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Abstract

We study the relationship between patent protection and the performance of software startups. Our empirical approach exploits the U.S. Supreme Court’s 2014 decision in Alice Corp. v. CLS Bank Int’l, which restricted the patentability of many software inventions. Using detailed data on venture capital financing and startup outcomes, we estimate difference-in-differences models comparing firms with greater and lesser exposure to the decision. We find no evidence that startups more exposed to Alice experienced worse financing outcomes, growth, or exit probabilities. These results suggest that restrictions on software patentability had little effect on venture-backed software startups