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Innovation Clinic - Significant Achievements for 2022-23

The 2022-2023 academic year was another highly successful academic year for the Innovation Clinic. We had our largest enrollment yet—16 Innovation Clinic students. They completed approximately 25 projects and represented clients in a very broad range of industries: medical device developers, SaaS platforms, AI-powered products in healthcare, adoption, art and music, hospitality, security, digital tokens, health insurance, consumer products, news, food and beverage, finance, and more. The matters that the students handled gave them an unparalleled view into the emerging companies and venture capital space, at a level of complexity and agency that most junior lawyers will not experience until several years into their careers, and that is not available at most peer law schools. One attorney commented that we might be the only experiential ed program in the country that is seriously tackling startup regulatory work of the type that we do.

The Innovation Clinic’s goal is to equip students with the knowledge that they need to be the primary client point of contact on all transactions. This means that we take “learning by doing” to the extreme—students are asked to become experts on brand new topics in just a couple of weeks when they join the program so that they can lead all client calls with minimal instructor intervention. They are tasked with preparing first drafts of all documents, incorporating all instructor and client feedback, handling logistics on all transactions, and contacting and interfacing with regulators where relevant, sometimes on a no-names, exploratory basis and other times in an advocate role. In doing so, they develop extraordinarily valuable skills that will serve them well in the future. They develop the skills required to translate very complicated legal jargon into plain English and to coach and advise clients to make the best decisions for their companies taking into account all risks and benefits, and to understand the complicated technical aspects of our clients’ businesses in order to effectively advise them, in addition to basic transactional drafting skills. They also learn to interact with subject matter experts in an efficient, professional manner to supplement the services that the Innovation Clinic provides to its clients. Students leave the Innovation Clinic performing at a level well above their seniority, with a sense of self-sufficiency and confidence that enables them to tackle the biggest challenges of startup legal practice. We receive feedback nearly weekly that our students are talented, capable, and in demand! In fact, some of our clients even hire students to work for them full-time after graduation, or as fellows for summer work before they begin their law firm roles.

While the Innovation Clinic’s engagements are highly confidential and so we cannot describe them in detail, a high-level description of a representative sample of projects undertaken by the Innovation Clinic this year includes:

Transactional/Commercial Work

  • Formation of a new startup venture studio. This included equity arrangements for the employees and owners of the studio itself, employee leasing arrangements between the studio employees and startups to which they were assigned to work, and forms of documents to be used to form entities to house the startup concepts once the startups are ready to graduate from the programming and seek institutional capital. This matter gave students critical insight into startup product and company development processes as well as the early-stage investor mindset.
  • Assisted a medical device startup company on its entity formation, acceleration of vesting schedules for founders, removal of an original founder, and addition of its first independent director.
  • Represented an internet platform that supports independent artists by creating short films featuring the artists to promote their work, and facilitating sales of the artists’ art through its platform including through co-design arrangements, on its conversion from an LLC to a C corporation, to facilitate future fundraising efforts. Students had the experience of determining how existing documentation might limit (or not) the structure of a future transaction, learned about how tax can drive business decisions, and spent much time working with relevant regulators and third parties to accomplish the transaction. Another team of students assisted the same client by putting together two forms of agreements for use with the artists featured on the platform, one that contemplated only that the platform would create and promote content featuring the artist and sell art that the artist had already generated, and another contemplating that the platform would additionally co-design and partially fund capsule collections with the artist that could be sold exclusively on the platform. Students gained a strong appreciation for copyright law, operational aspects of an e-commerce business with no fixed location, and the balance between a contract that appropriately mitigates risk and one that will scare an unsophisticated counterparty away from a transaction.
  • Represented a company that developed a proprietary nanoemulsion that masks the taste, and enhances the effectiveness, of cannabinoid powder in food and beverage products on their conversion from an LLC to a corporation. Students received a very similar experience to the project above, with the added wrinkle of handling patent assignments and a much broader array of communications with and obtaining consents of third parties like existing commercial partners and investors.
  • Represented a platform aiming to serve as a one-stop-shop for short-term rental users to arrange services for their short-term rental like photography, cooking, babysitting, drivers, and the like, by preparing a form of agreement for use with service providers and drafting terms of service and a privacy policy for the service.
  • Assisted the founders of an AI-powered platform for patients with chronic disease to track, manage, and predict symptom flareups in discussing and ultimately reaching a deal among them with respect to roles and equity that was more appropriate for the company than what they had adopted through an automated tool including to contemplate a reconfiguration of the time each founder spent on the company. Students then drafted all documentation necessary to operationalize the new arrangement.
  • Drafted terms of service and a privacy policy and a form of customer agreement for a novel financial literacy SaaS startup.

Regulatory Research and Advice

  • Performed regulatory research for a novel platform facilitating connections between potential adoptive parents and birth parents thinking of adopting to advise as to how the platform could advertise without violating state laws around human trafficking that were never intended to encompass such a platform, and the scope of services that the platform could provide under various licenses in such states.
  • Advised an internet security company that contemplated issuing tokens to various third-party commercial relationships as to how to structure those tokens so that they were not securities in compliance with the no-action letters issued by the Securities Exchange Commission in Turnkey Jet, Pocketful of Quarters, and IMVU.
  • Performed regulatory research on current law regarding ERISA preemption of state health insurance stop-loss regulations to analyze whether a particular regulatory strategy contemplated by the client was likely to be successful, and created a different regulatory strategy for the client as a result of the research.
  • Researched Food & Drug Administration and Federal Trade Commission standards for food and beverage products making various nutrient and health claims both in their advertising and on their nutrition facts and ingredients labels to advise a client developing a novel form of electrolyte mix as to such standards to inform its advertising and product design.

Miscellaneous

  • In the spring of 2022, Innovation Clinic students submitted a comment to the Financial Crimes Enforcement Network (“FinCEN”) in response to its Notice of Proposed Rulemaking implementing the Corporate Transparency Act. The Innovation Clinic’s comment focused on aspects of the proposed regulations that would be either impossible for startups to comply with, or particularly onerous for startups as opposed to other types of small business. When FinCEN published its final rule in September 2022, the majority of the Innovation Clinic’s comments and suggestions were incorporated, and FinCEN further meaningfully responded to our remaining proposals in its notice accompanying the final rule, explaining why the other proposals were not adopted, or providing guidance as to how to interpret the language that was not changed but on which we commented in order to better advise startups. Our students have thus meaningfully impacted corporate law before even graduating. This year’s students built upon that progress to create a client alert summarizing the final rule, its impact on startups, and what startups need to know in order to comply, so that the Innovation Clinic can alert its current and former clients to these issues and potentially provide representation to them with respect to the required FinCEN filings. The Director of the Innovation Clinic has also been invited to speak at conferences such as the Transactional Clinicians Conference to shed light on issues that compliance presents for clinical legal practice.
  • We continued our partnership with Gunderson Dettmer, in which the firm sends students legal topics and questions on which some of its non-specialist lawyers aren’t well versed so that students can prepare educational materials for the lawyers on those topics. This year, one student prepared an excellent memorandum summarizing the development of open-source software, and key business and legal issues surrounding open-source software. Another pair of students prepared a memorandum regarding the Committee on Foreign Investment in the United States and issues that corporate and startup lawyers should be aware of as it pertains to cross-border transactions, including a summary of the Biden Administration’s expansion of the Committee’s authority and focus areas for Committee transaction review. These projects are a great opportunity for students to experience first-hand what it is like to educate non-specialist lawyers as a specialist within a team.
  • Students continued to present at various programs sponsored by the Polsky Center for Entrepreneurship and Innovation, mHub, and others on topics such as entity formation, intellectual property considerations for startups, and negotiation basics.

In addition to the impactful and meaningful work that the Innovation Clinic performs for its clients, we also enjoy a highly beneficial relationship with alumni who are willing to share their time and experience with current students. Of course, a huge component of that is our Innovation Trek, initially held over Spring Break 2022. We are pleased to share that we have successfully secured another generous gift from Douglas Clark, ’89, Managing Partner of Wilson, Sonsini, Goodrich & Rosati, to put on the Innovation Trek again over Spring Break 2024, and to take twice the number of students and make the trek a full day longer than what we originally accomplished in 2022. We are thrilled with this news and very much look forward to deepening the connections we have fostered with our alumni in the Bay Area, and thank Doug for his support. If you are interested in participating, please do reach out! More immediately, we were fortunate this year to be joined by fabulous guest speakers who added context and color to our seminar component, including Brooke Fallon of Trust Ventures who came to speak about regulatory challenges that disruptive startups face.

The feedback we receive from clients continues to glow. They are consistently impressed and amazed that the students are so hard-working, talented, and thoughtful given that their legal careers have only just begun. For example, one of our clients, who had worked with major international law firms in the past and whose parents were also sophisticated lawyers, said that their other counsel and parents could not believe that they were getting this caliber of legal services for free. Word of mouth has certainly spread—in any given quarter, the Innovation Clinic is only ultimately able to accommodate 10-15% of the work that is requested of it by prospective clients. We hope to eventually grow the program to serve more of this need.

The Innovation Clinic is grateful to all of its clients for continuing to provide its students with challenging, high-quality legal work. Our clients are breaking the mold and bringing innovations to market that will improve the lives of people around the world in numerous ways. We are glad to aid in their success in any way that we can. We look forward to another productive year in 2023-2024!