I don't think the defence is really the happiness, it's the appearance of immunity to their behaviour. Which only helps if they're not actually in a position to puncture your defensive bubble. Are you supposed to keep acting happy when the jerk starts being physically violent or stealing your stuff?
Edit: Please imagine me smiling broadly despite the downvotes.
There's only a difference in practice if you have a chance of getting whatever law they're breaking enforced. Also there are bad things people can do that are legal.
The technique may work well with people whose only ambition is to be slightly irritating and who aren't particularly committed to that goal.
Edit: Please imagine me smiling broadly despite the downvotes.