Article May 24, 2016

Patent Demand Letters and Initial Public Offerings

The popularity of the Initial Public Offering has waned somewhat since its peak in 2014, with many companies electing to stay private and avoid the increased scrutiny and regulatory oversight that inevitably follows an IPO. For some start-ups though, the IPO is the seminal point where the company can raise sufficient capital to fulfill its potential.

IPOs are also an excellent way to raise a company’s public profile. Whilst this is likely to have the serendipitous effect of making potential new customers aware of the company’s product, it is also likely to bring the company to the attention of patent trolls and other potential litigants.

The fact that NPEs target companies around the time of an IPO has been long observed by those who it concerns, evidence though has been anecdotal at best. A new study published in the Stanford Technology Law Review seeks to remedy this lack of evidence by providing quantitative data on the prevalence of NPE suits before, during and after an IPO.

The study, “Patent Demands and Initial Public Offerings” by Robin Feldman and Evan Frondorf, surveyed some 50 product based companies in a variety of sectors, all of whom were going public in the US. Information requested included, whether the company received demand letters, how many they received and the origins of the demand letters. A brief outline of some of the reports key findings is shown below:


  • 60% of Information Technology Companies reported a demand letter at or around the time of their IPO
  • Overall, nearly half of respondents reported letters around time of IPO
  • Of the companies that received demand letters after their IPO, half said they received four or more and 80% said that some of activity originated from NPEs
  • Nearly half of all companies and more than two third of ICT companies said they had spent more than USD 250,000 preparing or defending against NPE demands


The report can be accessed in full here: