Thanks to Gordon Smith for inviting me to guest blog—and kudos to Gordon for inviting Michael Burstein, who penned several insightful guest blogs here a few weeks ago—to generate some buzz about the intersection of IP and business law. In my posts over the next two weeks, I’ll follow on Michael’s outstanding foray into the overlap—and as I’ll describe, the “gap”—between IP and business law.
As Michael explained, IP and business law often intersects in three key areas: (1) Law & Entrepreneurship; (2) Markets for Technology; and (3) Innovation and Corporate Performance. Each of these areas has been growing at tremendous rates both in terms of academic study and real-world deals.
As an IP law professor and former founder of a .com-era software company, it’s greatly refreshing to see this newfound interest in IP & business law in the legal academy and practice. Yet, both domains still often suffer from what I term the IP transaction “gap”—namely, the lack of a deep understanding on the part of academics and lawyers of both the “IP of Business” and the “Business of IP.”
In simple terms, business lawyers often fail to appreciate the important details of IP and IP lawyers often fail to understand the business of their clients. As a client, my difficulties stemmed in finding business-savvy lawyers who had a sufficient grasp of IP—particularly the business aspects of IP—to ink the kinds of nuanced licensing, assignment, and acquisition agreements that would suitably account for the structure and risks unique to IP deals. The same sorts of “gaps” between IP and business law pervade law review articles that attempt to tackle this thorny intersection.
Of course, there are notable exceptions among scholars and practitioners alike. For instance—in addition to Michael Burstein—Ashish Arora, Stuart Graham, Richard Gruner, Bronwyn Hall, Jay Kesan, Josh Lerner, and David Teece represent an abbreviated list of some of the scholars with deep knowledge in both fields. Similarly, there are well-known (and lesser-known) attorneys with the same sort of cross-disciplinary aptitude. How do scholars—and practitioners and students—acquire this kind of knowledge? I have a few suggestions.
First, law schools should offer more cross-over courses in IP and business law. For example, at the University of San Diego School of Law, David McGowan and I have focused on expanding our cross-disciplinary IP offerings, which now include IP & Business, IP Strategies, Technology Transfer, and a Technology Entrepreneurship Law Clinic. Based on a survey of IP courses performed by William Mitchell Law School, fewer than 20 law schools offer any IP transactional courses other than IP licensing. Relatedly, law schools should provide certificates or concentrations in IP Transactional Law, as well as more opportunities for joint MBA/JD programs, with a special emphasis on technology-focused business and law.
Second, legal academics writing in IP & business should more frequently read and cite literature from outside the law review canon. In my view, often the best law review articles in IP draw upon scholarly works from business, economics, management, marketing, and related journals. One excellent way to quickly learn about the latest thinking in these fields is to attend conferences in these disciplines, such as the Academy of Management or American Economic Association annual meetings.
In this vein, academics and practitioners alike should cease the frequent practice of pigeon-holing certain issues as “legal” and others as “business,” relegating the latter to the expertise of non-lawyers. At my software company, we eventually fired every lawyer who made such hidebound distinctions. In their place, we hired transactional lawyers who understood our business well—not only our goals in a specific deal, but also overall—and who thus could provide integrated business and legal advice. In order to have this deep level of knowledge, transactional lawyers—especially those who practice in the tech space—need to immerse themselves in the business of their clients. In many situations, this might mean self-educating by reading a client’s business plan and fundraising slides, as well as general business magazines, books, blogs, and journals.
Last, and perhaps most importantly, we in legal academia—in addition to training students to “think like lawyers”—should give today’s transactional law students a head-start on “thinking like businesspeople.” By doing so we can help ensure clients receive the kinds of lawyering they increasingly demand (and need).
Letter received today from The Association of American Law Schools:
I am pleased to inform you that the AALS Executive Committee has approved your petition for full status as the AALS Section on Transactional Law and Skills.
Tina Stark got this section started in 2010. The initial officers of the provisional section were Tina, Joan Heminway, Eric Gouvin, and Afra Asharipour, and the executive committee was Lyman Johnson, Therese Maynard, and Gordon Smith.
Many others have participated in building the Section since that time. Thanks all around for the hard work required to make this happen.
This is a reminder from Sue Payne, Executive Director of the Center for Transactional Law and Practice at Emory Law:
If you haven’t yet registered for Emory Law’s Fourth Biennial Conference on Teaching Transactional Law and Skills, entitled “Educating the Transactional Lawyer of Tomorrow,” you should do so now. The Conference is June 6th and 7th.
Tina L. Stark will return to Emory to kick off the Conference by updating the fantasy curriculum that she proposed in her speech at the inaugural conference in 2008. On Day Two, the keynote panel will address the topic, “Skills is Not a Dirty Word: Identifying and Teaching Transactional Law Competencies.”
You won’t want to miss these or the many other terrific sessions we have planned. Please see the attached Conference Schedule for more details. You can register for the Conference by clicking here. If you have any questions about registration, please contact the Conference Coordinator, Edna Patterson, at firstname.lastname@example.org.
We write to ask two small (but important) favors of you that are directly related to law schools' pedagogical mission as well as the rapidly changing future of legal education.
As you may know, an ABA task force has recently proposed to establish minimum requirements within ABA-accredited law schools for "experiential" learning related to building practical skills and competencies. (Similar proposals are percolating up from state bar association task forces as well.) We believe this endeavor to be an intriguing and important invitation for law schools to re-imagine how they deliver legal education, and on this basis we are generally supportive. At the same time, a challenging question that the ABA and other task forces face is the question of what topics constitute "skills and competencies." Within business law, this challenge is perhaps greatest for attorneys whose practice is principally "transactional" in nature (in contrast to work that is oriented around litigation). It is unclear how much input transactionally-oriented business law practitioners (attorneys, other professionals, educators) have had on the process of drafting the proposed guidelines, or whether there has been much systematic analysis of what topics constitute important "skills" for entering transactional attorneys.
To address these gaps, we have developed an on-line survey instrument to help gauge what sorts of core competencies established professionals in transactional practice areas consider important. We hope the results of the survey will help both practitioners and legal educators assess (and if necessary, work to amend) the current proposed guidelines. Although largely directed to practicing attorneys, the survey is also open to other professionals who work closely with practicing attorneys in transactional practices (such as bankers, accountants, financial advisers, etc.).
Here are the two favors we ask of you:
(1) Please take a few moments yourself to fill out the survey. It will not take longer than 5-10 minutes of your time.
(2) Please ask your colleagues, partners, associates, co-workers, and other professional contacts to consider filling out the survey.
The survey is available on-line, at
When complete, results of the survey will be made available on the website for the Berkeley Center for Law, Business and the Economy (BCLBE), at http://www.law.berkeley.edu/bclbe.htm.
Just before Christmas the Washington Law Review published a symposium issue honoring Larry Cunningham's new book, Contracts in the Real World. The issue is a good read for Contracts teachers. You can read my contribution, "Contracts as Pattern Language" here. The abstract for this essay is below:
Christopher Alexander’s architectural theory of a "pattern language" influenced the development of object-oriented computer programming. This pattern language framework also explains the design of legal contracts. Moreover, the pattern language rubric explains how legal agreements interlock to create complex transactions and how transactions interconnect to create markets. This pattern language framework helps account for evidence, including from the global financial crisis, of failures in modern contract design.
A pattern represents an encapsulated conceptual solution to a recurring design problem. Patterns save architects and designers from having to reinvent the wheel; they can use solutions that evolved over time to address similar problems. Contract patterns represent encapsulated solutions within a legal agreement (or set of agreements) to a specific legal problem. This problem might consist of a need to match the particular objectives of counterparties in a discrete part of a bargain or to address certain legal rules. A contract pattern interlocks, nests, and works together with other contract patterns to solve more complex problems and create more elaborate bargains. Interlocking patterns enable scalability. Just as Alexander’s architectural patterns for rooms create patterns for buildings, which create patterns for neighborhoods and cities, patterns of individual contract provisions form legal agreement patterns, which interlock to create patterns for transactions, which, mesh to create patterns for markets. For example, contract patterns help lawyers draft real estate contracts. These contracts interlock in sophisticated real estate transactions, which mesh with other contract patterns to form securitization transactions. Securitization patterns create markets for asset-backed securities, which, form part of the larger shadow banking system.
This scalability differentiates contract patterns from boilerplate. However, legal scholarship on boilerplate – including Henry Smith’s work on the modularity of contract boilerplate – patterns allow certain debt contracts to become what Gary Gorton calls "informationally insensitive" and to enjoy many of the economic features of money.
The pattern language framework explains not only how sophisticated contracts function, but also how they fail. The pattern language framework provides a lens for examining recent contracts law scholarship on the failures of sophisticated contract design, including "sticky" contract provisions in sovereign bond agreements, "Frankenstein" contracts in mortgage-backed securitizations, and the "flash crash." If modularity and contract design patterns foster the development of new financial instruments and markets, then their features can also contribute to the unraveling of these markets. For example, by restricting the information content of contracts, patterns and modularity not only midwifed the creation of liquid markets for those contracts, they also played a role in "shadow bank runs" and the catastrophic freezing of these markets. The failure of contracts can have systemic effects for entire markets when a particular contract enjoys widespread use or when it is so connected to other critical contracts that cascading failures occur.
This essay was a contribution to a symposium for Larry Cunningham’s book, Contracts in the Real World.
The Section on Transactional Law and Skills is still emerging, but we have another great program this year ...
Researching and Teaching Transactional Law and Skills in an Increasingly Global World
Moderator: Brian JM Quinn, Boston College Law School
Deborah Burand, The University of Michigan Law School
John C. Coates, IV, Harvard Law School
Claire M. Dickerson, Tulane University School of Law
Juliet M. Moringiello, Widener University School of Law
Marco Ventoruzzo, Pennsylvania State University, The Dickinson School of Law
Stephen Zamora, University of Houston Law Center
The business world is facing continuing challenges related to globalism and cross-border open electronic access through the Internet. Many transactions cross national borders and almost all – including traditional goods and services purchase orders and real property transactions – have international significance. Some legal structures have begun to encompass international business supervision and enforcement efforts, while others remain grounded in traditional nation-state-based regulatory systems. As a result of these changes in the market for business transactions, international and comparative law scholarship has broadened to include a robust and growing business transactional element. All of these changes have increased our challenge as legal scholars and instructors in educating our students in the theory, policy, doctrine, and skills that they will need as participants in the transactional business law setting.
This two-part panel features (1) two academic paper presentations on international, comparative, or cross-border transactional law topics culled from a Call for Papers, and (2) an expert panel of law teachers commenting on the program theme, implemented in a roundtable discussion format with a moderator, focusing on transactional law scholarship and teaching in this current, dynamic business transactional environment.
A note from Joan Heminway, chair of the Section on Transactional Law and Skills:
Cynthia Adams, Patricia Lee, and Afra Afsharipour are working on our second section newsletter. We would like to include in the newsletter transactional law news and a list of recent transactional law or skills books, book chapters, and articles. Accordingly, please send us any information you may have about, e.g.:
(i) new developments at your law school in transactional law or skills, such as the establishment of a new transactional law curriculum or the hiring of new scholars in the field;
(ii) highlights from 2012 transactional law events or conferences or announcements about upcoming 2013 transactional law events or conferences; and/or
(iii) a list of recent papers or other publications (theoretical, empirical, doctrinal, pedagogical, etc.) that, defined broadly, relate to transactional law or skills.
Thanks, in advance, for your submissions. I look forward to seeing many of you in New Orleans in January.
As in a bad horror movie (or a great Rolling Stones song), observers of the current crisis may have been disquieted that one of the central characters in this disaster also played a central role in the Enron era. Is it coincidence that special purpose entities (SPEs) were at the core of both the Enron transactions and many of the structured finance deals that fell part in the Panic of 2007-2008?
Bill Bratton (Penn) and Adam Levitin (Georgetown) think not. Bratton and Levin have a really fine new paper out, A Transactional Genealogy of Scandal, that not only draws deep connections between these two episodes, but also traces back the lineage of collateralized debt obligations (CDOs) back to Michael Millken. The paper provides a masterful guided tour of the history of CDOs from the S&L/junk bond era to the innovations of J.P. Morgan through to the Goldman ABACUS deals and the freeze of the asset-backed commercial paper market .
Their account argues that the development of the SPE is the apotheosis of the firm as “nexus of contracts.” These shell companies, after all, are nothing but contracts. This feature, according to Bratton & Levin, allows SPEs to become ideal tools either for deceiving investors or arbitraging financial regulations.
Here is their abstract:
Three scandals have fundamentally reshaped business regulation over the past thirty years: the securities fraud prosecution of Michael Milken in 1988, the Enron implosion of 2001, and the Goldman Sachs “Abacus” enforcement action of 2010. The scandals have always been seen as unrelated. This Article highlights a previously unnoticed transactional affinity tying these scandals together — a deal structure known as the synthetic collateralized debt obligation (“CDO”) involving the use of a special purpose entity (“SPE”). The SPE is a new and widely used form of corporate alter ego designed to undertake transactions for its creator’s accounting and regulatory benefit.
The SPE remains mysterious and poorly understood, despite its use in framing transactions involving trillions of dollars and its prominence in foundational scandals. The traditional corporate alter ego was a subsidiary or affiliate with equity control. The SPE eschews equity control in favor of control through pre-set instructions emanating from transactional documents. In theory, these instructions are complete or very close thereto, making SPEs a real world manifestation of the “nexus of contracts” firm of economic and legal theory. In practice, however, formal designations of separateness do not always stand up under the strain of economic reality.
When coupled with financial disaster, the use of an SPE alter ego can turn even a minor compliance problem into scandal because of the mismatch between the traditional legal model of the firm and the SPE’s economic reality. The standard legal model looks to equity ownership to determine the boundaries of the firm: equity is inside the firm, while contract is outside. Regulatory regimes make inter-firm connections by tracking equity ownership. SPEs escape regulation by funneling inter-firm connections through contracts, rather than equity ownership.
The integration of SPEs into regulatory systems requires a ground-up rethinking of traditional legal models of the firm. A theory is emerging, not from corporate law or financial economics but from accounting principles. Accounting has responded to these scandals by abandoning the equity touchstone in favor of an analysis in which contractual allocations of risk, reward, and control operate as functional equivalents of equity ownership, and approach that redraws the boundaries of the firm. Transaction engineers need to come to terms with this new functional model as it could herald unexpected liability, as Goldman Sachs learned with its Abacus CDO.
The paper should be on the reading list of scholars in securities and financial institution regulation. The historical account also provides a rich source of material for corporate law scholars engaged in the Theory of the Firm literature.
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The AALS Section on Transactional Law and Skills will meet during the AALS Annual Meeting in New Orleans, Louisiana, from 1:30 pm – 3:15 pm on Saturday, January 5, 2013. Please note this program in your calendar. We hope to see you there.
We are soliciting papers for presentation at the Annual Meeting. The topic for this year’s session is: Researching and Teaching Transactional Law and Skills in an Increasingly Global World.
Two presenters will be chosen on the basis of paper summaries submitted in response to this Call for Papers. The topic encompasses the scholarship and teaching of international and comparative transactional law and cross-border transactions. The Executive Committee encourages submissions on a broad range of transactional law and skills issues related to this year’s topic. Paper proposals focused on the teaching of international and comparative transactional law and skills are welcomed, but the Executive Committee is especially interested in papers that explore international and cross-border transactions from an empirical, doctrinal, or theoretical perspective. The Executive Committee specifically encourages submissions from junior scholars.
If you are interested in presenting a paper, please submit a summary of no more than three double-spaced pages, by e-mail, on or before Monday, July 30, 2012. You also may submit a complete draft of your paper. Send your submission to Joan Heminway at The University of Tennessee College of Law (email@example.com). Papers will be reviewed and selected for presentation at the program by members of the Executive Committee of the Section on Transactional Law and Skills:
Afra Afsharipour, Treasurer (U.C. Davis)
Eric Gouvin, Chair-Elect (Western New England)
Joan Heminway, Chair (Tennessee)
Lyman Johnson (Washington and Lee/St. Thomas)
Therese Maynard (Loyola Los Angeles)
Gordon Smith, Secretary (BYU)
Tina Stark, Past Chair (Boston University)
Authors of accepted papers will be notified by August 31, 2012. Please pass this Call for Papers along to any colleagues who may be interested.
Here is a highly productive way for business law professors to procrastinate from grading exams:
The National Bureau of Economic Research just circulated a new version of a paper that provides a medieval complement to the law & finance literature and to Gilson's lawyer as transaction cost engineer idea. The paper by Davide Cantoni and Noam Yuchtman presents evidence that the training of commercial lawyers by new universities contributed to the expansion of economic activity in medieval Germany. Here is the abstract:
We present new data documenting medieval Europe's "Commercial Revolution'' using information on the establishment of markets in Germany. We use these data to test whether medieval universities played a causal role in expanding economic activity, examining the foundation of Germany's first universities after 1386 following the Papal Schism. We find that the trend rate of market establishment breaks upward in 1386 and that this break is greatest where the distance to a university shrank most. There is no differential pre-1386 trend associated with the reduction in distance to a university, and there is no break in trend in 1386 where university proximity did not change. These results are not affected by excluding cities close to universities or cities belonging to territories that included universities. Universities provided training in newly-rediscovered Roman and Canon law; students with legal training served in positions that reduced the uncertainty of trade in medieval Europe. We argue that training in the law, and the consequent development of legal and administrative institutions, was an important channel linking universities and greater economic activity.
A very interesting read.
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Some of you may have been planning to attend the Boston University Transactional Conference, which was scheduled for November 2nd and 3rd of this year. Please note that the conference has been cancelled, and a new date is not anticipated.
This semester, Afra Afsharipour (UC Davis) and I are organizing a virtual workshop featuring transactional law scholarship. Unlike the many workshops on law and economics or other topics that are housed in particular law schools, this workshop is independent of any particular law school. We meet online every other week, and scholars present working papers to a group of ten core faculty via video conference technology. It's an experiment in low-cost scholarly community building, and while the technology is not perfect, I was encouraged by our first session on January 13.
In that session, Brian Quinn (BC) presented his working paper, Putting Your Money Where Your Mouth Is: The Performance of Earnouts in Corporate Acquisitions. Brian tests the claim that earnouts are a contractual response to adverse selection in corporate acquisitions. The empirical data in the paper is available because of the disclosure of fair value accounting data now required by the Financial Accounting Standards Board. Brian concludes, "Rather than resolve the problem of adverse selection, earnouts are probably better explained by an alternative hypothesis: that they resolve the problem of uncertainty present in corporate acquisitions."
If you are interested in transactional scholarship, this paper is worth a read.
Tina Stark is leaving the academy, and Boston University is looking for a new Director for the Transactional Law Program. The position annoucement is here.
The only negative from the first meeting of the Section on Transactional Law and Skills this afternoon was the absence of Section Chair Tina Stark, who was unable to attend. Tina provided the energy and leadership for the creation of this new section. We are all indebted to her, and we missed her today.
The section meeting had two parts. First, two speakers who were selected from the call for presentations described their efforts in transactional education. Carol Morgan talked about corporate counsel externships at the University of Georgia, and she rekindled my interest in this form of transactional education. When I interviewed for my first academic job in 1993, I talked about the need to bring transactional training to law students, and shortly after arriving at Lawis & Clark, I created the "Clinical Internship Seminar: Corporate Counsel," which seems similar to the Georgia externship program. It's a great context for students to learn something about business and law.
Karl Okamoto followed by describing his incredible LawMeets competitions, MiniMeets tools, and ApprenNet program. I am not sure if I can claim to have been there at the creation, but I remember Karl floating some of these ideas at a dinner just three or four years ago, and I am astounded by the amount of progress he and his team have made. You can read more about all of this in The National Law Journal. After hearing Karl's presentation, I have decided to use a couple of his MiniMeets in my Business Associations course this next semester. If you want to include some transactional lawyering in one of your courses, I know he would be eager to discuss his products.
In the second part of the program, I moderated a panel discussion on "Getting it Done." Law schools have embraced the teaching of transactional skills, but many questions remain about how best to execute this strategy, and this panel featured people who were implementing transactional training on a grand scale. Scott Burnham of Gonzaga described the first-year Transactional Skills and Professionalism Lab; Jim Moliterno of Washington and Lee discussed transactional immersion and other components of that school's well-known third-year program; Bob Rasmussen of USC talked about the importance of interprofessional education for business lawyers and efforts at USC to encourage such training; and Janet Thompson Jackson related her experiences as transactional clinician at Washburn. The panelists were uniformly excellent.
While we touched on many subjects during the panel session, one point of emphasis among the panelists and the audience was the importance of adjunct professors. Eric Gouvin referred us to his ABA Report on Best Practices Report on the Use of Adjunct Faculty, which is essential reading for academic deans and others who work with adjunct professors. Eric noted that the ABA encourages law schools to employ adjunct professors. While that is true, the AALS has a membership requirement limiting the use of adjunct professors. My sense is that this requirement is not well known among law professors who have no experience in administration. AALS Bylaw 6-4(d) provides:
In each division of a member school's program, each student shall have the opportunity to obtain substantially all of his or her instruction leading to the Juris Doctor degree from the school's full-time faculty.
The interpretation of this bylaw appears in Executive Committee Regulation 6-4.1:
Full-time Faculty Requirement. A member school demonstrates compliance with Bylaw 6-4(d) if in each division of its program, the school's full-time faculty offer at least two-thirds of the credit hours or student-contact hours leading to the J.D. degree. (emphasis added)
Most plans for increasing transactional training rely heavily on the use of adjunct professors, but truly ambitious programs run the risk of pushing a school into dangerous territory with regard to this provision. I hope the AALS' emphasis on full-time faculty is not merely a protectionist measure from law professors. In any event, if we are serious about encouraging experiential learning during law school, the Executive Committee will need to revist this interpretation.
The emphasis of this year's program was on transactional education, and I think it was terrific. Tina should be proud. However, I know that Tina, our new chair Joan Heminway, and the other officers and executive committee members of the Section are committed to the promotion of transactional scholarship, too. If you are interested in transactional teaching or scholarship, I hope you will support this Section.
The Third Annual Transactional Lawyering Meet is expanding to five cities with regional rounds being held on February 17, 2012. The national championships will be hosted by the Earle Mack School of Law at Drexel University in Philadelphia on March 29 and 30th. The Transactional Lawyering Meet is a novel “moot court” experience for law students interested in transactional practice. For more information, go to www.lawmeets.com or contact Professor Karl Okamoto at firstname.lastname@example.org.