While Canadian law firms have traditionally lagged behind their American counterparts in adopting legal tech, the AI explosion is closing the gap. This slower adoption rate isn't due to a lack of innovation—Canada boasts a thriving legal tech sector. Instead, factors like a smaller legal market and stricter privacy regulations have historically hindered technology uptake. This often resulted in a noticeable delay between a product's US launch and its availability in Canada.

Although direct comparisons are challenging due to the continuous evolution of legal tech, the recent announcements and release timelines for major AI-powered tools point to a notable shift in how the Canadian market is being prioritized. For instance, Westlaw Edge was announced in the US in July 2018, but the Canadian launch wasn't announced until September 2021—a gap of over three years. Similarly, Lexis+ was announced in the US in September 2020, with the Canadian announcement following in August 2022. However, the latest AI products show a different trend. Thomson Reuters' CoCounsel Core was announced in the US in November 2023 and shortly followed in Canada in February 2024. The announcement for Lexis+ AI came in October 2023 in the US and July 2024 in Canada. This rapid succession of announcements suggests that the Canadian legal tech market is no longer an afterthought. 

The Canadian federal government has demonstrated a strong commitment to fostering AI innovation. It has dedicated CAD$568 million to its national AI strategy, with the goals of fostering AI research and development, building a skilled workforce in the field, and creating robust industry standards for AI systems. This investment should help Canadian legal tech companies, such as Clio, Kira Systems, Spellbook, and Blue J Legal, all headquartered in Canada. With the Canadian government's focus on establishing Canada as a hub for AI and innovation, these companies stand to benefit significantly from increased funding and talent attraction.

While the Canadian government is actively investing in AI innovation, it's also taking steps to ensure responsible development through proposed legislation, which could impact the availability of AI legal tech products in Canada. In June 2022, the Government of Canada introduced the Artificial Intelligence and Data Act (AIDA), which aims to regulate high-impact AI systems. While AI tools used by law firms for tasks like legal research and document review likely fall outside this initial scope, AIDA's evolving framework could still impact the sector. For example, the Act's emphasis on mitigating bias and discrimination may lead to greater scrutiny of AI algorithms used in legal research, requiring developers to demonstrate fairness and transparency.

While AIDA may present hurdles for US companies entering the Canadian market with AI products, it could conversely provide a competitive advantage for Canadian companies seeking to expand into Europe. This is because AIDA, despite having some material differences, aligns more closely with the comprehensive approach in the European Union’s Artificial Intelligence Act (EU AI Act).

While US companies are working to comply with the EU AI Act, Canadian companies may have an advantage. Although AIDA isn't yet in force and has some differences from the EU AI Act, it provides a comprehensive regulatory framework that Canadian legal tech leaders are already engaging with. This engagement with AIDA could prove invaluable to Canadian legal tech companies as AI regulation continues to evolve globally.

Canadian companies looking to leverage their experiences with AIDA for European expansion will nonetheless encounter some material differences. For instance, the EU AI Act casts a wider net, regulating a broader range of AI systems than AIDA. The EU AI Act's multi-tiered risk-based system is designed to address a wider spectrum of concerns, capturing even "limited-risk" AI systems with specific transparency obligations. Furthermore, tools used for legal interpretation could be classified as "high-risk" systems under the EU AI Act, triggering more stringent requirements.

In conclusion, the rise of generative AI is not only revolutionizing Canadian legal tech and closing the gap with the US, but it could also be positioning Canada as a key player in the global legal tech market. While AIDA's impact remains to be seen, its emphasis on responsible AI could shape the development and deployment of AI-powered legal tools in Canada.