Cornell Law Review Volume 98 Issue 6

Carrots and Sticks: How VCs Induce Entrepreneurial Teams to Sell Startups

Venture capitalists (VCs) usually exit from their investments in a startup via a trade sale. But the startup’s entrepreneurial team—the startup’s founder, other executives, and common shareholders—may resist a trade sale. Such resistance is likely to be particularly intense when the sale price is low relative to the VCs’ liquidation preferences. Using a hand-collected dataset [...]

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Reviving the Paper Patent Doctrine

One of the most interesting developments in patent law during the last century is the catastrophic collapse of the paper patent doctrine, which had authorized courts to discriminate against patents that were never successfully practiced by their patentees. The doctrine’s demise opened the door for the dramatic and controversial rise in patent litigation by “nonpracticing [...]

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Liquidation Rights and Incentive Misalignment in Start-Up Financing

This Article analyzes how the accumulation of liquidation rights in a start-up can result in a suboptimal contract among the company’s investors and its management team. Liquidation rights determine the allocation of the proceeds when a start-up is sold. Because a sale is the most common form of exit for investors, these rights are a [...]

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Monte Carlo Simulation of Contractual Provisions: An Application to Default Provisions in Venture Capital Limited Partnership Agreements

This Article has two main components: methodological and substantive. Methodologically, it develops a new way of measuring and coding the financial impact of contractual, statutory, and regulatory variables through Monte Carlo simulations. The simulation approach develops a measure of value by putting a hypothetical party in a realistic environment and asking how much this party [...]

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The Right Not to Use in Property and Patent Law

In Continental Paper Bag Co. v. Eastern Paper Bag Co., the Supreme Court held (1) that patent owners have an absolute right not to practice their patent and (2) that even these nonpracticing patent owners are entitled to the liberal use of injunctive relief against infringers. Both of these holdings have been very important to [...]

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Law and Entrepreneurial Opportunities

In his book Siberia Bound, Minnesota-native Alexander Blakely details his five years living and working in postcommunist Siberia in the mid-1990s. Blakely was motivated to bring capitalism to a place where it had not existed. During Blakely’s time in Siberia, he and his Siberian business partner “Sasha” engaged in numerous entrepreneurial ventures that included selling [...]

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Redrawing the Public-Private Boundaries in Entrepreneurial Capital Raising

Congress enacted the Jumpstart Our Business Startups (JOBS) Act in 2012 amidst a perceived crisis in entrepreneurial capital raising. The number of initial public offerings (IPOs)—long the gold standard for capital raising by successful emerging companies—has dropped off considerably in the last decade. Companies not yet large or successful enough to consider an IPO complain [...]

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