When BigCo comes calling with their stack of patents demanding a license or profit share, you break out your few key patents and demand one back from them. BigCo has a lot more to lose compared to SmallCo.
SmallCo has little or no profit and little revenue so BigCo gets no money from them for patent infringement. BigCo has a bunch of money. If SmallCo has good patents BigCo will go away or make SmallCo a deal to avoid millions of dollars in damages or license fees BigCo would owe SmallCo for infringement.
IP litigators will take such cases on contingency.
If you don't have good IP you are a commodity.
IP is one of the very few areas wherein smaller companies can have any hope of leverage over larger ones.
That small companies are blocked from some other patents is an issue, but a lesser one - and it applies to big and small alike.
"whereas small companies without a large IP portfolio can't do anything without inadvertently violating someone's patent." - is plainly false.
Obviously, companies continue to innovate.
Large companies have much more to protect, and far from 'being safe' - IP laws make them more risk averse if anything because they put a lot more at risk than smaller one's.
Google has outright banned their employees from even downloading MongoDB etc. due to lack of clarity over licensing. Without IP protections, Google wouldn't care one bit what they did.
Large companies play against each other mostly in the domain of competition, without IP laws they would step on every smaller company like little ants, without any concern.
Leverage over another isn't the only way to compete.
If there was no IP, smaller companies would have alternatives such as blatantly copying the larger companies' better product features, while being nimbler to innovate with those ideas, and to blend features from different companies into a new product.
Not every small company would be good at that. But some would. Some smaller companies would have more ability to out-innovate incumbents.
Of course that already happens, but it could happen more freely without IP.
The smaller companies would still have the problem of being noticed, selling their products, and getting investor interest (which I'm told IP helps with), but those problems aren't new.
This is one of the most absurd and backwards claims I've seen on this site. Large companies are members of patent pools that prevent them from being sued by other members, whereas small companies without a large IP portfolio can't do anything without inadvertently violating someone's patent.