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?

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.

10 March 2019

Patent Attorneys Are Leaving Firms in Listed Groups While Privately-Owned Practices Grow

EscapeesSince January 2018, on an approximately monthly basis, I have been taking snapshots of the official Register of attorneys maintained by the Trans-Tasman IP Attorneys Board (TTIPAB).  I therefore now have 15 months of data on the employment of registered patent attorneys in Australia and New Zealand.  And what this data reveals is that, even over this relatively short period of time, the number of registered patent attorneys employed with the three publicly-listed ownership groups (IPH Limited, ASX:IPH; Xenith IP Group Limited, ASX:XIP; and QANTM IP Limited, ASX:QIP) has fallen by over 10%.  At the same time, the number of patent attorneys working in privately-held practices has grown by almost exactly the same amount.  The number of attorneys employed across other sectors (corporate, research/university, and government) has remained almost constant.  Furthermore, while the number of registered patent attorneys has increased slightly, the number identifiably employed in any of these ‘conventional’ roles is exactly the same now as it was at the start of 2018.

Overall, then, net movement of patent attorneys in Australia and New Zealand over the past 15 months has been almost entirely from firms in listed groups to privately-held practices.  This is consistent with the trends in patent filings that I reported recently:
  1. ‘original’ filings (i.e. applications filed without earlier priority claims, the majority of which are made by Australian applicants) have been shifting for a number of years from larger firms, and those in publicly-listed groups, to smaller, and privately-held, firms; and
  2. ‘follow-on’ filings (i.e. applications claiming earlier priority, the majority of which are made by foreign applicants) have been growing overall, however much of the benefit of this growth has been reaped by privately-held firms, with filings made through firms in publicly-listed groups having largely flat-lined in recent years.
Of course, it is difficult to discern cause-and-effect here.  Are firms in publicly-listed groups shedding staff in response to declining workload, while privately-held firms hiring to meet growing demand?  Or are attorneys leaving firms in publicly-listed groups in favour of employment within privately-held firms, and taking capacity with them?  In this article, I will take a look at the data, and what it might tell us about the answers to these questions.

27 February 2019

Are Australian Listed-Group IP Firms Losing Market Share in Patent Filings?

City Business DownFor a long time now the number of patent applications filed in Australia has been increasing.  For example, between 2009 and 2018 the total number of standard patent applications rose by over 25%, to nearly 30,000.  This growth has been driven by foreign applicants, with the number of applications filed by domestic applicants being, at best, steady.  There has, however, been a clear downward trend in provisional applications – which are predominantly filed by Australians, and represent the most common first-step into the patent system – where numbers have fallen by 22% over the same period.

Not all of these patent applications – and especially provisional and innovation patent applications – are filed using the services of patent attorneys.  For example, many inexperienced and impecunious Australian individuals and small businesses attempt to prepare and file their own applications, while some overseas applicants arrange their own filings, but are nonetheless required to provide an ‘address-for-service’ in Australia, which need not be a patent attorney. 

It is therefore not immediately apparent from the overall filing numbers what impact these changes are having on the businesses of Australian patent attorneys.  It is even less obvious whether there are any trends within the profession in relation to which firms are most affected by such changes.  Conveniently, however, I have developed some data matching and analysis tools that enable me to identify filings according to whether or not they were handled by a registered Australian patent attorney or firm – as opposed to some other non-attorney agent – as well as which firms were responsible.

In this article, I will present the results of this analysis, some of which I found quite surprising.  For example, I found that while the total number of provisional applications filed may have been in decline, this is almost entirely due to there being fewer self-filers, with attorney-filed applications remaining steady (though not showing any growth).  I also found that, over time, there appears to have been a gradual shift by domestic applicants away from larger firms, in favour of smaller firms and individual attorneys.  Further, I found that there has been a significant shift in the past few years, by both international and domestic clients, towards firms that remain privately held, at the expense of firms within Australia’s three publicly-listed ownership groups.  I know that many private-practice attorneys will tell me that they already knew this, and I have certainly heard stories about client-transfers, however the plural of ‘anecdote’ is not ‘data’.  So now we have some data!

20 February 2019

What Every Patent Practitioner and Applicant Needs to Know About Divisional Applications in Australia

Divisional children Since commencement of the Raising the Bar patent reforms in 2013 there has been a potentially fatal trap in the Australian rules relating to divisional applications.  I have always thought it inevitable that someone would eventually fall into this trap – and practically certain that when it did happen, the applicant would be from the United States.  A recent decision of the Australian Patent Office, in which a US-based applicant has been denied the opportunity to convert an application into a divisional of an earlier filing, in order to avoid having one of its own previous applications cited as invalidating prior art, has confirmed my prediction: Magnum Magnetics Corporation [2019] APO 3.  Of course, this may not be the first time this situation has arisen.  To the best of my knowledge, however, it is the first time it has resulted in an actual Patent Office decision highlighting the issue.

In this recent case, Magnum Magnetics Corporation (‘Magnum’) filed an independent patent application in Australia when (as it subsequently turned out) the application should really have been filed as a divisional of an earlier application.  So far, its efforts to correct this error have been unsuccessful.

As most readers will be aware, a divisional patent application is a type of patent application which is based on a previously filed application, commonly called the ‘parent’ application.  A divisional application inherits the parent’s filing date and, to the extent that it discloses and claims subject matter that was also present in the parent, those claims are entitled to the same priority date.  The primary purpose for which divisional applications were originally created was to enable further inventions that may have been disclosed in an initial application to be protected, since as a general principle a single patent may only claim a single invention.  However, over the years many other practical and strategic uses of divisional applications have been developed.  For example, it is permissible to update or add new subject matter in a divisional application, although any claims based on the added matter will not usually be entitled to the benefit of the parent’s priority date.

Historically, it has been very easy in Australia to convert between ‘regular’ and divisional applications, requiring only a straightforward amendment to the patent request.  Such an amendment could be made at any time during the lifetime of the application/patent.  However, the Raising the Bar reforms changed the rules, adding additional restrictions on when an application may legitimately be converted to a divisional.  These restrictions will rarely be an issue for applicants that are making appropriate and well-informed use of the Australian patent application system.  However, a failure to appreciate the limitations of the Australian system – and, to be honest, this is something I have seen on a number of occasions from US practitioners, since their system is quite different – can get an applicant into trouble.

Unfortunately, this appears to be what happened to Magnum, although I think that there may still be some hope of saving its application.

13 February 2019

Listed IP Group IPH Ltd Acquires Nearly 20% Stake in Competitor Xenith IP Group Ltd

Almighty dollar Today, 13 February 2018, IPH Limited (ASX:IPH) announced [PDF, 156kB] that it has acquired a 19.9% stake in Xenith IP Group Limited (ASX:XIP).  It states that it ‘acquired its interest in Xenith at a price of $1.85 per share from institutional investors at a total cost of approximately $33 million which has been funded from debt facilities’, and that its purpose in doing so is ‘to participate in industry consolidation, consistent with its strategy to pursue acquisitions in the domestic market which are compelling from a strategic and financial sense.’ 

The immediate objective of the transaction, however, appears to be to try to block the proposed acquisition of Xenith by QANTM IP Limited (ASX:QIP), which was announced back in November 2018, and which is currently subject to a review by the Australian Competition and Consumer Commission (ACCC).  At today’s opening price for QANTM of $1.51 per share, the amount paid by IPH for Xenith shares is almost exactly equivalent to the offer on the table under the proposed merger of 1.22 QANTM shares for each Xenith share.  A bird in the hand being worth two in the bush, the ‘institutional investors’ must be delighted with the transaction.  Whether IPH shareholders are as pleased with this imaginative piece of debt financing remains to be seen.

Xenith shares, on the other hand, leapt from a close yesterday (12 February 2018) of $1.40 to open today at $1.75 per share, before closing at $1.69.  This jump followed IPH's notification to the ASX of its off-market purchase prior to the opening of trading, and is most likely a result of retail investors speculating on IPH's willingness to acquire further shares at around $1.85.

ASX:XIP 13 February 2019
In its announcement, IPH explains that:

On the basis of the information released to date, IPH does not support the current Xenith scheme to be acquired by QANTM Intellectual Property Group Limited (“QANTM”) and does not intend to vote in favour of it.

IPH believes an alternative transaction involving a strategic combination of one of these businesses with IPH has the potential to create significant value. IPH intends to seek discussions with Xenith and / or QANTM in relation to an alternative transaction to the current scheme.

06 February 2019

How Australian Patent Attorney Firms Compared on Filings in 2018

2018 Last week, I looked at Australian patent filings in 2018 from the perspective of the patent applicants.  This week, I analyse the data from the perspective of the patent attorney firms and others who actually performed the filing.  The analysis reveals that while the merger of Fisher Adams Kelly Callinans and Cullens into Spruson & Ferguson made that firm the top filer of patent applications across all categories, a number of other firms have distinct ‘strengths’ when it comes to particular types of filings.  For example, smaller and privately-held firms tend to feature more prominently in new provisional application filings (most of which are on behalf of Australian clients), while larger firms and members of the three listed groups dominate in ‘follow-on’ filings derived from earlier priority and international applications (most of which originate overseas).

In a similar vein, while firms within listed groups were responsible for filing 54% of all Australian patent applications during 2018, they filed only 26% of provisional applications, with 39% being filed by individual attorneys and privately-held firms.  ‘Private’ attorneys also filed 27% of all innovation patents, compared with just 16% filed by firms within listed groups.

The ‘low-cost’ option of self-filing continues to be a popular – if unwise – choice for many Australian applicants.  Over a quarter of all provisional applications and innovation patents were self-filed in 2018, as were perhaps 10% or more of all standard applications filed by Australian residents.  Assuming that the past remains a good guide, the overwhelming majority of these applications will never deliver any value or result in rights being granted to their owners.

30 January 2019

Top Patent Filers of 2018 – Software, Gaming and FinTech Companies Prominent Despite Questions Over Eligibility

2018 In the 2018 calendar year, the number of standard patent filings in Australia in grew modestly, by 3.6%, to 29,960.  This growth was reflected in both direct national filings, up from 9,007 to 9,046, and National Phase filings under the Patent Cooperation Treaty (PCT), up from 19,898 to 20,914.  Meanwhile, the number of provisional applications filed fell once again, by 5.2% from 5,182 to 4,943.  Applications for the condemned innovation patent, however, increased from 1,816 in 2017 to 2,121 in 2018, although abuse of the system by Chinese applicants seeking government subsidies at home remains rife, probably accounting for nearly a quarter of all innovation patent filings.

Interestingly, despite continuing uncertainty amid rejections by IP Australia of applications directed to so-called computer-implemented business methods, companies with significant interests in software, gaming/gambling, and financial technology (‘fintech’) feature strongly among the top applicants for Australian patents in 2018.  These companies include Qualcomm, Aristocrat Technologies Australia, Apple, LG Electronics, Huawei, Accenture Global Solutions, Samsung, Visa International, Mastercard International, Facebook, and Google.

The fall in provisional filings is disturbing, and continues a trend that has been virtually unbroken since the start of the millennium – in 2000, the number of provisional applications filed hit a peak of 7,434, and has declined almost every year since then.  As far as I can tell, the number of provisional applications filed in Australia has not been below 5,000 since at least as far back as the mid-1980s.  The overwhelming majority of provisional applications are filed by Australian resident companies and individuals, and the number of filings thus reflects a combination of the amount of innovation taking place in the Australian economy, and the level of interest from Australians in protecting their ideas through the patent system.

Sadly, the decline in provisional filings does not surprise me, and is symptomatic of the malaise in the Australian market that I wrote about most recently in relation to the proposed merger of QANTM IP Ltd and Xenith IP Group Ltd.  Before this, I had written about Australians’ lack of business sophistication when it comes to IP, about the poor appreciation in this country of the value of IP and corresponding decline in per capita patent filings, and about the particular failures of small and medium enterprises (SMEs) to identify, manage and protect their IP assets.  The situation is certainly not improving.

The top Australian applicant for standard patents in 2018 was, once again, Aristocrat Technologies, with 252 applications – up from 157 applications in 2017.  No other Australian resident company featured in the top 30 applicants, with the next most prolific Australian filer being CSIRO with 55 applications – encouragingly up from 45 in 2017.

Public research institutions also featured strongly among the top filers of provisional applications, with Monash University (44), the University of NSW (44), The University of Sydney (40), CSIRO (39), the University of Queensland (27), the University of Melbourne (21), the University of Western Australia (17), and the Queensland University of Technology (16) occupying eight of the top 10 spots.

For all the numbers, and further commentary, please read on.

22 January 2019

Commissioner of Patents Files Appeal in Case On Patent-Eligibility of Computer-Implemented Invention

Christmas briefsThere may have been little rest and relaxation over the Christmas and New Year period for lawyers working on behalf of the Australian Patent Office because, as I predicted back in December, on 16 January 2019 the Commissioner of Patents filed an application in the Federal Court of Australia for leave to appeal the decision of a single judge in Rokt Pte Ltd v Commissioner of Patents [2018] FCA 1988.  In that judgment, Justice Alan Robertson found that a claimed method and system for providing ‘a dynamic, context-based advertising system, introducing a distinction between an engagement offer, without a direct advertising benefit, and an advertisement designed to lead directly to the sale of the product’ is patent-eligible subject matter under the Australian ‘manner of manufacture’ test.  In doing so, he reversed the decision of a Patent Office Hearing Officer, who had found that ‘the substance of the invention in this case amounts to business innovation’, which was not patentable, and therefore refused Rokt’s patent application: Rokt Pte Ltd [2017] APO 34.

There is no great surprise in this move by the Commissioner.  As I have previously noted, judgment is pending in the appeal from Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2018] FCA 421 – a case that has been heard by an expanded bench of five judges, and which concerns similar issues to those which arose in RoktThe Commissioner of Patents intervened in the Encompass appeal, and the Institute of Patent and Trade Mark Attorneys of Australia (IPTA) also sought to intervene, and filed written submissions.  The outcome in Encompass could well change the understanding of the law relied upon by the judge in Rokt.  The Commissioner will therefore want to ensure that the opportunity to have the facts in Rokt reconsidered under the law to be explained in Encompass is not lost.

The Encompass and Rokt cases are not the only appeals currently before the Federal Court in respect of Patent Office decisions refusing applications for patents on computer-implemented inventions.  The other ongoing cases are:
  1. Aristocrat Technologies Australia Pty Ltd v Commissioner of Patents (NSD1343/2018), which is an appeal from Aristocrat Technologies Australia Pty Limited [2018] APO 45, and is scheduled to be heard on 2-4 September 2019; and
  2. Repipe Pty Ltd v Commissioner of Patents (WAD323/2018), which is an appeal from Repipe Pty Ltd [2018] APO 42, and is scheduled to be heard on 25-27 June 2019.
With the Encompass judgment expected in the first half of the year, and the Rokt, Aristocrat and Repipe appeals likely to be heard subsequently (assuming they are not resolved between the parties in the wake of the Encompass decision), 2019 could be the year – at last – that we get some clarity around what is, and is not, patent-eligible when dealing with computer-implemented inventions.

Australian Competition Regulator Conducting Public Review of Proposed Merger of Listed IP Groups

Maybe On 10 January 2019, the Australian Competition and Consumer Commission (ACCC) commenced a public review of the proposed merger of QANTM IP Limited (ASX:QIP) and Xenith IP Group Limited (ASX:XIP).  As I wrote back in December, the proposed merger was announced on 27 November 2018 and, should it proceed, would see each Xenith share exchanged for 1.22 QANTM shares, with existing QANTM and Xenith shareholders ultimately owning 55% and 45%, respectively, of the merged group.  The group would bring together five Australian specialist IP firms (Davies Collison Cave, FPA Patent Attorneys, Griffith Hack, Shelston IP and Watermark), along with IP valuation, innovation and advisory service provider Glasshouse Advisory (currently owned by Xenith IP) and Malaysian IP firm Advanz Fidelis (which was acquired by QANTM IP in June 2018).

Section 50 of the Australian Competition and Consumer Act 2010 (‘CCA’) prohibits those mergers that ‘would have the effect, or be likely to have the effect, of substantially lessening competition in any market.’  The ACCC thus has a role to play in conducting ‘informal’ reviews of proposed mergers, providing authorisation for proposed mergers, and acting to block mergers from proceeding where it considers that the merger would breach the ‘substantial lessening of competition’ test.  Although merger parties are not legally required to notify the ACCC of a merger, and may proceed without seeking any regulatory consideration, this does not prevent the ACCC from investigating the merger, making public inquiries and/or taking legal action.

The fact that the ACCC is undertaking a public review of the proposed QANTM/Xenith merger does not imply that it has any particular competition concerns.  Over the five years between 2014 and 2018, inclusive, an average of 34 such reviews were commenced each year, and in the overwhelming majority of cases the ACCC concluded that it was not opposed to the mergers proceeding.  As noted by the ACCC: ‘Mergers and acquisitions are important for the efficient functioning of the economy.  They allow firms to achieve efficiencies and diversify risk across a range of activities.’

The ACCC is seeking public input, and information on the review of the proposed QANTM/Xenith merger can be found on the ACCC web site.  A ‘market inquiries letter’ sets out the focus of the review, along with a range of issues that respondents may wish to address in their submissions.  In particular, the letter explains that:

The ACCC’s investigation is focused on the impact on competition in the supply of services relating to Australian IP rights including patents, trade marks, designs and plant breeder’s rights (Australian IP related services). In particular, we are seeking your views on:
  • the extent of competition between QANTM and Xenith
  • the likely impact of the proposed merger on prices and quality of Australian IP related services
  • the extent of future competitive constraints (such as other competitors or new entrant competitors) for the supply of Australian IP related services.

Submissions are due by no later than 5 pm on 31 January 2019.

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