As part of the retreat, I had the pleasure of reading and discussing a paper entitled Entrepreneurial Litigation and Venture Capital Finance, by Doug Cumming, Bruce Haslem and April Knill. The paper focuses on a dilemma that I suspect many entrepreneurs face in the startup stage: whether to devote limited resources to litigation that might [...]]]> I attended the Fifth Annual Law and Entrepreneurship Retreat this week, and it was an interesting, inter-disciplinary discussion of all things entrepreneurial. The papers and debate focused not only on how the law shapes entrepreneurial conduct, but also how entrepreneurial conduct and innovation might reshape the law. (As I noted in a previous post, whether lawyers have the entrepreneurial spirit that often facilitates innovation is a separate question that some debate.)

As part of the retreat, I had the pleasure of reading and discussing a paper entitled Entrepreneurial Litigation and Venture Capital Finance, by Doug Cumming, Bruce Haslem and April Knill. The paper focuses on a dilemma that I suspect many entrepreneurs face in the startup stage: whether to devote limited resources to litigation that might be necessary to protect and preserve key rights for the company (see, e.g., here). These rights might concern intellectual property, contracts, employees or other aspects of the entrepreneur’s nascent business. Initiating litigation may consume all of the company’s resources and make it less attractive to a venture capitalist; but losing the subject rights may force the company out of business. Entrepreneurial Litigation presents empirical data to guide entrepreneurs and venture capitalists in this decision-making process.  (For an interesting study of the other side of this equation and how litigation impacts venture capitalist reputation, see here.)

Although not the focus of Entrepreneurial Litigation, the paper also highlights the significant risk and uncertainty inherent in any entrepreneurial venture. Having a big idea is not enough; a lot can happen as an entrepreneur tries to get that idea to market. Litigation is just one of these risks. But certainly instituting litigation to protect a patent or challenge the application of an existing law to the entrepreneur’s product or business model is not cheap. Litigation can easily consume a large portion of an entrepreneur’s working capital.  (For some perspectives on entrepreneurs and litigation, see here and here.) And if the firm folds, a competitor may get the benefit of its innovation and proactive legal strategy—adding insult to injury.

I am not sure that most people appreciate this inherent risk. Certainly entrepreneurs and venture capitalists living this risk cycle do, but I suspect others associate entrepreneurship with Bill Gates, Mark Zuckerberg, Biz Stone and other success stories. It looks so easy in the movies. Given the importance of entrepreneurs and startups to our economy, I am excited that academics and industry organizations are devoting resources to the role that law plays in entrepreneurial ventures.

ROBIN MALLOY

Law and Entrepreneurship offers many opportunities for interdisciplinary work and for finding common ground among the various categories of property (real, personal, intangible, cultural, IP, etc.) The recent Conference at Wisconsin [...]]]> I recently wrote about the Creativity, Law and Entrepreneurship Workshop at the University of Wisconsin in which I participated. One of the speakers, Robin Malloy who is the E.I. Chair and Distinguished Professor of Law at Syracuse University College of Law,  emailed me and about the ideas he presented. I am quite interested Robin’s ideas and approaches to this area of the law, so I asked whether he would mind writing a short piece to share with our readers. He was gracious enough to agree. So I am pleased to offer Robin Malloy:

ROBIN MALLOY

Law and Entrepreneurship offers many opportunities for interdisciplinary work and for finding common ground among the various categories of property (real, personal, intangible, cultural, IP, etc.) The recent Conference at Wisconsin on Creativity, Law and Entrepreneurship highlighted this exciting possibility. In thinking about property transactions and entrepreneurship I believe there are at least four central starting points, all of which can be expanded. 1) It is important to get beyond definitions of property and look at what we can do with property… to look at transactions in exchange (asking not just what is property but also, and more importantly, what can we do with property). And from the perspective of market exchange theory asking how we capture and create value from transactions in property. 2) Entrepreneurship requires us to develop a more complex vocabulary. We need to start thinking about a variety of types of entrepreneurship instead of always dealing in an abstract sense with just one big category called “entrepreneurship”, as if all entrepreneurship is of the same type or kind. We need to develop more nuanced categories of entrepreneurship based on different observable patterns of behavior and motivations as they might relate to different types of transactions and different categories of property. 3) Creativity is key to entrepreneurship and this requires us to incorporate a theory of interpretation because creativity requires both an understanding of current boundaries of meaning and a recognition of a possibility for setting new boundaries. Recognizing something as new, of course, requires a cultural-interpretive reference point and, thus, interpretation theory is key to understanding a set of given relationships and to imagining the potential for something new and different. 4) The relationship between law and entrepreneurship requires a dynamic approach to market theory. Traditional efficiency analysis is not entirely helpful since it is really a status quo analysis with little application to creativity. Efficiency is directed at thinking about ways of allocating already known resources and not about the market conditions under which creativity, innovation, and discovery are best facilitated. This means that there is a need to think creatively about the meaning of markets and the tools we use to understand law in a market context.