11 November 2016

Public Listings – Australian IP Firms’ Bold Experiment

ExperimentThe Australian IP professions – registered patent and trade marks attorneys and specialist IP lawyers – are currently engaged in what might well be regarded as a brave and daring experiment. Prior to 15 April 2013 the regulatory regime in Australia did not even permit patent attorneys to incorporate. Now, less than four years later, not only have many firms chosen to take up the option of incorporation, but Australia now has not one, but three, publicly-listed companies each holding multiple operating IP firms.

In developments to date:
  1. in November 2014, the firm of Spruson & Ferguson went public on the Australian Securities Exchange (ASX) via the listed entity IPH Limited (ASX:IPH), which has since acquired Fisher Adams Kelly Callinans (itself the result of a merger between Fisher Adams Kelly and Callinans), Pizzeys, and Cullens;
  2. in November 2015, Shelston IP went public through the vehicle of Xenith IP Group Limited (ASX:XIP), which recently completed the acquisition of my former employer Watermark; and
  3. in August 2016, Davies Collison Cave and FPA Patent Attorneys (formerly Freehills Patent Attorneys) jointly went public under the holding company QANTM IP Limited (ASX:QIP).
Most recently, on 26 October 2016 IPH announced [PDF. 298kB] that it has reached an agreement to acquire Ella Cheong (Hong Kong) Limited and its subsidiary Ella Cheong Intellectual Property Agency (Beijing) Company Limited for approximately A$27 million.

At this stage you are probably wondering whether there is something in the water in Australia!  However, there is method to this apparent madness.

The fact is that firms offering IP services in Australia are currently facing significant structural challenges.  Many transactions that were once the ‘bread and butter’ of the profession, such as payment of renewal/maintenance fees, preparation of translations of patent specifications, and filing of national applications under the Patent Cooperation Treaty (PCT) or Paris Convention, have been increasingly computerised and centralised by specialist service providers which have been able to achieve significant economies of scale.  Combined with increasing competition in the Australian market, in the face of very modest growth in demand (around four per cent) the choice for many firms is between innovation and stagnation.

Public listing can provide firms with the capital they need to make the significant investments necessary to achieve efficiency and productivity gains through deployment and use of new IT infrastructure, and to address the limited growth in demand for traditional IP services through acquisitions and /or diversification, e.g. into a range of new services or into other markets, such as south-east Asian countries.

However, this daring strategy does not come without challenges of its own.  The Australian model of public ownership has thus far produced three public companies each holding two or more firms that continue to do business as completely separate, and competing, operating entities.  This creates potential concerns about the ethical positions of these firms and their employed attorneys, including whether there may be conflicts between their duties to client and to shareholders, and/or between the clients of different firms within the same operating group.

These challenges are not, and have not been, insurmountable.  Whether the solutions are being effectively communicated to the market is a separate question.

You can read my detailed analysis of the reasons for consolidation and public listing of firms in Australia, the ethical issues that have arisen, and the ways in which these issues are being managed, in a recent article I wrote for the IP Watchdog blog: Will Australia’s Listed Firms Save the IP Profession from Stagnation?


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