Two of Canada’s prominent legaltech startups, Clio and Alexi, are locking horns in a new court battle over access to legal data. 

Clio subsidiary Fastcase is suing Toronto-based Alexi for unfair competition, breach of contract, trademark infringement and misappropriation of trade secrets, alleging the Toronto firm misused its data to build a competing product. Fastcase is seeking a court order forcing Alexi to pay back any revenue that it made by allegedly misusing Fastcase’s extensive library of court cases. Clio says the lawsuit is necessary to protect its intellectual property but Alexi denies the allegations and Alexi CEO Mark Doble calls the lawsuit “baseless.”

The lawsuit, filed in Washington, D.C. last Wednesday, comes as law firms are increasingly turning to generative AI to help them stay on top of paperwork. The competition for that business is fierce, prompting traditional law library providers like Thomson Reuters to invest in AI, alongside venture capitalists who are pouring money into startups like Clio, which hit a new valuation of US$5 billion last month.

Alexi, which makes a generative AI product that lawyers use for drafting documents and other tasks, has had a license since 2021 to use the Fastcase database, a digital library of legal texts and court decisions. Washington, D.C.-based Fastcase merged with vLex Group in 2023, which in turn was acquired by Clio last month in a blockbuster US$1-billion deal. 

In the legal complaint, Fastcase says it licensed its database to Alexi for internal research, meaning Alexi’s lawyers could use it to draft memos for clients with the help of AI. Over time, Alexi’s generative AI offerings expanded, granting users more power to generate their own memos based on case law, Fastcase said. That’s taking things too far, Fastcase argued in its complaint, alleging that Alexi is effectively building a competitive service for “publishing and distributing Fastcase-sourced case law directly to its users.” The allegations in the lawsuit have not been tested in court.

Doble said Alexi’s actions were always within the scope of its deal with Fastcase and has never sold, sublicensed or given its users direct access to Fastcase data. 

Alexi is “generating direct answers to questions, as opposed to a search tool,” Doble said in an interview. “There was nothing that we were doing that was not consented to—in fact, fully desired by—Fastcase.” 

Doble said Fastcase hadn’t raised the issue prior to Clio taking ownership of vLex, making Doble question when Clio realized that Alexi had access to the data, or whether Clio expected the vLex acquisition would make that data available to it exclusively. 

“Clio paid a billion dollars [for vLex Group]. A large part of that’s predicated on the value of this data,” said Doble. 

Clio declined to answer questions about whether it was making a strategic push to have vLex data be more exclusive for its customers, saying in a statement that its lawsuit is a matter of protecting intellectual property. In the legal complaint, Fastcase argues that the issue is Alexi’s changing business model, which now uses less human oversight to draft memos.

“Clio takes its contractual obligations and intellectual property very seriously,” said a statement provided by Clio spokesperson Pamela Smith.

Despite the conflict, Doble said he looks up to Clio and wants to resolve the issue quickly, including potentially negotiating a new agreement over the Fastcase data.

“As far as we know, there’s no other company now, prior to Clio’s acquisition of vLex, that had the similar rights to it,” said Doble. “That’s why we’re in this situation, and that’s why it’s led to litigation.”