Or it’s inevitable---the threat of litigation is enough to trigger the link
Appel et al 18 (Ian Appel is a professor at UVA Darden, Joan Farre-Mensa is a professor of Finance at the University of Illinois at Chicago and Elena Simintzi is a research fellow at Centre for Economic Policy Research and professor of business at University of North Carolina (UNC) at Chapel Hill, July 22, 2018, “Patent Trolls and Startup Employment”, http://dx.doi.org/10.2139/ssrn.2887104)
Our study joins a growing literature that analyzes the economic consequences of NPEs. Cohen, Gurun, and Kominers (2017) show that, when suing public firms, NPEs tend to target those that are cash rich, leading to a substantial decrease in their innovative activities. Tucker (2014) and Smeets (2015) also find a decline in innovation at firms sued by NPEs. Our study differs from previous papers in two distinct ways. First, prior work has focused on analyzing the effects of being sued by an NPE. Lawsuits are the main tool NPEs have when targeting large, public firms (as in in Cohen et al.’s and Smeets’s samples). Crucially, our findings indicate that the simple threat of litigation expressed via the frivolous demand letters anti-troll laws aim to curtail can disrupt the operations of startups. Second, prior studies examine the consequences for firms that have been directly targeted by NPEs. By contrast, our empirical setting captures both the realized and expected effects of frivolous NPE demands by analyzing legal changes that reduce the risk any firm in a state faces of being targeted by such demands.