Introduction

Hello and welcome to CS01 a case study in Term Sheet Negotiation. This is the Instructor’s guide. I thought I would provide some background on how and why this case study came to be.

This case study started life as a client project in the University of Wisconsin’s Law & Entrepreneurship Clinic. Years ago (2015/2016, maybe?) a Professor on-campus came to us and asked if we would help him review a term sheet he had been given by the Wisconsin Alumni Research Foundation (“WARF”). This was one of the very first projects that WARF was going to take an ownership interest in a campus-based startup using technology owned and licensed by WARF. We agreed to help him. We had an attorney in our office supervise a student who: reviewed the term sheet, spoke with the client about the term sheet to better understand goals and motivations, redlined the term sheet for presentation by the client to WARF, and again spoke to the client about the changes that were made and the reasoning behind those changes. It was an excellent learning experience for everyone. So, shortly after, I took this case and turned it into a classroom negotiation simulation. A doctrinal professor teaching a corporate simulation class asked us to present the case study to his course and we did that for many years. It has been hugely successful here at UW Law School in helping students understand the basic mechanics of startups and term sheets and redlining and negotiations.

This term sheet in this case study is the actual term sheet offered by WARF at the time with very few changes (indeed, WARF’s current term sheet does not differ substantially). This case study as you see it, is largely as it has existed since it was first developed. The “technology” is abstract enough for our purposes that it continues to be relevant.

I have added to the negotiation simulation a second pitch “competition” component. This piece actually started life as different exercise that we had students in our clinic do. In the clinic we had a “Shark Tank” day where groups of 4-5 students were each assigned a Shark Tank video to watch. After watching the video, they would adopt that product as their own and develop their own pitch. Then, every group that wasn’t pitching would become “sharks” and ask questions of the pitching team. Each “shark” was allocated some amount of fake money ($50k actually) that they were required to invest in the other companies (or company) in any allocation they saw fit. We then discussed the pitches and the investment decisions. It was a fun, group bonding moment plus it helped the students to see entrepreneurship from their clients’ perspective and understand the issues that the client is thinking about instead of only seeing the legal issues. I adopted that exercise here and really broadened the case study a bit so that it might adapted in a business school or general entrepreneurship class in addition to a law school classroom.

Syllabus

With this in mind, then, this Instructor’s manual will be more general than if I were writing it specifically for a law school classroom. You will all take a different approach to teaching the material that might be relevant here. So, in the Syllabus section I will just attempt to outline the important issues presented and some general thoughts on how to approach these subjects. This is not a case study that can be presented early in the semester; it does require some amount knowledge on behalf of the participants about the concepts underlying it.

Source Documents and Resources

Similarly, in the normal case I would provide you with powerpoints and lecture notes for teaching these concepts. But, given how broad this case study is, and the breadth of contexts where it might be used, that approach won’t be terribly helpful. Thus, you will also find Source Documents and Resources that might be helpful in developing your own materials and were used in the creation of this case study.

The original case study and term sheet are also in the source-documents folder if you want to just run the base case study exercise.

A Note on AI

Finally, I fully expect students and teachers to use AI in the course of this case study. The modern practice of business and law uses AI, so it would be ridiculous to create a case study that did not assume its use. Moreover, I hope by explicitly including AI compenents, students and entrepreneurs will get a sense of the scope, scale, capabilities, and limitations of AI in making these kinds of legal and business decisions. As a teacher and leader of this case study, you should engage the students and entrepreneurs to think deeply about their use of AI in this case study. What was it good at? What was it not good at? Where were humans better? Where were we worse? What was unexpected about it? etc.