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Patent Trolls and Small Business Employment

56 Pages Posted: 19 Dec 2016 Last revised: 22 Jul 2017

Ian Appel

Boston College - Carroll School of Management

Joan Farre-Mensa

Cornerstone Research

Elena Simintzi

University of British Columbia

Date Written: July 21, 2017

Abstract

We analyze how frivolous patent-infringement claims made by non-practicing entities (NPEs, or “patent trolls”) affect small firms’ ability to grow, create jobs, and raise capital. Our identification strategy exploits the adoption of anti-troll laws in 32 US states. We find the adoption of these laws leads to a 2% increase in employment at small high-tech firms—an increase driven by IT firms, a frequent target of NPEs. By contrast, the laws have no significant impact on employment at larger or non-high-tech firms. Financing is a key channel driving our findings: In states with an established VC presence, anti-troll laws increase the number of firms receiving VC funding by 14%. Our findings suggest measures aimed at curbing the threat posed by NPEs can help reduce both the real and financing frictions faced by small firms.

Keywords: employment, patent trolls, NPEs, venture capital

Suggested Citation

Appel, Ian and Farre-Mensa, Joan and Simintzi, Elena, Patent Trolls and Small Business Employment (July 21, 2017). Available at SSRN: https://ssrn.com/abstract=2887104 or http://dx.doi.org/10.2139/ssrn.2887104

Ian Appel (Contact Author)

Boston College - Carroll School of Management ( email )

Carroll School of Management
140 Commonwealth Avenue
Chestnut Hill, MA 02467-3808
United States

Joan Farre-Mensa

Cornerstone Research ( email )

Boston, MA 02115
United States
617-927-3014 (Phone)

Elena Simintzi

University of British Columbia ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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