14 May 2019

Chinese Applicants Are Bypassing Local Patent Attorneys to Obtain Australian Standard Patents

Somewhere in Canberra... According to IP Australia records, somewhere in this unprepossessing block of apartments in suburban Canberra is the Australian ‘office’ of not one, but at least 47 Chinese companies, which collectively filed 164 standard patent applications between the beginning of January and the end of April, 2019 (link to Google Sheet with full listing).  In each case, it further appears that expedited examination of the application was requested at filing.  A number of the applications have already been accepted.  In some cases, examination reports have been issued, and responses filed.  These have generally been of high quality and, but for formalities in a couple of instances, have resulted in acceptance of the applications concerned.  In no case, however, has any registered trans-Tasman patent attorney been involved.  Purportedly, each response letter has been signed by an inventor on behalf of the applicant company, i.e. presumably their employer.  The actual occupant of the Canberra address is a mystery – unnamed on any application, and seemingly uninvolved other than to assist the applicants in meeting the requirement, under regulation 22.10 of the Patents Regulations 1991 to provide an ‘address for service’ in Australia or New Zealand.

Unusual Australian patent filing behaviour by Chinese companies is nothing new.  I first wrote about the phenomenon of Chinese companies obtaining relatively large numbers of Australian innovation patents back in February 2013, a practice that – notwithstanding some limited efforts by the Patent Office to curb abuse of the system – continues largely unabated to this day.  I recently estimated that around a quarter of all innovation patent applications filed in 2018 were made by Chinese applicants (upon further analysis, I would probably now revise that number upwards, closer to one third).  It is widely believed that this behaviour is motivated by direct financial incentives provided by Chinese authorities to companies that obtain foreign patents.  In this context, the Australian innovation patent has the advantages of being cheap to apply for, fast to issue, and providing an official ‘patent certificate’ upon grant that can, presumably, be used for the purposes of claiming the Chinese government hand-outs.

These latest applications are something different, however.  First and foremost, they are for standard patents, for which no certificate will issue until and unless the applications pass substantive examination (and the opposition period).  They all claim priority from earlier Chinese national patent applications which were, in most cases, filed only shortly before the corresponding Australian applications (and certainly well within the 12-month period allowed under the Paris Convention).  And, as I have already noted, it appears that expedited examination has been requested in each case, with the applicants having a genuine intention of securing a granted Australian patent, even where objections have been raised by the examiner.

In short, these Chinese applicants are not looking merely to obtain an official patent certificate by any means available, at the lowest possible cost.  Rather, they are seeking enforceable patent rights, and in doing so they are willing to incur the additional costs of examination fees, acceptance fees, and dealing with any examination objections that may arise.

Even so, these companies do not appear to be willing to incur the costs associated with engaging Australian patent attorneys to assist them in applying for or obtaining patents.  This naturally raises the question of whether this is a problem for the applicants, for the occupant of that Canberra apartment, or for anybody else who might be involved in these filings?

26 April 2019

IP Australia Launches 2019 Annual IP Report on World Intellectual Property Day

World IP Day 2019 World Intellectual Property Day is celebrated each year on the 26th of April.  This year, the theme is ‘Reach for Gold: IP and Sports’.  To read more about World IP Day 2019, and to explore how ‘innovation, creativity and the IP rights that encourage and protect them support the development of sport and its enjoyment around the world’, feel free to head on over to the website of the World Intellectual Property Organization (WIPO).  Because this article is not about World IP Day, or the role of IP in sports.  It is about how IP Australia is marking the occasion – with the launch of its Australian Intellectual Property Report 2019.

As I reported at around this time last year, the 2018 annual report attracted a fairly negative response in certain circles, with InnovationAus reporter Stuart Kennedy calling it a ‘damning report card on patent filing’, after earlier writing disparagingly about the allegedly ‘shocking’ revelation that ‘poker machine king Aristocrat Technologies’ had been the top Australian-resident patent applicant for 2017 which, in its ‘quest to find fresh ways to relieve pokie players of their dough, crushed the patent application efforts of CSIRO by a factor of more than three.’

In light of last year’s experience, it is perhaps unsurprising that the ‘patents’ section of the 2019 IP Report avoids mention of the fact that Aristocrat was once again the top Australian filer.  As I reported back in January, in 2018 the company increased its haul of new standard patent applications by 60% over 2017, to 252 – reaching almost five times the number of applications (55) filed by CSIRO.  If the ratio of the number of applications filed by a leading commercial entity in the gaming industry to the number filed by Australia’s flagship public research organisation is any kind of measure of research output – which it emphatically is not – then this would be a far worse result than the previous year.  Of course, not all patents are created equal, and the truth is that there is no conflict in celebrating the international successes of both Aristocrat – a great Australian company in its field, setting aside personal views on the merits, or otherwise, of gambling – and CSIRO – which has generated globally-significant outcomes including influenza drug Relenza, polymer banknote technology, and key technologies underlying high-speed Wi-Fi, among many others.

26 March 2019

Competition Regulator OK With QANTM/Xenith Merger, But Notes That Group Firms ‘Lack Incentive to Compete’

Tick of ApprovalLast Thursday, 21 March 2019, the Australian Competition and Consumer Commission (ACCC) completed its public review of the proposed merger of QANTM IP Limited (ASX:QIP) and Xenith IP Group Limited (ASX:XIP), which commenced back in January.  The outcome of the review was ‘not opposed’, i.e. the competition regulator found no basis to object to the proposed merger under the ‘substantial lessening of competition’ test established by section 50 of the Australian Competition and Consumer Act 2010 (‘CCA’).  Focussing primarily on patent services (for reasons that I will explain further below), the ACCC concluded that ‘a merged QANTM and Xenith is likely to continue to face competition from a number of alternative large and medium suppliers’.

Notably, however, the ACCC distinguished between the independence of firms providing attorney professional services within the QANTM and Xenith groups, for avoidance of conflicts as required under the Code of Conduct for Trans-Tasman Patent and Trade Marks Attorneys 2018, and the presence of actual competition between such firms.  In particular, the ACCC stated that:

While firms within the same ownership group have regulatory obligations to maintain independence for the purposes of managing conflicts of interests, the ACCC considered that firms within a merged QANTM and Xenith do not have the incentive to compete with each other.  (Emphasis added.)

This is, I think, a subtle but important distinction, which indicates that the ACCC has developed a fairly good understanding of the dynamics within the market for IP services in Australia.  This will carry over into its ongoing review of the prospective hostile takeover of Xenith by IPH Limited (ASX:IPH), with the consequence that the absence of any objection to a QANTM/Xenith merger does not necessarily imply a similarly smooth passage for an IPH acquisition of Xenith (although, personally, I rate the likelihood of the ACCC actually blocking such an acquisition at virtually nil).

While this regulatory hurdle has now been overcome, it remains uncertain whether the QANTM/Xenith merger will proceed, in light of IPH’s opposition as owner of nearly 20% of Xenith shares.  On the one hand, Xenith now requires nearly 94% of the remaining votes (i.e. 75% of the total) to be in favour for the merger with QANTM to go ahead.  On the other hand, IPH still requires a green light from the ACCC, and would then need to secure 75% of the votes it does not control in order to succeed in its takeover bid for Xenith.  So even if IPH is successful in blocking the QANTM/Xenith merger, this is no guarantee that it will get its own way in the end.

For my further thoughts on these most recent events, and where they may lead, please read on.

17 March 2019

Survey – How Is Life As a Trans-Tasman Patent Attorney?

Update: As of 2 May 2019, the survey is closed. I received 247 responses, which was a fantastic outcome. I am grateful to all who took the time to complete the survey, including many who wrote extensive comments in reply to the open questions. I have commenced analysing the results, and will report via a number of articles over the coming weeks. This article will be updated with links as new reports are published.

Original Post:

Take the Survey Last week I looked at aggregate numbers of patent attorneys employed within different sectors of the Australian/New Zealand markets – listed-group firms, privately-held firms, corporate, research/university, and government – and observed that there has been a notable drift over the past 15 months from the listed groups to privately-held firms.  In an upcoming post, I will look beneath the aggregate numbers at more detailed figures showing that the loss of experience from the listed-group firms is significantly greater than the overall changes in numbers indicate.  For example, while the net reduction in patent attorneys employed across the three listed groups is just 34, the actual number of departures from firms in these groups since January 2018 is 66.  Furthermore, the difference has not been made up by experienced hires, but mostly by registration of new attorneys, who were presumably already working as trainees (for want of a better generic term) within the listed-group firms prior to achieving qualification.

Right now, however, I want to ask a favour of all trans-Tasman patent attorneys.  While all of these numbers tell us what is happening, they do not tell us very much about why or how it is happening.  Some feedback that I receive, in the comments beneath these articles, and through conversation and other channels, suggests that there are attorneys working within the listed groups who are not very happy with the current situation.  On the other hand, I have also heard of people welcoming the new opportunities that the listed-group model provides.  Management within the listed groups would like us all to believe that most of their ‘losses’ are people who were close to retirement in any event, or who are unsuited to a competitive environment that is demanding ever-greater efficiency and productivity.  Privately-held firms, for their part, have a vested interest in promoting themselves as offering greater independence, stability, partnership opportunities, and so-called ‘work-life balance’ (a term that I detest, by the way, although that is a topic for another time).

I would like to make some attempt to get to the truth of this, so the favour I am asking of trans-Tasman attorneys (and current trainees, along with any trade marks attorneys and IP lawyers working with specialist IP firms who may wish to participate) is to complete a survey that I have prepared.  While not scientifically designed or conducted – for one thing, the respondents are going to be self-selecting and anonymous, so I am relying on people’s honesty and integrity in responding – I have nonetheless put considerable thought into the questions, and the structure of the survey, and am hopeful that the responses will provide insights that the publicly-available data alone cannot.

For the survey to be useful, however, I need responses from across the profession.  I am hoping for at least 200 participants, representing firms of all sizes and ownership structures.  So, assuming you qualify, here are a few reasons why you should complete the survey, and why you should encourage your colleagues to do so.
  1. It is quick and easy.  Most of the questions are multiple choice. All of the compulsory questions are multiple choice.  If you do not want to spend time typing longer answers, you do not have to.
  2. It is mobile-friendly.  You can complete the survey wherever you want, on whatever device you choose, beyond the prying eyes of your employer or IT department (if that in an issue for you).
  3. It is completely anonymous.  I have absolutely no way to track the identity or location of any respondent.
  4. It will benefit the profession as a whole.  I am unaware of any other attempt to conduct such a survey publicly and independently.  All results and analysis will be published openly on this blog.  The data will not be made available for private use by individual firms, for any reason.
  5. It will benefit your firm.  I genuinely have no idea what the responses will reveal.  As I have said, anecdotally I hear different views from different people, both within the listed groups, and privately-held firms.  I therefore suspect that even the management of these firms have little visibility of the true sentiments among their staff and within the profession more broadly.  Whether or not you like the answers, the truth will set you free!  (Or, at least, assist you to manage more effectively.)

I am considering conducting a similar survey for clients (including foreign associates) of Australian/New Zealand IP firms.  However, I am not sure whether I would receive a sufficient number and diversity of responses to make this worthwhile.  If anyone is interested in seeing me conduct such a survey, and would be willing to assist in promoting it to likely respondents, please get in touch.  You can communicate via the comments below, or via the email link in the menu bar above.

12 March 2019

IPH Shows Its Hand With Proposal to Acquire Xenith IP

Blocking move Following-on from its acquisition on 13 February 2019 of a 19.9% stake in Xenith IP Group Limited (ASX:XIP), IPH Limited (ASX:IPH) has now announced [PDF, 3.0MB] that it has submitted a proposal to acquire Xenith in its entirety for a combination of cash and IPH shares valued at $1.97 per Xenith share (based on the IPH closing price as it 11 March 2019).  The announcement weighs-in at a hefty 204 pages, because it includes the complete proposal, along with a deck of presentation slides, and the proposed Scheme Implementation Deed.  I understand that IPH has chosen this mechanism to present its proposal because it has been unable to enter into any discussions with Xenith due to the terms of an agreement between Xenith and QANTM IP Limited (ASX:QIP) established in relation to their proposed merger, which was announced back in November 2018.

Xenith has acknowledged receipt of the proposal [PDF, 76.3kB], advising that it ‘is currently reviewing the IPH proposal’ and noting that ‘its proposed merger with QANTM Intellectual Property Limited remains on foot.’

QANTM has provided a more substantive initial response [PDF, 204.7kB], in which it takes issue with two specific aspects of the IPH announcement.

Firstly, QANTM contends that the IPH announcement understates the value of the proposed QANTM/Xenith merger consideration.  This appears to be a fair criticism.  IPH compares the value of its offer, i.e. $1.97 per Xenith share, with the value of the QANTM merger proposal at the time of its announcement on 26 November 2018, when it was just $1.85 per Xenith share.  Since then, however, the QANTM share price has risen, and as at the close of the market on 11 March 2019 was $1.66, making the implied merger consideration $2.03 per Xenith share.  QANTM also notes that the one month VWAP (volume weighted average price) of its shares is currently $1.64, on which measure the implied merger consideration is $2.00 per Xenith share.

The other point of contention raised by QANTM relates to an implication in IPH’s proposal that that its acquisition of Xenith would be subject to similar risks regarding clearance by the Australian Competition and Consumer Commission (ACCC) as the QANTM/Xenith merger.  The ACCC began its review of the QANTM/Xenith proposal on 10 January 2019, and is scheduled to announce its findings on 21 March 2019.  It commenced a similar review of potential acquisitions by IPH of either QANTM or Xenith on 22 February 2019, following IPH’s acquisition of its 19.9% stake in Xenith.  The provisional date for announcement of the findings of that review is 2 May 2019.

QANTM’s first point is thus that the clearance risk in relation to the QANTM/Xenith merger will be resolved far sooner than that associated with an acquisition of Xenith by IPH.  This is true, but is only relevant if there were some great urgency for a transaction to be completed.  I cannot see why that should be so, other than the fact that Xenith is hoping to have shareholders vote on the proposal to merge with QANTM at a Scheme Meeting that I understand is already scheduled to take place on 3 April 2019.

QANTM’s second point is that, in its words, ‘a takeover of Xenith by IPH would lead to a materially different market structure than the merger of QANTM and Xenith’.  Again, while there may be some truth to this, I am not sure that it is ultimately relevant.  Given the structure of the listed groups, the continuing independent operation of the firms within each group, and the fact that numerous privately-held firms collectively retain a larger – and growing – share of the market than even all three listed groups combined, I cannot see how a merger between any two of the three groups would result in a substantial lessening of competition in the market for IP service in Australia.  This is the only consideration that is subject to review by the ACCC.

I am beyond predicting what is likely to happen next.  However, my guess is that Xenith’s fate is in the hands of its institutional investors.  It requires a 75% majority vote in favour at the Scheme Meeting in order to proceed with the QANTM merger.  IPH holds 19.9% of Xenith shares, and will vote against.  So unless Xenith can secure the votes of all of its remaining institutional investors (i.e. the ones that did not already sell out to IPH), along with a majority of smaller shareholders (including, presumably, the various present and past employees of Xenith group firms who hold shares), then the QANTM merger is dead in the water.

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