Patent Trolls and Startup Employment
68 Pages Posted: 19 Dec 2016 Last revised: 5 Aug 2018
Date Written: July 22, 2018
We analyze how frivolous patent-infringement claims made by non-practicing entities (NPEs, or "patent trolls") affect startups' ability to grow and create jobs, innovate, and raise capital. Our identification strategy exploits the staggered adoption of anti-troll laws in 32 U.S. states. The laws lead to a 4.4% increase in employment at high-tech startups—an increase driven by IT firms, a frequent target of NPEs. Increased access to financing, both venture capital and patent-backed lending, is a key channel driving our findings. Measures aimed at curbing the threat posed by NPEs can thus help reduce the real and financing frictions faced by startups.
Keywords: employment, startups, patent trolls, NPEs, venture capital
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