Patent Trolls and Startup Employment

68 Pages Posted: 19 Dec 2016 Last revised: 17 Oct 2018

See all articles by Ian Appel

Ian Appel

UVA Darden

Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance

Elena Simintzi

Centre for Economic Policy Research (CEPR); University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School

Date Written: July 22, 2018

Abstract

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

Suggested Citation

Appel, Ian and Farre-Mensa, Joan and Simintzi, Elena, Patent Trolls and Startup Employment (July 22, 2018). Available at SSRN: https://ssrn.com/abstract=2887104 or http://dx.doi.org/10.2139/ssrn.2887104

Ian Appel (Contact Author)

UVA Darden ( email )

United States

Joan Farre-Mensa

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States

Elena Simintzi

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of North Carolina (UNC) at Chapel Hill - Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States

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