IP Australia on Collision Course with Private Practitioners?

Last week the Director General of IP Australia, Philip Noonan, gave a presentation at the conference 'Perspectives on Metrics-Based Research Evaluation – Two Years On', held at the University of Queensland.  The presentation was entitled The hidden value of patent information: What can universities learn?  In it, Mr Noonan described the features and benefits of ‘patent analytics’, and set out IP Australia’s plans for a ‘National Patent Analytics Pilot’.

A copy of the presentation slides is available from the conference website.  Mr Noonan’s comments have also been reported in The Australian newspaper.

IP Australia obviously subscribes to commercial patent information services to support its patent searching and examination activities.  We have been hearing whispers for some time that it would like to extract additional value (and revenue) from these subscriptions by providing additional intelligence services, such as patent analytics.  The National Patent Analytics Pilot appears to be an example of such a service.

However, this clearly raises questions about the proper role of a government authority in offering ‘value-added’ services that potentially compete with private enterprise providers.  IP Australia’s core task is to administer statutes (e.g. the Patents Act 1990, Trade Marks Act 1995 and Designs Act 2003) relating to IP, and to grant exclusive IP rights for defined periods of time in accordance with those statutes.  It also has responsibilities in shaping IP policy. 

It is not at all clear, however, that IP Australia should be getting involved in providing services that are already available from commercial service providers on a competitive basis.  And if it is going to become a player in this market, the existing providers may have a legitimate concern as to whether IP Australia’s services will be offered on a truly competitive basis, considering that it already has essentially all of the resources and infrastructure necessary – funded from its core activities – to provide these services.

In this article, we will therefore delve more deeply into ‘patent analytics’, and the potential concerns in relation to IP Australia’s proposed pilot program and future activities.

WHAT ARE ‘PATENT ANALYTICS’?

For the uninitiated, the term ‘patent analytics’ refers to data-mining of patent information databases in order to identify various commercial and intellectual property trends.  This might include evaluating the patenting behaviour of competitors over a specified period (e.g. how many applications are filed, and patents obtained, in which fields of technology), or identifying key inventors in particular companies, institutions and/or technical fields. 

More sophisticated applications of patent analytics include the generation and analysis of patent ‘landscapes’, including so-called ‘theme maps’ such as those generated by the Thomson Innovation software, provided by Thomson Reuters.  An example of a patent theme map is shown below (produced by Watermark Intellectual Asset Management, and originally published in a report for the IAM Magazine website).

In essence, the contours on the above map reflect the ‘thematic density’ of 18,300 solar energy inventions for which patent applications were published over the full coverage period of the international Thomson Innovation database.  ‘Height’ on the map represents the density of clustering of documents determined by the software, based on textual analysis, to disclose similar subject matter.  Thus the higher the ‘peak’, the more patents lie in the corresponding technology field.  The absolute positioning of each peak is not important, only relative location – the closer together the peaks are located on the map, the more closely the technologies are related.

Five main peaks appear within the patent landscape:

1. solar thermal technologies, including storage and heat transfer systems;
2. organic compounds and polymers, and solar cells using these technologies;
3. optical elements and devices, including modules and combinations with solar lighting;
4. power conversion equipment and power electronics; and
5. semiconductor structures used in photovoltaic cells.

These types of landscape maps, when properly interpreted, can provide valuable business intelligence, such as:

1. identifying technology areas that are particularly competitive;
2. identifying competitors, potential partners and/or prospective licensors/licensees in relation to specific technologies;
3. identifying ‘neglected’ areas of research or IP protection, which may represent new opportunities; and
4. locating a company’s own patents within the landscape, and assessing the risks and opportunities associated with that IP.

THE REAL COST OF PATENT ANALYTICS SERVICES

As may be appreciated from the above example, generating valuable business intelligence from patent analytics requires a combination of technical knowledge, business and/or industry insights, and skill in the use of the analytics software tools.  In other words, it is a specialised and potentially time-consuming activity, and thus relatively expensive.  On top of this, it is our understanding that the annual subscription fee for a product such as the Professional level of Thomson Analytics (required to generate sophisticated outputs, including patent theme maps) is on the order of some tens of thousands of dollars annually.

As a result, most small-to-medium professional IP services firms (including patent attorneys) cannot afford, or justify, subscriptions to the top-end patent analytics tools.  This is particularly true in the rather limited Australian marketplace.  Firms such as Watermark, which has chosen to invest in capabilities in this area, are the exception rather than the rule.

Patent attorneys, and other private patent information services organisations, are therefore rightly concerned about the prospect of IP Australia offering patent analytics as a fee-based service.  There is a real fear that private practitioners will be unable to compete on price.  It is generally assumed that IP Australia’s subscriptions to the relevant databases (including Thomson Analytics, as evidenced by graphics in Mr Noonan’s presentation) are already funded for the purposes of examination and searching, as are examiner's salaries.  The incremental cost to IP Australia in providing ‘value-added’ services using this existing infrastructure is therefore relatively low, as compared with a specialist professional practice in the private sector.

We have already heard – anecdotally – that IP Australia’s proposed National Patent Analytics Pilot may have resulted in a loss of interest by some Universities in the commercially-priced offerings of private service providers.

THE ROLE OF COMPETITIVE NEUTRALITY POLICY?

We cannot help wondering, however, how all of this fits in with the Australian Government’s ‘Competitive Neutrality’ policy, established under the Competition Principles Agreement (CPA).

As explained on the Productivity Commission website:

Competitive neutrality policies aim to promote efficient competition between public and private businesses. Specifically, they seek to ensure that government businesses do not enjoy competitive advantages over their private sector competitors simply by virtue of their public sector ownership.

…

In essence, the Australian Government requires its businesses to:

1. charge prices that fully reflect costs
2. pay, or include an allowance for, government taxes and charges such as Goods and Services tax, payroll tax, stamp duties and local government rates
3. pay commercial rates of interest on borrowings
4. generate commercially acceptable profits
5. comply with the same regulations that apply to private businesses (such as the Trade Practices Act and planning and environmental laws).

More-detailed information on the Competitive Neutrality policy is available from the Treasury website.

CONCLUSION

Given the challenges already faced by smaller-to-medium sized firms in providing patent analytics services at competitive prices, the prospective entry of IP Australia into this space certainly has the potential to distort the market, and lessen competition (from its already very low level).

If IP Australia’s services are offered on a genuinely competitively neutral basis, then the entry of a new provider can only be a good thing for consumers of these services.  However, at least anecdotally (for what that is worth), the proposed National Patent Analytics Pilot may already be having the effect of reducing the business available to existing competitive commercial service providers.  If so, then that is not a good thing, in the long term, for the service providers or their clients.

Disclosure / Disclaimer

Dr Mark Summerfield is employed by Watermark Intellectual Asset Management.  The views expressed in this article are independent and solely those of the author.  (Also see our 'About' page.)

Tags: Australia, Intellectual Asset Management, Patent analytics, Patent Office