Poison Pills Targeting Activists Push Judges to Draw New Lines

An emerging use for so-called poison pills is yielding a wave of court cases asking judges to reconsider how companies can deploy them.

A wave of recent lawsuits has raised questions about the shift in strategy, decades after the device emerged as a staple of corporate defensive posturing in the heyday of hostile raids from heavyweight buyout firms. Formally called shareholder rights plans, they work by initiating a major dilution event against any investor or bloc that crosses a specified ownership threshold.

But now, poison pills and similar board entrenchment provisions are less likely to target uninvited bidders with takeover ...