Yet another believer in the Just world hypothesis...

As Cardinal Richelieu said[1] about 400 years ago: Give me six lines written by the most honest man in the world, and I will find enough in them to hang him

1. the attribution of this quote is disputed

In this case, I believe the threat was twofold. They'd drag out proceedings so that we couldn't have afforded to make it to a judgment. But they'd also threaten to cancel a deal with one of our other large customers if they didn't cancel with us. Knowing basically our customer list and how much those customers paid for the software, it wasn't much work to infer the company's somewhat tenuous financial situation. They guessed, correctly, that we'd drop it rather than risk the company's future on a successful lawsuit that, win or lose, would likely mean the loss of a significant customer.

There was nothing we'd done as a company that was actionable.

I wouldn't assume so: a larger company can afford to sink a lot more money into litigation, so they could effectively bleed the small company dry defending even a frivolous lawsuit.

Patent trolls are one example of this - where they may deliberately select weaker defendants (instead of going after the bigco "infringers") so ensure they hold the upper hand in the financial power imbalance.

I was only kidding. You can say that of any profession.

Some day people will say the same of software engineers.