Data Privacy and Ethical Use of Microsoft CoPilot in Law Firms

Data Privacy and Ethical Use of Microsoft CoPilot in Legal Practice

Microsoft 365 Copilot can unlock real productivity and quality gains for law firms—but only when implemented with rigorous privacy, security, and ethical controls. This tutorial-driven guide shows attorneys and legal operations leaders how to configure, supervise, and use Copilot responsibly. You’ll learn concrete steps for privacy-by-design configuration, a hands-on intake workflow, and day-to-day best practices grounded in legal ethics and information governance.

Table of Contents

• What Copilot Is and How It Touches Client Data
• Ethical Guardrails for Attorneys
• Privacy-by-Design Configuration in Microsoft 365
• Step-by-Step Tutorial: Privacy-Safe Client Intake and Engagement Drafting
• Prompting for Privacy and Accuracy
• Risk Scenarios and Practical Mitigations
• Audit, eDiscovery, and Billing Ethics with Copilot
• Quick Implementation Checklist
• Conclusion and Next Steps

What Copilot Is and How It Touches Client Data

Microsoft 365 Copilot is an AI assistant embedded in Word, Outlook, Teams, Excel, PowerPoint, and other Microsoft 365 apps. It generates drafts, summaries, action lists, formulas, and more based on your prompts and the content you can access under your organization’s permissions model. Importantly for law firms, Copilot uses the Microsoft Graph and respects object-level permissions, so users can only draw from content they are authorized to view. Microsoft states that Copilot does not train the foundation models on your tenant data. Still, the way you configure identity, access, labeling, and logging determines how safely it behaves in your environment.

Best practice: Treat Copilot like a very capable junior assistant with instant access to everything the user can see. If the user’s access is broader than needed, so is Copilot’s.

Ethical Guardrails for Attorneys

Copilot use must align with professional responsibility obligations. The following rules and principles commonly apply: ABA Model Rules 1.1 (Competence), 1.6 (Confidentiality), 5.1 (Responsibilities of Partners/Supervisory Lawyers), 5.3 (Nonlawyer Assistance), and 1.5 (Fees). Jurisdictions vary; check local opinions and client restrictions (e.g., HIPAA BAAs, ITAR, CJIS, cross-border data transfer rules).

• Competence (1.1): Understand AI’s capabilities and limits; validate outputs and cite-check.
• Confidentiality (1.6): Keep client information within your protected tenant; avoid using consumer AI tools for client data.
• Supervision (5.1/5.3): Establish written AI policies; train and monitor staff; review outputs before use.
• Fees (1.5): Ensure AI-assisted efficiencies don’t create unreasonable fees; adjust billing practices and disclosures.
• Informed Consent: For sensitive projects, consider disclosing AI use and controls in engagement terms if required or prudent.

Privacy-by-Design Configuration in Microsoft 365

Identity and Access Controls

• Require strong MFA and Conditional Access in Microsoft Entra ID; block sign-ins from risky locations and unmanaged devices.
• Use role-based access control and Privileged Identity Management (time-bound admin roles).
• Map Teams/SharePoint permissions to matters; enforce least privilege and remove stale access with Access Reviews.

Information Protection and Data Loss Prevention

• Create and publish Microsoft Purview Sensitivity Labels (e.g., Confidential–Client Matter) with encryption and external sharing restrictions. Set defaults per library.
• Apply DLP policies to block or warn on sharing client data externally or copying to personal storage.
• Use Retention Labels for legal hold and lifecycle requirements; align with client terms and regulatory timelines.

Content Governance and Monitoring

• Enable Microsoft Purview Audit to capture Copilot usage events and file interaction logs. Use eDiscovery (Standard/Premium) for matter readiness.
• Restrict Graph connectors/plugins to vetted sources; disable what you do not need.
• Establish data residency and transfer controls; leverage Microsoft’s data boundary options where required.

User Prompt → Copilot in Word/Teams → Microsoft Graph (permissions-respected)
               ↓                                   ↓
     Content Sources (SharePoint, OneDrive, Teams, Outlook)
               ↓                                   ↓
     Copilot Draft/Summary → User Review → Save to Labeled Repository
               ↓
      Purview DLP / Retention / Audit / eDiscovery
  

Step-by-Step Tutorial: Privacy-Safe Client Intake and Engagement Drafting

This hands-on tutorial shows how to design an intake-to-engagement workflow that uses Copilot while enforcing legal-grade privacy and ethics. You’ll use SharePoint, Microsoft Forms, Power Automate, Teams, Word, and Purview.

Outcome

• Clients submit a secure intake form.
• Data lands in a labeled SharePoint library; a matter folder is created with restricted access.
• Teams notifies intake staff; Copilot summarizes the intake for quick triage.
• Copilot in Word drafts an engagement letter using a labeled firm template.

Prerequisites

• Microsoft 365 licenses with access to SharePoint, Teams, Forms, Power Automate, and Copilot for Microsoft 365.
• Purview Sensitivity Labels and DLP policies configured (at least one “Confidential–Client Matter” label).
• Teams channel for Intake (private channel recommended) and a SharePoint site for Client Intake.

Part 1: Build a Secure, Labeled Repository

1. In SharePoint, create a site called “Client Intake” and a document library named “Intake Submissions.”
2. In Microsoft Purview:
   • Create a Sensitivity Label “Confidential–Client Matter” with: encryption, no external sharing, and watermarking if desired.
   • Publish the label to the intake team.
3. Set the “Confidential–Client Matter” label as the default for the “Intake Submissions” library.
4. Create a Retention Label “Client Matter—7 years” and set it to auto-apply to the library.

Part 2: Create the Intake Form and Flow

1. In Microsoft Forms, create a form “New Client Intake” capturing:
   • Client name and contact
   • Matter type and brief description
   • Adverse parties (if known)
   • Conflict-check keywords
   • Upload supporting documents (enable file upload)
2. In Power Automate, create a cloud flow:
   • Trigger: “When a new response is submitted” (Microsoft Forms) for “New Client Intake.”
   • Action: “Get response details.”
   • Action: “Create new folder” in SharePoint under Intake Submissions using a naming convention like “YYYYMMDD-ClientLastName-MatterType.”
   • Action: “Create file” to store uploaded documents inside the new folder.
   • Action: “Post a message in a chat or channel” (Teams) to the Intake channel with key fields and a SharePoint link.
   • Optional: “Create a task” in Planner with due dates for conflicts and engagement letter drafting.
3. Confirm the default sensitivity and retention labels are applied automatically to the folder and files. Test with a sample submission.

Part 3: Triage with Teams and Copilot

1. In the Intake Teams channel, open the Copilot pane.
2. Prompt Copilot to summarize the intake:
   • Example: “Summarize the new intake from [SharePoint link]. Identify conflict-check terms, deadlines, and missing information. Provide a checklist for next steps.”
3. Use the summary to drive conflicts and follow-up questions. Keep the discussion within the private Intake channel.

Part 4: Draft the Engagement Letter with Copilot in Word

1. Store your firm’s engagement letter template in the “Templates” library in SharePoint with the “Confidential–Client Matter” label.
2. Open the template in Word and launch Copilot.
3. Provide a privacy-aware prompt grounded in labeled sources:
   • Example: “Using our engagement template and the intake details from [SharePoint folder link], draft an engagement letter for [Client Name] for [Matter Type]. Include scope, exclusions, fee arrangement [hourly/flat], and conflict waiver language if needed. Keep to two pages and use the firm’s standard arbitration clause.”
4. Review the draft carefully. Verify names, scope, venue, fee terms, and governing law. Adjust tone and ensure it reflects jurisdictional rules.
5. Save the letter back to the matter folder so it inherits the sensitivity and retention labels.
6. Send via Outlook using secure sharing and the appropriate sensitivity setting; avoid attachments when client portals are available.

Governance Tips During the Workflow

• Never paste client data into consumer AI tools; keep all prompts and data within Microsoft 365.
• Work from labeled locations; if Copilot asks to include sources, point it to your SharePoint folder, not personal locations.
• If external counsel or vendors are involved, use guest access in a segregated Team with restricted channels and DLP rules.

Quality gate: Require a human-in-the-loop review sign-off for any Copilot-generated client document. Track approval in the document properties or Planner task.

Prompting for Privacy and Accuracy

The PACT Framework

• Purpose: State the legal task and desired output.
• Access: Reference only labeled, approved sources (SharePoint links, matter numbers).
• Constraints: Jurisdiction, word limits, tone, and required clauses.
• Traceability: Ask Copilot to cite the specific files and sections it used.

Safer Prompt Patterns

• Do: “Using the documents in [SharePoint/matter folder link], summarize the factual background and list unresolved issues with citations to document names and sections.”
• Avoid: “Here’s a client summary [paste raw PII]. Search the internet and write a demand letter.” (Risks: unnecessary disclosure, unreliable sources.)
• Do: “Compare the attached two drafts and highlight changes that affect arbitration or venue. Provide a redline summary.”
• Avoid: “Find the best clause online and insert it.” (Risk: licensing and suitability.)

Risk Scenarios and Practical Mitigations

Audit, eDiscovery, and Billing Ethics with Copilot

Audit and Records

• Enable Microsoft Purview Audit to capture relevant Copilot events (e.g., feature usage and referenced file metadata) and standard file operations.
• Retain drafts and final outputs in labeled repositories to ensure they are discoverable and can be placed on hold.
• Document AI-assisted decisions in matter notes or Planner tasks for accountability and client transparency.

eDiscovery Readiness

• Keep Copilot-generated content in SharePoint/Teams to fall under established eDiscovery processes.
• Use eDiscovery (Standard/Premium) to apply holds, collect, and review matter content, including Teams messages.
• Avoid side channels (personal drives, email attachments) that complicate legal holds.

Billing Ethics

• Update engagement letters to clarify technology use as needed and how efficiencies affect fees.
• If billing by time, avoid charging for speed gains as if drafted manually; if value pricing, define deliverables and outcomes upfront.
• Track attorney review time distinctly from AI generation to show professional judgment and oversight.

Quick Implementation Checklist

• Adopt a written AI policy aligned to Model Rules and client requirements.
• Enable MFA, Conditional Access, and least-privilege access for matter spaces.
• Deploy Purview Sensitivity Labels, DLP, and Retention Labels; set defaults per library.
• Restrict external connectors/plugins; maintain an approval workflow.
• Train staff on privacy-aware prompting and verification procedures.
• Log Copilot usage with Purview Audit; test eDiscovery on a pilot matter.
• Define billing practices for AI-assisted work; update templates and terms.
• Pilot the intake-to-engagement workflow described above; iterate based on feedback.

Conclusion and Next Steps

Microsoft 365 Copilot can accelerate legal work without compromising confidentiality—if you implement it with privacy-by-design controls, strong supervision, and disciplined prompting. Use the configuration steps, tutorial, and checklists above to pilot Copilot on a low-risk matter, validate governance, then scale. With the right guardrails, your firm can realize meaningful productivity, consistency, and risk reduction from day one.

Want expert guidance on bringing Microsoft CoPilot into your firm’s legal workflows? Reach out to A.I. Solutions today for tailored support and training.