operated by public agencies to be accessed by federal agencies and other jurisdictions. As of this June, Washington has 80 cities, six counties, and three tribes using Flock cameras. While Flock Safety has received nationwide attention recently, there are other prominent ALPR vendors used in Washington, including Vigilant Solutions (Motorola) and Axon (formerly Taser). 

How ALPR data is used, stored, and shared matters because these cameras capture more than license plate information. Law enforcement use ALPRs during real-time investigations, by checking a vehicle’s license plate information against a “hot list” of vehicles associated with an investigation or reported crime. The information collected by ALPRs can be cross-referenced with other law enforcement or public agency databases to identify individuals which vehicles are registered to. Law enforcement can also search historic ALPR data to track the direction, speed, and travel patterns of a vehicle. In aggregate, ALPR data can reveal sensitive information about where an individual frequents and their travel patterns. Furthermore, ALPR photos can capture the likeness of drivers, passengers, and nearby surroundings.

Constitutional Concerns

The specific protections provided by the Driver Privacy Act are guided by Constitutional principles. The surveillance capabilities of ALPRs can have a “chilling effect” on the exercise of Constitutionally protected activities. Awareness of constant surveillance may alter or deter people from exercising their protected rights of expression, association, and religion. These concerns are valid given historic law enforcement surveillance of political rallies, protests, and places of worship.

ALPRs also implicate the Constitutional right to privacy. The Supreme Court has not required a warrant for law enforcement to collect and search license plate information because there is a diminished expectation of privacy due to the systematic regulation of vehicles and drivers’ movements taking place on public roads. Though, the Court has also addressed in United States v. Jones , Carpenter v. United States, and Kyllo v. United States, whether law enforcement’s use of emerging surveillance technologies infringes on Fourth Amendment protections.

The Supreme Court has found that a warrant is required before installing a GPS tracker or obtaining cell site location information (CSLI) to track an individual’s long-term movements. Justice Sotomayor wrote a concurring opinion in Jones highlighting how emerging technologies have enhanced law enforcement surveillance capabilities without physical intrusion: “GPS monitoring generates a precise, comprehensive record of a person’s public movements that reflects a wealth of detail about her familial, political, professional, religious, and sexual associations.” The aggregation of ALPR data to reveal historical travel patterns raise concerns similar to those articulated in the Jones concurrence. Similarly, the Court in Carpenter, was concerned by how CSLI time-stamped data provides an intimate view into a person’s life and is cheaper and more easily accessible compared to other surveillance strategies. This is comparable to retained, historical ALPR data.

The Supreme Court recognized in Kyllo that people’s Fourth Amendment protections should not be left to “the mercy of advancing technology.” Law enforcement use of sense-enhancing technology in the form of infrared scanners to collect information “that could not otherwise have been obtained without physical ‘intrusion into a constitutionally protected area,’” was found to be a search subject to Fourth Amendment protections. While cars have lesser Constitutional privacy protections than homes, modern ALPR systems with embedded AI also provide law enforcement with extra-sensory capabilities that may implicate the Fourth Amendment.

Federal courts have yet to conclude that police use of ALPRs violate Fourth Amendment search and seizure requirements. The Washington State Constitution provides an affirmative right to privacy, enshrined in Section 1, Article 7. Washington courts have interpreted this article to create a higher standard for lawful search and seizures. As of December 2024, 18 states already have ALPR laws, with more states considering passing ALPR legislation. Washington is now contemplating joining these states in passing ALPR regulations.

Where the Bill Stands Now

The Driver Privacy Act has already passed in the Senate with amendments. The House Civil Rights & Judiciary Committee will hold a public hearing in consideration of the amended bill on February 18th.

The Driver Privacy Act not only regulates the use of ALPRs in Washington state, but it can also create meaningful privacy protections for all Washingtonians.

Reclaiming Urban Housing: A Case Study on Regulating Online Platforms

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By: Matt Unutzer

Sky-high rents are a defining feature of modern urban life. Among the many forces blamed for rising housing costs, one issue has drawn sustained regulatory attention: the conversion of long-term housing into short-term rentals (STRs) listed on platforms such as Airbnb and VRBO. Critics argue that when apartments and homes are diverted into the short-term market, overall housing supply shrinks, placing upward pressure on rents and home prices. In response, cities across the country have spent the last decade experimenting with new regulatory frameworks aimed at curbing the perceived housing impacts of STR proliferation. The following sections examine how Washington D.C., Santa Monica, and New York City regulate short-term rentals, and, in doing so, illustrate the boundaries of regulating online platforms.

Washington D.C.’s Host-Liability Model

Most cities regulating short-term rentals utilize a common approach: placing compliance obligations on individual property owners and enforcing violations through traditional municipal oversight. Washington D.C. exemplifies this default model.

Washington, D.C.’s short-term rental law requires hosts to register with the city and obtain a short-term rental license before offering a unit for rent. Hosts are generally limited to operating a single short-term rental associated with their primary residence. Operating without a license or offering an unregistered unit may result in civil penalties or license suspension.

Enforcement authority rests with the city’s Department of Consumer and Regulatory Affairs, which investigates violations through complaints, audits, and reviews of booking activity. The city bears responsibility for identifying noncompliant listings and linking them to individual hosts; for these activities, penalties are imposed directly on hosts who violate the law.

This regulatory model imposes limited duties on booking platforms. Platforms are not required to independently verify license status before allowing a listing to appear; further, these booking services may only be fined for processing a booking when the city has already identified the underlying listing as non-compliant and sent the platform notice. Platforms are required to submit periodic reports to the city identifying short-term rental transactions and associated host identity information to aid the city in identifying unlicensed STRs.

This host-based enforcement model places significant administrative demands on the city’s enforcement entity, requiring the city to identify noncompliant listings, trace them to individual operators, and pursue penalties. Furthermore, because unlawful listings may remain active until discovered, this approach does not guarantee the reduction in short-term rental activity that the regulatory framework seeks to achieve.

Santa Monica’s Platform-Liability Model

In response to the administrative burdens and enforcement limitations associated with a traditional host-based enforcement model, some cities have adopted regulatory frameworks that shift liability for unlicensed STR bookings upstream to the platforms themselves. Santa Monica represents one of the clearest examples of this model.

Santa Monica’s short-term rental ordinance requires hosts to obtain a city-issued license before offering a short-term rental and provides for a municipal registry of all licensed STR hosts. The ordinance makes it unlawful for a booking platform to complete a short-term rental transaction for any host that does not appear on the City’s registry, attaching civil fines for each such transaction.

In contrast to a host-based enforcement model, this regulatory framework has proved successful in realizing desired STR reductions. However, the imposition of fines on the platforms themselves poses the question of how far municipalities may go in regulating the online platforms which operate in their communities.

That question was addressed in HomeAway.com, Inc. v. City of Santa Monica, where short-term rental platforms Airbnb and HomeAway.com challenged the ordinance claiming immunity for fines under Section 230(c)(1) of the Communications Decency Act. Section 230(c)(1) provides online platform immunity for the content it hosts if posted by third parties. In so doing, it draws a line between platforms themselves and the third-party “publisher or speaker” of the content. In the platforms’ view, Santa Monica’s ordinance effectively established platform liability for the third-party listing content hosted on the platform.

The Ninth Circuit rejected this argument, holding that the ordinance did not impose liability for publishing or failing to remove third-party content, but instead regulated the platforms’ own commercial conduct by imposing fees when the platforms completed booking transactions for short-term rentals of unregistered properties.

While the courts have upheld Santa Monica’s use of platform liability as a lawful enforcement mechanism, the platform-liability model does not substantially reduce the administrative burden borne by the city. Enforcement still requires the city to identify individual non-compliant transactions and pursue penalties against the platforms that facilitated them.

New York City’s Affirmative Duty to Verify Model

The most aggressive iteration of STR regulation laws is found in New York City’s Local Law 18. Local Law 18, enacted on January 9th, 2022, establishes an automated STR registration verification system. First, an STR host is required to register with the city, which assigns them an STR registration number. Second, the ordinance provides for an electronic verification portal where platforms must submit a prospective host’s STR registration number and receive a confirmation code prior to processing a booking with that host. The ordinance also includes a mandatory reporting requirement directing STR platforms to submit an inventory of all STR transactions completed each month and certify that they received a confirmation code from the city’s verification portal prior to each booking.

This innovative regulatory framework automates compliance, ensuring the desired reduction in STRs is realized while minimizing the administrative burden of enforcement. However, this verification-based model has not yet been directly evaluated under Section 230. Curiously, Airbnb has not chosen to challenge the law under Section 230 and instead has largely complied with the regulatory regime, focusing its efforts on lobbying instead. Perhaps the platform has “read the tea leaves” of past lawsuits, such as the aforementioned Santa Monica suit, and determined that when liability is tied to a commercial transaction, platforms cannot claim section 230 immunity.

There are, however, material differences between the two frameworks. In Santa Monica, liability attaches when a platform completes a booking for a host who is not registered in the City’s STR registry. In New York City, by contrast, liability attaches because the platform failed to perform a mandated verification step prior to the booking, regardless of the host’s registration status. It remains an open question whether this structural shift––which ties liability to a platform’s screening process rather than underlying host noncompliance––moves closer to treating platforms as “publishers” in a manner that implicates Section 230’s platform-liability protections.

Conclusion

The ultimate impact of short-term rentals on local housing supply remains unsettled. What is clear, however, is that cities across the country are responding to growing concerns about the effects of STR platforms like Airbnb on housing supply. The result is an ongoing, nationwide case study on how local governments can regulate both short-term rentals and the online platforms that facilitate them. As municipalities continue to experiment with regulatory regimes, the legal boundaries emerging from these efforts may influence the future of platform regulation far beyond the housing context.

#ShortTermRentals #HousingPolicy #PlatformRegulation

Jody Allen and the Future of the Seahawks: A Week of Legal Confusion

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By: Thomas Oatridge

Media Reports and Conflicting Narratives About a Seahawks Sale

Just days before Super Bowl LX between the Seattle Seahawks and the New England Patriots was set to kick off, it was announced that the Seattle franchise would be back on the market after nearly three decades, a deal that is estimated to close for around $7 to $8 billion. Paul Allen, the Seattle Seahawks’ longtime owner and a co-founder of Microsoft, passed away in 2018. Prior to his death, Allen established a trust encompassing most of his assets and appointed his sister, Jody Allen, to be the personal representative of the estate and trustee to oversee the eventual sale of the trust’s assets, including the Seattle Seahawks. Although it is widely understood that the trust documents do not impose a specific timeline for selling the team, ESPN reported that the franchise would soon be put on the market. The Paul G. Allen Trust promptly issued a statement dismissing the report as rumor and stating unequivocally that “the team is not for sale.” Adding to the speculation, the Wall Street Journal reported that the NFL issued the Seahawks a $5 million fine for being out of compliance with ownership requirements. However, NFL Commissioner Roger Goodell denied such allegations shortly after these reports surfaced.

Days after this initial story broke, Yahoo Sports released an article outlining the confusion, while simultaneously creating more confusion by reporting contradictory statements about Washington State trust and estate law. The article opens by asserting the estate mandates that the Seahawks will “eventually” be sold. The article subsequently quotes a local Seattle sportswriter who claims that “when the estate comes around and says, ‘you got to sell the team,’ she has to sell the team,” because “her job is to carry out the will of the estate.” Yet, as the same article reports, just moments earlier, the estate’s governing documents never set a specific timeline for selling its assets. The week leading up to the Super Bowl has underscored the need to ask more precise legal questions, rather than accepting the latest rumor as a statement of law.

The Legal Pressure Point: NFL Ownership Rules

To frame our legal analysis and fairly characterize Yahoo Sports’ interpretation, it’s important to point out the key legal risk the Paul G. Allen Trust assumes by deferring the sale of the Seahawks. The National Football League’s bylaws are clear and unambiguous regarding ownership structure, mandating the majority stakeholder must be an individual, rather than a trust. Additionally, all controlling owners must maintain a 30% ownership stake in their respective team. It is possible that this contractual obligation to the league will trigger a sale of the team earlier than what the trustee of the Paul G. Allen Trust, Jody Allen, would have otherwise preferred. The aforementioned stories by ESPN and the Wall Street Journal may in fact be pointing to this as the likely outcome, especially given the recent announcement that the estate agreed to sell the Trail Blazers to the majority stakeholder of the Carolina Hurricanes for $4 billion.

Does Washington State Law Require an Immediate Sale?

Contractual obligations to the NFL are only part of the legal picture. In accordance with Paul Allen’s will, his sister Jody was assigned as personal representative to properly probate his estate. She was also given the role of trustee to the Paul G. Allen Trust. Therefore, trust and estate law must be considered to properly understand this situation. Under the Revised Code of Washington (RCW), a trust is created by the transfer of property to a trustee to carry out the terms of the trust. Personal representatives and trustees must fulfill functionally identical fiduciary duties such as administering the trust solely in the interests of the beneficiaries, keeping the beneficiaries reasonably informed, managing assets properly, and avoiding self-dealing for personal benefit. In a 2022 interview, Jody Allen indicated the estate could take 10–20 years to unwind due to its complexity and size. Thus, if there is no reason to doubt the validity of this claim and no established deadline for the sale of the trust’s assets, it is hard to say what would trigger a breach of fiduciary duty to the trust if the Seahawks are not sold within the NFL’s preferred timeline. Furthermore, given Jody Allen is both the personal representative of the estate and the trustee of the Paul G. Allen Trust, it is unlikely the estate will “come knocking” to force Jody to sell the team either.

When a Sale Could Become Legally Problematic Under Washington State Law

There is, however, a scenario where Jody Allen could be found in breach of her fiduciary duty as personal representative of the estate and trustee. According to Yahoo Sports, their source discussed a rumor of “Allen and a bunch of her affluent friends at Seattle-based companies Microsoft and Amazon coming in and buying the team from her brother’s trust.” If this rumor turns out to be true, Jody could open herself up to the risk of breaching her fiduciary duties through self-dealing. This occurs when a trustee enters into a sale, encumbrance, or other transaction involving the investment or management of trust property for the trustee’s own personal account or which is otherwise affected by a conflict between the trustee’s fiduciary and personal interests. In 2018, a Washington State appeals court affirmed a lower court’s decision to block the sale of estate assets by a personal representative to himself because it breached his fiduciary duties via self-dealing. However, if Jody Allen decides to move forward with the sale of the Seahawks to herself, Washington State law allows for three exceptions to this doctrine which include waiver by the trust instrument, waiver by the beneficiaries, or permission from the court.

Conclusion

At present, there is no indication that Jody Allen or the Paul G. Allen Trust are under any immediate legal obligation to sell the Seattle Seahawks. If a sale occurs in the near term, it is more likely to stem from contractual obligations to the NFL rather than any requirement imposed by Washington State law. Absent meaningful pressure from the NFL, the timing of any sale remains largely within the discretion of Jody Allen as trustee of the Paul G. Allen Trust.

#Seahawks #JodyAllen #TrustAndEstateLaw #WJLTA

Beyond the Billable Hour: How AI is Forcing Legal Pricing Reform

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By: Joyce Jia

Pricing reform to replace billable hours has long been debated in the legal industry. Yet as software companies increasingly shift toward outcome-based pricing with AI agents’ assistance—charging only when measurable value is delivered—the legal profession remains anchored in time-based billing and has been slow to translate technological adoption into pricing change. The recently released Thomson Reuters Institute’s 2026 Report on the State of the US Legal Market (“2026 Legal Market Report”) revealed that average law firm spending on technology grew “an astonishing 9.7% … over the already record growth of 2024”, while “a full 90% of all legal dollars still flow through standard hourly rate arrangements,” This growing disconnect between technological investment and monetization reflects not merely a billing challenge, but a deeper crisis in how legal value is defined, allocated, and captured in the AI era. 

How Did We Get Here?

The billable hours system wasn’t always dominant. As documented by Thomson Reuters Institute’s James W. Jones, hourly billing emerged in the 20th century but remained relatively peripheral until the 1970s, when the rapid growth of corporate in-house legal departments demanded standardized fees and greater transparency from outside counsels’ previously “amorphous” billing practices. The logic was straightforward: time equaled work, work equaled measurable productivity, and productivity justified legal spending for in-house departments (and conversely, profitability for law firms).

That logic, however, is increasingly strained. As AI enables what Clio CEO Jack Newton describes as a “structural incompatibility”, the revenue model built on time becomes increasingly unjustifiable. According to Thomas Reuter’s 2025 Legal Department Operations Index, corporate legal departments face mounting pressure to “do more with less.” Nearly three-quarters of respondents plan to deploy advanced technology to automate legal tasks and reduce costs, while one-quarter are expanding their use of alternative fee arrangements (AFAs) to optimize operations and control costs. As the 2026 Legal Market Report observes, general counsels now scrutinize matter budgets line by line. Seeing their own team leverage AI to perform routine work “at a fraction of the cost,” they question why outside counsels charging premium hourly rates are not delivering comparable efficiencies. Unsurprisingly, corporate legal departments have led their outside firms in AI adoption since 2022. 

Is AI a “Margin Eroder or Growth Accelerator”?  

Research by Professor Nancy Rapoport and Legal Decoder founder Joseph Tiano frames this tension as a central paradox of AI adoption. When an attorney completes discovery review using AI in 8 hours instead of 40, firm revenue could drop by 80 percent theoretically under the hourly model even as client outcomes improve. This appears to be a productivity trap: AI-driven efficiency directly cannibalizing revenue. But this framing is overly narrow. With careful design, restructuring billing models around technology-enabled premiums need not shrink revenue; instead, it can enhance productivity while strengthening client trust through greater transparency and efficiency.  It also enables a more equitable sharing of the benefits of technological advancement and a more deliberate allocation of the risks inherent in legal matters.

Recapturing the Lost Value of Legal Inefficiencies

According to the Thomson Reuters Institute’s 2023 research on billing practices, the average law firm partner writes down over 300 hours annually, nearly $190,000 in lost potential fees. These write-offs typically involve learning curves in unfamiliar legal areas, time-intensive research, drafting various documents and meeting notes, or correcting associates’ work. Partners often decline to bill clients for such work when it exceeds anticipated time expectations, even though it remains billable in principle. This is precisely where AI excels. By reducing inefficiencies and accelerating routine tasks, AI allows firms to recapture written-off value while offering clients more predictable budgets and higher-quality outputs. 

Justifying Higher Hourly Rates Through AI-Enhanced Value

Paradoxically, AI may also support higher hourly rates for certain categories of legal work. As Rapoport and Tiano argue, AI enables lawyers to deliver “unprecedented insights” through deeper, more comprehensive, and more reliable analysis. By rapidly synthesizing historical case data, identifying patterns, and predicting outcomes, AI may elevate legal judgment in ways that time and cost constraints previously rendered impractical. In this context, premium rates can remain justifiable for complex, strategic work where human judgment and client relationship prove irreplaceable.

Extending Contingency (Outcome-Based) Fee Beyond Litigation

Beyond traditional litigation contingency fees, Rapoport and Tiano identify “disputes, enforcement actions, or complex transactions” as areas ripe for outcome-based pricing, where firms can “shoulder more risk for greater upside.” The term “disputes” may be understood broadly to encompass arbitration, debt collection, and employment-related conflicts, such as discrimination or wage claims.

An even more underexplored application lies in regulatory compliance, a domain characterized by binary and verifiable outcomes. Unlike litigation success or transactional value, compliance outcomes present even clearer metrics: such as GDPR compliance versus violation, SOX compliance versus deficiency, patent prosecution approval versus rejection. This creates opportunities for compliance-as-a-service models that charge for compliance or certification outcomes rather than hours worked. Where AI enables systematic, scalable review, risk allocation becomes explicit: the firm guarantees compliance, and the client pays a premium above hourly equivalents for that assurance.

New Revenue Streams in the AI Era

The rise of data-driven AI also creates entirely new categories of legal work. As Rapoport and Tiano identify, “AI governance policy and advisories, algorithmic bias audits, data privacy by design”, all represent emerging and durable revenue streams. Moreover, as AI regulatory frameworks continue to evolve across jurisdictions, clients will increasingly seek counsel for these specialized services, where interdisciplinary expertise at the insertion of law and technology, combined with sound professional judgment and strategic foresight, remain indispensable for navigating both compliance obligations and long-term risk. 

The Hybrid Solution: Tiered Value Frameworks

Forward-thinking firms are increasingly experimenting with hybrid AFA that blend fixed fees, subscriptions, outcome-based pricing, and legacy hourly billing into tiered value offerings. Ultimately, the legal industry’s pricing transformation is not solely about technology. It is about candidly sharing the gains created by technology and confronting how risk should be allocated when AI reshapes legal work.

As AI simultaneously frees lawyers’ time and creates new revenue opportunities, law firms face a defining challenge: articulating, quantifying, and operationalizing a value-and-risk allocation framework capable of replacing the billable hour and sustaining the economics of legal practice for the next generation.