PayPal, Inc. Initial Public Offering

Essay by zmantimwUniversity, Master'sA-, March 2004

download word file, 4 pages 4.8

PayPal, Inc.'s road to its Initial Public Offering (IPO) was rocky and strew with problems. It postponed it offering just the day before it was scheduled due to a lawsuit filed and many felt that its price would suffer as the result of decisions by Louisiana claiming that PayPal was violating banking laws.

The offering was postponed because of a lawsuit filed by privately held online security firm CertCo, charging PayPal with patent infringement. CertCo claimed that the PayPal system violated its patent for a method for making payment and transactions in an electronic payment system. This "bump in the road" as it was termed by John Fitzgibbon, editor of IPODesktop caused major headaches for PayPal. They were unable to comment on the lawsuit due to securities regulations that restrict a company's ability to make public statements prior to a stock offering and had to ultimately refile its IPO prospectus with the Securities and Exchange Commission in order to include information about the suit.

Without, of course, being privy to all actions taken by the management of PayPal prior to their IPO, I believe one thing that should have been done was an exhaustive investigation into all patents, copyrights, etc. that any possible competitors had filed. Computer programs are treated like electronic machines or tools. As such, a patent can protect the ideas, systems, methods, algorithms, functions, or other properties of computer programs that are otherwise unable to be protected under copyright or trade secret laws. A patent can also protect the program at multiple levels. Detailed coding sequences as well as the ``look and feel" of the program can be protected under patent law. So patents can protect a software program all the way from specific application to equivalent or similar implementations, or even a series of...