Legal tech firm Clio hit with countersuit in Alexi trade secrets case

By David Thomas

Jan 20 (Reuters) - Legal technology firm Alexi is mounting a counterattack against Fastcase and its parent company Clio, accusing them of trying to use an "objectively baseless" trade secrets lawsuit to eliminate the company as a rival in artificial intelligence-backed research.

In counterclaims filed Friday in Washington, D.C., federal court, Alexi said that since acquiring Fastcase three years ago, Clio has orchestrated a bad‑faith campaign to destroy Alexi as an AI‑research competitor by dominating the market and breaching a contract that gives any future acquirer of Alexi the right to buy Fastcase's vast legal research library without restrictions.

Alexi said customers have canceled or not renewed their subscriptions after Fastcase sued it in November. Investors and potential acquirers of Alexi have also been scared off due to Clio's lawsuit, and Alexi has had to lay off two-thirds of its staff, the countersuit said.

"Clio’s abusive tactics, from pressuring Alexi to give up its contractual rights, to filing baseless claims, to cutting off critical updates and sowing fear among customers and potential acquirers, reflect a deliberate plan to neutralize Alexi as a competitor," Alexi said in its lawsuit.

A Clio spokesperson said Fastcase "categorically denies" Alexi's allegations and called them baseless. The spokesperson said Alexi sought to shift attention from its misuse of Fastcase's data and "challenges Fastcase for enforcing its contractual rights and protecting intellectual property it has built over many years."

The case stems from a licensing deal Alexi signed with Fastcase in 2021, before Fastcase merged with vLex in 2023. As part of that deal, Alexi said it retained access to Fastcase's online law library even if Alexi is bought by another company. After Clio acquired Fastcase when it bought vLex for $1 billion last year, Alexi alleged Clio tried to pressure it into giving up that contractual right without getting anything in return.

Fastcase alleged in its lawsuit that Alexi was barred from publishing or distributing any part of the Fastcase database. Fastcase said that Alexi not only trained its generative AI models on Fastcase data but also displayed Fastcase-sourced case law to users and used Fastcase's trademarks in its interface, creating a false impression of affiliation. Alexi denied wrongdoing and said in its counterclaims that Fastcase has known about and supported its AI service for years.

Alexi is seeking an unspecified amount of damages, as well as a court order requiring Clio to "license the Fastcase database to rival AI legal analysis service providers on non-discriminatory terms."

In addition to counterclaims of breach of contract and tortious interference, Alexi also alleged that Clio's acquisition of vLex and Fastcase violated federal antitrust law, as it "may substantially lessen competition in the market for AI legal analysis services that rely on access to comprehensive primary-caselaw data."