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Publications
  • 2017
  • Working Paper
  • HBS Working Paper Series

Patent Trolls and Small Business Employment

By: Ian Appel, Joan Farre-Mensa and Elena Simintzi
  • Format:Print
  • | Language:English
  • | Pages:53
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Abstract

We analyze how frivolous patent-infringement claims made by “patent trolls” affect small firms’ ability to create jobs, raise capital, and survive. Our identification strategy exploits the staggered passage of anti-patent-troll laws at the state level. We find that the passage of this legislation leads to a 2% increase in employment at small firms in high-tech industries, which are a frequent target of patent trolls. By contrast, the laws have no significant impact on employment at larger or non-high-tech firms. Anti-troll legislation is also associated with fewer business bankruptcies. Financing appears to be a key channel driving our findings: in states with an already established VC presence, the passage of anti-troll laws leads to a 19% increase in the number of firms receiving VC funding. Our findings suggest that measures aimed at curbing the litigation threat posed by patent trolls may play an important role in reducing both the real and financing frictions faced by small businesses.

Keywords

Patent Trolls; Patents; Small Business; Employment; Venture Capital

Citation

Appel, Ian, Joan Farre-Mensa, and Elena Simintzi. "Patent Trolls and Small Business Employment." Harvard Business School Working Paper, No. 17-072, February 2017.
  • SSRN
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More from the Authors

    • 2017
    • Faculty Research

    What Is a Patent Worth? Evidence from the U.S. Patent 'Lottery'

    By: Joan Farre-Mensa, Deepak Hegde and Alexander Ljungqvist
    • 2016
    • Faculty Research

    Patent Trolls and Small Business Employment

    By: Joan Farre-Mensa, Ian Appel and Elena Simintzi
    • February 2016
    • Review of Financial Studies

    Do Measures of Financial Constraints Measure Financial Constraints?

    By: Joan Farre-Mensa and Alexander Ljungqvist
More from the Authors
  • What Is a Patent Worth? Evidence from the U.S. Patent 'Lottery' By: Joan Farre-Mensa, Deepak Hegde and Alexander Ljungqvist
  • Patent Trolls and Small Business Employment By: Joan Farre-Mensa, Ian Appel and Elena Simintzi
  • Do Measures of Financial Constraints Measure Financial Constraints? By: Joan Farre-Mensa and Alexander Ljungqvist
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