"Patent Trolling" IPO?! Malicious Patent Litigation Targets Critical Periods! Regulatory "Combination Punch" is Coming

The registration system reform has opened up a smooth path for technology innovation companies to access the capital market, and more and more tech startups are embarking on the IPO journey. However, during this critical process, malicious patent infringement lawsuits have become a “weapon” used by some entities to interfere with listings and suppress competition.

Public reports show that YuShu Technology, which is currently in the IPO counseling stage, was sued for patent infringement maliciously by a non-industry company; LingGe Technology, during its critical transition from the “New Third Board” to the Beijing Stock Exchange, was sued maliciously by a business competitor, forcing the suspension of its listing process. These cases are not isolated; companies often face patent malicious lawsuits during IPOs, which not only halt review processes and cause valuation fluctuations but also force some small and medium-sized enterprises to abandon their IPO plans due to high litigation costs, seriously disrupting the order of the capital market and the ecosystem of technological innovation.

Journalists note that this chaos has also become a focus of attention at the 2026 National Two Sessions. Deputies and members have proposed suggestions, and judicial authorities and regulators have taken strong actions. A comprehensive governance chain targeting patent malicious lawsuits is underway to safeguard the listing of tech startups.

Cross-industry claims, repeated face-changing, patent “stalking” targeting IPO key periods

“Such behavior can be described as both carefully calculated and unpredictable.” Recently, the Supreme People’s Court issued a stern condemnation of the plaintiff’s behavior in the final ruling of the patent infringement dispute between LuWeiMei and YuShu Technology. This typical patent malicious lawsuit exposes some entities’ use of rights protection as a cover for hunting IPO targets.

As one of Hangzhou’s “Six Little Dragons,” YuShu Technology is in a critical stage of IPO counseling. The plaintiff, LuWeiMei, a household chemical company unrelated to robotics, has neither produced nor sold products related to the patent in question, nor does its business scope involve the patent technology. Notably, LuWeiMei filed a lawsuit just five days after transferring the patent involved.

Regarding the claim amount, LuWeiMei’s actions are even more puzzling. In the first instance, it claimed that YuShu Technology profited thousands of millions yuan from infringement but only demanded 500 yuan in compensation; in the second instance, it initially claimed 80 million yuan, but the day after the court hearing, it reduced the claim to 500 yuan in writing. The final ruling by the Supreme Court rejected all appeals from LuWeiMei, stating that its claims lacked basis.

YuShu Technology’s experience is not unique. The Intellectual Property Court of the Supreme Court disclosed that LingGe Technology was sued for 23 million yuan by a leading company in the industry after the latter’s application for listing on the Beijing Stock Exchange was accepted, causing the listing process to halt.

The phenomenon of tech innovation companies facing lawsuits during critical capital operation periods has also attracted attention from deputies and members at this year’s Two Sessions. Fan Yun, a deputy of the National People’s Congress and chairman of Shanghai Fushen Evaluation Consulting Group, found through research that a certain company with complete equipment technology, engineering technology, process equipment technology, process technology, and process configuration, a typical self-controlled Chinese enterprise, encountered unprecedented difficulties during its application for IPO on the STAR Market, including malicious “reports” and “pressure” from opponents, making IPO difficult. The company’s second-round inquiry response has not yet been officially disclosed, and the listing review is stalled.

Data from Tianyancha shows that since 2025, a total of 53 companies have been involved in judicial cases during IPO, totaling 133 cases, including 10 cases involving industry competition and invention patents.

Zhang Song, partner and head of the Intellectual Property Department at TianDa HeGong Law Firm, told Securities Times that such lawsuits are not uncommon in practice and are a typical abuse of the “litigation to promote negotiation, litigation for profit” business strategy. The core purpose of these lawsuits is not genuine rights protection but to exploit the vulnerability of companies’ zero-tolerance for litigation risks during IPO to create uncertainty, delay listing, force companies to pay high settlement fees, or directly target competitors.

“Malicious intellectual property lawsuits are often patent infringement cases, but they can also include patent ownership disputes, trade secret infringement lawsuits, trademark infringement, or other unfair competition lawsuits,” Zhang said. These types share the common feature of directly impacting core assets or operational legitimacy, such as technology and brands, affecting the review committee and investors’ judgment of the issuer’s ongoing operation ability and asset independence, thus achieving malicious goals.

Clear triple recognition standards and strict judicial regulation of malicious lawsuits

Why do malicious patent lawsuits target IPO companies? Industry insiders point out that the key difficulty in regulation lies in defining “maliciousness.” With the judgments in typical cases like YuShu Technology and LingGe Technology, courts have established a clear three-tier recognition standard, providing explicit guidance for identifying and regulating patent malicious lawsuits in judicial practice.

The stability of the rights foundation is the primary criterion for malicious litigation. Although LuWeiMei’s patent was still valid, YuShu Technology filed invalidation requests twice, and the patent was transferred and used in litigation shortly after, raising doubts about its stability; in the LingGe case, the plaintiff deliberately concealed key facts from patent evaluation reports indicating the patent lacked inventiveness, showing a weak rights basis. Courts believe that initiating lawsuits with unstable rights foundation contradicts the original purpose of intellectual property rights protection.

Whether the purpose of the lawsuit is legitimate is the core criterion for judging maliciousness. Such malicious lawsuits often target companies at critical points like counseling, review, or transfer to the stock exchange, with claims that are grossly disproportionate to the actual infringement scale. LuWeiMei’s claim of 80 million yuan dropping to 500 yuan, and LingGe’s claim of 23 million yuan far exceeding the defendant’s revenue at the same time, highlight the unreasonable nature of these claims. Additionally, plaintiffs often evade litigation costs or repeatedly sue, interfering with normal business operations.

Whether the behavior is persistently malicious is an important supplementary criterion. In the LingGe case, the plaintiff had previously initiated similar patent claims against multiple competitors, showing a clear pattern of repeated and targeted malicious behavior. This persistent maliciousness is a key basis for courts to determine abuse of rights.

“Not only did the Supreme Court in the YuShu Technology case ‘address the facts’ by making a legal and technical infringement determination, but it also explicitly criticized the plaintiff in the judgment, which reflects a negative judicial stance against such abuse of rights and interference with market order, signaling a strong regulatory message,” Zhang said.

Zhang believes that malicious patent lawsuits pose serious substantive harm to companies preparing for listing, the order of capital markets, and the ecosystem of technological innovation. Specifically, for companies planning to go public, such lawsuits can directly cause listing delays or cancellations, incur huge legal costs, damage reputation, disrupt financing and development plans, or even cause a flagship tech project to fail; for the capital market, they undermine fairness, distort the function of IPO as a resource allocation channel, and damage investor confidence; for the innovation ecosystem, they may create a “bad money drives out good,” forcing companies to allocate limited resources to defensive litigation rather than R&D, thereby stifling innovation vitality.

Full-chain governance system accelerates construction

The dual damage of patent malicious lawsuits to technological innovation and capital market order has attracted high market attention. During this year’s Two Sessions, deputies and members proposed measures, calling for systemic solutions. Meanwhile, judicial authorities and regulators are taking coordinated actions, deploying a combination of regulatory measures to accelerate the construction of a comprehensive governance chain.

“Regulating malicious patent lawsuits is about protecting the spark of new productive forces and supporting high-quality development in key core areas,” said Jia Yu, president of the Shanghai Higher People’s Court and a deputy of the National People’s Congress. During the Two Sessions, he proposed specific governance measures: establishing cross-departmental law enforcement coordination mechanisms, exploring the creation of patent credit evaluation systems, building patent data query databases, and improving industry self-regulation standards. He emphasized that regulating malicious patent lawsuits requires balancing “punishing evil” and “protecting rights,” avoiding tolerance of malicious disruptions while respecting legitimate rights protection, thus establishing a legal framework for technological innovation and fostering a thriving new productive ecosystem.

Fan Yun suggested that procuratorates and courts should initiate public interest litigation against illegal acts that damage the business environment for IPOs and securities markets.

Regulatory authorities have already taken proactive measures. On May 15, 2025, the Supreme Court and the China Securities Regulatory Commission jointly issued the “Guiding Opinions on Strict and Fair Law Enforcement and Judicial Services to Support High-Quality Capital Market Development,” clearly defining red lines for regulating malicious patent lawsuits. It states that behaviors such as malicious litigation and deliberate obstruction of issuance and listing review processes will be pursued with civil, administrative, or criminal liability, imposing heavy penalties on malicious litigants, and strengthening the fairness of the capital market from judicial and regulatory levels.

Zhang Song believes that tech companies should have sufficient legal awareness from the outset, paying close attention to various legal risks, including founders’ own risks, employee non-compete or invention rights, data compliance during R&D, timely and reasonable layout of intellectual property rights such as trademarks and patents, infringement risks of others’ IP, and legal compliance in business activities.

Regarding IP-related legal risks, Zhang recommends building early defenses, such as conducting thorough IP due diligence before IPO—assessing the stability, clear ownership, and potential infringement risks of core patents, trademarks, and trade secrets; establishing early warning and rapid response mechanisms to monitor competitors’ patent activities and litigation history; and if facing lawsuits during IPO, quickly evaluating and taking legal action while maintaining transparent communication with regulators to clarify the nature and impact of the lawsuit. Utilizing judicial tools to counter malicious litigants promptly is also advised. “IP risk management should be a core part of IPO preparation, shifting from passive response to proactive management,” Zhang said.

This article was originally published in Securities Times, March 16, A2 edition, under the title “Malicious Patent Lawsuits ‘Stalking’ IPO Key Period, Judicial Heavy Hand to Regulate and Support Tech Innovation.”