The America Invents Act requires the study of the positive and negative effects of patent assertion entities (“PAEs”) on the economy. This report provides one account of these impacts, as they are experienced by young technology companies. How patent demands impact startups is critical because they are a vital source of innovation and new jobs,3 and whether patents hurt or help is fiercely debated. In addition, little attention has been paid to date to the distributional impacts of PAE suits. Small companies and startups are more vulnerable to failure than large, well-established companies, and the consequences of this vulnerability are not well understood. To assess the impact of trolls on startups, I analyzed a comprehensive database of patent litigations from 2005 to the present, conducted a non-random survey of 223 tech company startups, and interviewed nearly twenty subjects with relevant knowledge of startup patent issues.
