Patent Trolls and Small-Business Employment

  • 28 Feb 2017
  • Working Paper Summaries

by Ian Appel, Joan Farre-Mensa, and Elena Simintzi

Overview — Small businesses, a pivotal engine of practice and mercantile growth, have been hindered by a a attainment of “patent trolls,” organizations that possess patents though do not make or use them directly. Instead, they use their patentd to aim firms with patent-infringement claims. While these claims are mostly baseless, a elementary hazard of lawsuit can be a vital intrusion for a targeted firms’ operations, quite in a box of tiny firms. In response to a miss of congressional movement to quell trolls’ activities, 31 state legislatures, commencement with Vermont in 2013, have upheld state laws to extent obvious trolls’ ability to aim internal firms with bad-faith patent-infringement claims. This paper provides a initial research of a effects of these state anti-patent-troll laws.

Author Abstract

We investigate how whimsical patent-infringement claims done by “patent trolls” impact tiny firms’ ability to emanate jobs, lift capital, and survive. Our marker plan exploits a staggered thoroughfare of anti-patent-troll laws during a state level. We find that a thoroughfare of this legislation leads to a 2% boost in practice during tiny firms in high-tech industries, that are a visit aim of obvious trolls. By contrast, a laws have no poignant impact on practice during incomparable or non-high-tech firms. Anti-troll legislation is also compared with fewer business bankruptcies. Financing appears to be a pivotal channel pushing a findings: in states with an already determined VC presence, a thoroughfare of anti-troll laws leads to a 19% boost in a series of firms receiving VC funding. Our commentary advise that measures directed during curbing a lawsuit hazard acted by obvious trolls might play an critical purpose in shortening both a genuine and financing frictions faced by tiny businesses.

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