06 December 2019

Repipe Rebuffed in Appeal Against Rejection of Patent on Computer-Implemented Invention for Workplace Safety

Networked SystemIn a decision issued on 22 November 2019 (Repipe Pty Ltd v Commissioner of Patents [2019] FCA 1956), Justice McKerracher in the Federal Court of Australia has found two innovation patents owned by RePipe Pty Ltd to be invalid, and thus liable to be revoked, on the ground that neither was for a patent-eligible ‘manner of manufacture’ under Australian law.  Coming on the heels of the recent five-judge decision in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161 (for more on which, see ‘Generic’ Implementation of an Abstract Idea is not Patentable, but Does Prior Art have Anything to Do with It?), the Repipe decision is further evidence – assuming any such evidence was needed – of the difficulties now inherent in securing patent protection for computer-implemented inventions, even when the inventions in question satisfy all other requirements for patentability, and reflect considerable investment in the development of innovative and useful technology that was not previously available in the market.

Repipe confirms that where the overall functionality of a computer-implemented invention relates only to excluded subject matter, such as an abstract idea or a business scheme, then the fact that the functionality is embodied via software in a technical system is, in itself, insufficient to confer patent-eligibility.  There must, additionally, be some patentable ingenuity (whatever that might mean) in the implementation itself.  Of course, the relevant implementation details would necessarily be reflected in the claims, and the scope of protection available is therefore correspondingly limited.  This applies regardless of the cost and business risk involved in devising, developing, and bringing the invention to market.

As a result, many software innovators seem to be second-class citizens under the Australian patent system when compared with those working in other fields of technology.  It is difficult to discern any coherent policy basis for this distinction.  The classical economic rationale for having a patent system is to provide an incentive for the risky process of invention, development, and marketing of new products and services.  Once an invention has proven to be commercially successful, competitors can enter the now-established market at considerably reduced risk, even if their production costs are the same as those of the innovator.  Why, then, should patent protection be considered justified for, say, a ‘packing box for shuffled playing cards’, but not for RePipe’s invention of a sophisticated networked system for improving workplace health and safety?  I know which one of these involved the larger investment and business risk in development, and I know which one offers the greater social benefit … and it is not the one that is entitled to patent protection in Australia!

27 November 2019

Another Venerable Brand to Vanish, as IPH Folds Watermark into Griffith Hack

Merger AheadOn 20 November 2019 IPH Limited (ASX:IPH) announced its intention to ‘integrate’ Watermark into Griffith Hack, to create one firm that will operate under the Griffith Hack brand from April 2020.  This is the second time that IPH has merged long-established brands out of existence, following its absorption of Fisher Adams Kelly Callinans and Cullens into Spruson & Ferguson last year.  The latest move will, sadly, spell the end of the oldest continuously-operating specialist IP firm in Australia – Watermark can directly trace its history over 160 years, back to 1859 when Edward Waters co-founded the firm of Hart and Waters in Melbourne, later to become Edward Waters and Sons, and eventually adopting the Watermark branding.  (Although I would be remiss not to mention that Watermark’s IPH stablemate, Shelston IP, also has a claim to this lineage, being descended from Edward Waters’ Sydney branch office, which was established in 1882.)  As many readers will be aware, I worked at Watermark for nearly 15 years, and I will be very sorry to see the brand disappear from the Australian market, as will many others who have passed through the firm over the years, along with those who work there still, clients past and present, and members of the wider profession for whom Watermark has always been part of the firmament.

Since the acquisition of Xenith IP Group Limited (formerly ASX:XIP) back in August, IPH’s portfolio has included Spruson & Ferguson, Pizzeys, A J Park, Shelston IP, Griffith Hack, and Watermark.  It was to be expected that IPH would review this portfolio, with an eye to improving the overall performance and productivity of the group.  Clearly, the conclusion from this review is that Watermark does not stack up as an independent operation.  Certainly, it covers much of the same territory as Griffith Hack – both have offices in Melbourne, Sydney, and Perth (with Griffith Hack also having a presence in Brisbane); both operate IP law firms alongside their patent and trade marks attorney businesses; and both have a similar mix of domestic and foreign-based clients.  But Griffith Hack is significantly larger than Watermark – for example, it employs about two-and-a-half times as many patent and trade mark attorneys, and files a correspondingly larger number of patent applications each year.  From a business perspective, operating two firms with comparable profiles, but such different scales, does not make a lot of sense.

Sad as it is, Watermark’s passing serves as a timely reminder that nothing lasts forever, and change is inevitable and unavoidable.  And while IPH may regard Watermark – no doubt rightly, in the context of its portfolio of firms – as a ‘sub-scale’ business, it remains, at the very end, a profitable business, with a strong reputation commensurate with its long history of service to clients, which is something of which its people can continue to be proud.  There are certainly many less auspicious ways to bow out than by merging into what will become, in all likelihood, the second largest IP services firm in Australia after Spruson & Ferguson.  Indeed, I have little doubt that in the years to come we will witness the demise of other firms in more unpleasant circumstances.

05 November 2019

Australian Senate Condemns the Innovation Patent, but Grants an Extra Six Months on Death Row

Sad GravestoneOn 16 October 2019 the Intellectual Property Laws Amendment (Productivity Commission Response Part 2 and Other Measures) Bill 2019 was passed by the Australian Senate. Among other purposes, this bill includes long-anticipated provisions to phase out Australia’s second-tier patent right, the innovation patent – despite concerted last-ditch efforts by opponents of the move to persuade non-government senators, in particular, to vote against the legislation. This lobbying did not fall entirely upon deaf ears, with Centre Alliance Senator Rex Patrick speaking passionately on behalf of Australian companies that wanted to see the innovation patent retained and unsuccessfully moving an amendment removing the phase-out provisions from the bill.

In the end, however, the Labor opposition voted with the government, thus ensuring passage of the bill, albeit on condition that the legislation be amended to provide for a statutory review to be undertaken to assess the impact on Australian small to medium enterprises of abolishing the innovation patent system, and make recommendations to facilitate access to standard patent protection for small business in Australia. The review is required to commence within three months of the legislation coming into effect, and must be completed within 12 months.

To allow time for the review, the period before the phase-out begins is to be extended from 12 to 18 months. During this period, it will remain possible to file new innovation patent applications. Once the phase-out commences, however, new innovation patents will only be available where they are based on existing applications filed prior to the phase-out date, e.g. as divisional applications or via conversion of pending standard patent applications.

To become law, the bill must still pass through the House of Representatives. However, its passage there is certain, since the government has a majority. The House will sit for the final time in 2019 between 25 November and 5 December, and I anticipate that the bill will pass during this period, and then be sent on to the Governor General for ‘Royal Assent’ (i.e. to be signed into law) before the end of the year. On this timetable, the statutory review will have to commence no later than March 2020, and be completed no later than March 2021. The phase-out will then begin by June 2021.

16 September 2019

‘Generic’ Implementation of an Abstract Idea is not Patentable, but Does Prior Art have Anything to Do with It?

Abstract ComputersOn Friday the 13th of September 2019, an expanded five judge panel of the Full Bench of the Federal Court of Australia handed down its much-anticipated judgment in the appeal by Encompass Corporation Pty Ltd against the finding of a single judge that its computer-implemented method for displaying information gathered from multiple sources was ineligible for patenting under Australia’s ‘manner of manufacture’ subject matter test: Encompass Corporation Pty Ltd v InfoTrack Pty Ltd [2019] FCAFC 161.  For those of us who had been hoping that this case would bring some much-needed clarity to the law relating to patent-eligibility of computer-implemented inventions, the decision is something of an anticlimax.  The Full Court has unanimously dismissed Encompass’ appeal, easily finding, at [112], that there was ‘no error’ in the primary judge’s ‘ultimate conclusion that no manner of manufacture is involved in the method and apparatus as claimed.’

The concern that many interested stakeholders had with the first instance decision in the Encompass case was the way the judge appeared to conflate considerations of novelty and inventive step with his evaluation of the subject matter of the invention.  As I pointed out at the time, this would violate what I called the ‘ball point pen principle’ (after an analogy drawn in the earlier unanimous Full Court decision of CCOM Pty Ltd  v Jiejing Pty Ltd [1994] FCA 1168).  According to this principle, while advances in technology will generally restrict what is subsequently patentable on grounds of anticipation or obviousness, the question of whether or not something is suitable subject matter for a patent is – or should be – independent of the state of the art.  Put simply, a ball point pen does not cease to be the ‘kind of thing’ for which a patent might, in principle, be granted simply because it is no longer new and inventive.

This issue has significance beyond the Encompass case, because it is now the published official practice of the Australian Patent Office to take the prior art into account when assessing patent-eligibility under the ‘manner of manufacture’ test: see Section 2.9.2.2 of the Patent Manual of Practice and Procedure (as archived on 8 March 2019).

For this reason I had hoped – in vain, as it turns out – that the five judge panel in Encompass would take the opportunity to state expressly, once and for all, whether the Court had intended, by various comments in its two previous decisions on patentability of computer-implemented inventions (Research Affiliates LLC v Commissioner of Patents [2014] FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd [2015] FCAFC 177) to bring considerations of prior art into the assessment of patent-eligibility.  My own view is that it did not, and that Encompass implicitly reinforces that position.  However, in seemingly being reluctant to expressly criticise the primary judge’s reasoning, the Full Court in Encompass stops short of making any explicit statement to this effect.

The fact is that Encompass was not an appropriate case for the Court to consider broader principles for patentability of computer-implemented inventions.  It was readily able to find the alleged invention ineligible on the well-established basis that the claims merely required generic computer implementation of an otherwise unpatentable abstract idea or scheme.  This finding requires no consideration of the state of the prior art, notwithstanding that the primary judge might have appeared to follow such an approach.

11 August 2019

Patent Attorney Survey Part 2 – How Life Within Listed Groups Compares with Privately-Owned Firms

Masks - happy and sadIn this article, I am going to look at responses to the second section of the survey of trans-Tasman IP professionals (primarily patent attorneys) that I conducted earlier this year.  This part of the survey addresses various aspects of job satisfaction and the working environment, including ‘happiness’, professional support, and opportunities for career development and advancement.  In particular, I will compare the responses across groups defined by firm structure (i.e. ‘listed group’ firms versus traditional privately-held firms) and seniority, distinguishing between those at the ‘top’ of their organisations (i.e. owners of privately-held firms and employed principals, or the equivalent, within listed group firms) and employees at the levels below who are perhaps aspiring to these roles in future. 

I selected these four categories (‘private owner’ – sample size 54; ‘private employee’ – sample size 97; ‘listed principal’ – sample size 28; and ‘listed non-principal’ – sample size 68) after initially analysing the data, and finding that the responses of firm owners are quite different, in many cases, from those of their employees.  It therefore would not make sense to divide the data only into ‘listed’ versus ‘private’.  And, having made this division among attorneys within privately-held firms, it made sense to make a corresponding division among the listed group respondents.  Indeed, as you will see, there are a number of areas in which the views of principals within the listed group firms differ measurably from those of their less senior colleagues.

If you have not already read my earlier article on respondent demographics, then I recommend you do so.  That article makes the case that the survey responses are, overall, reasonably representative of the profession as a whole – not least because around 25% of all registered patent attorneys working in private practice responded, and this sample of the population is broadly representative of the whole, on characteristics such as gender, firm structure/ownership, and firm size.

In the following analysis, you will find various statements regarding the survey results that are supported by p-values, i.e. measures of statistical significance.  I have written an article explaining how these values were derived, and what they do, and do not, mean.  I recommend reading this article if you really want to understand what can, and cannot, reasonably be concluded from the survey results.  Furthermore, if you intend to take these results and use, or quote, them in a different context, you would be performing a great disservice to yourself (and me) if you do not make the effort to read this article so that you properly understand what you are doing.

While it is difficult to summarise all of the results in brief, I will make a few observations by way of introduction.  Firstly, owners of privately-held firms stand out as being more satisfied with their circumstances in every respect.  This is perhaps unsurprising, in that they are essentially a self-selecting group of individuals who presumably wanted to be business owners, and have achieved that objective.  What might have been less expected is how little difference there is between the other groups.  Certainly there are differences, and many of those differences are statistically significant, even where they may be relatively small.  In many respects, employees of privately-held firms consider themselves on a fairly equal footing with employed principals of listed group firms.  To the extent that there is a difference, listed group principals are far more polarised in their views – broadly speaking, many in this group appear to be either highly satisfied or highly dissatisfied with their circumstances, while fewer take up the middle ground than in other groups.  Non-principal employees of listed group firms appear to be least content with their circumstances, but even so there are many in this group that report agreement, or strong agreement, with positive statements about their employment conditions.

Patent Attorney Survey – A Primer on Statistical Analysis (and Pizza)

Pizza chefIn my articles presenting results of the attorney survey that I conducted earlier this year, I provide statistical measures – notably p-values – of the significance of certain results, such as whether particular subsets of patent attorneys are more or less satisfied with various aspects of their employment than others.  It is, I believe, important that readers with an interest in these results have a clear understanding of what these statistical measures mean (and, indeed, what they do not mean).  This requires some explanation of how they have been obtained, and the specific questions that they are designed to address.  This article is intended to provide such an explanation.

I realise that not everybody will take the time to read this article in its entirety.  For those who do not, the two main points that you should nonetheless take away are these:
  1. statistical significance is not the same thing as what we might call ‘practical significance’ – while we might be confident, based on a statistical test, that an observed effect (e.g. a difference between two groups) is ‘real’, and not just the result of random variations in our limited sample, this does not necessarily mean that the effect is large and, indeed, we may not be able to say anything much about the size of the effect; and
  2. p-values are not ‘magic bullets’ that can tell us exactly what to think about our data, based upon some fixed threshold (e.g. p < 0.05) – it is necessary to consider them in the context of the data, and of the importance and consequences of any conclusions that may be drawn and/or decisions made based upon the results.
For casual readers, this may be enough.  However, I hope that anyone who intends to take any of the results presented in my articles and use them in other contexts (e.g. for decision-making, or quoting them elsewhere) takes the time to read this article, and the effort to be suitably careful in interpreting the data.  While statistics is obviously a pretty dry topic, I have tried to keep things reasonably simple and (hopefully) interesting by presenting the analysis with reference to a hypothetical example involving pizzas and anchovies!

24 June 2019

Australian SMEs Show a Growing Preference for Smaller Patent Attorney Firms

Choose wisely... Back in February, I published data which indicated that Australian patent attorney firms within listed groups, and perhaps larger firms in general, appear to have been losing share in the market for Australian patent applications filings to smaller, privately-held firms.  In this article I will take a closer look at this trend, by focusing specifically on filings by Australian-resident applicants, breaking firm size and corporate structure down into more precise groups, and looking at the behaviour of small and medium sized enterprises (SMEs) in particular. 

When it comes to preparing and filing original patent applications for new inventions, Australian SMEs collectively are patent attorneys’ most significant clients, by far.  In 2017, SMEs filed as many original patent applications with the assistance of patent attorneys as all other categories of Australian applicants combined.  They are also the only category of Australian applicants that actually generated an increase in the number of original patent applications filed over the decade spanning 2008 to 2017.

In recent years, however, this important category of patent applicants has been exhibiting some clear trends in choice of patent attorney service providers.  In particular, as I will show in this article, Australian SMEs are increasingly choosing smaller service providers over larger ones and, since local attorney firms began to be owned by publicly-listed companies, privately-held firms over those within the listed groups.

09 June 2019

The Patent Office is Granting Time Extensions to Australia’s Grace Period for Filing After Self-Disclosure

Deadline The Australian patent law and regulations provide applicants with a 12-month ‘grace period’, enabling an application to be validly filed following an inadvertent, or intentional, act of self-disclosure of an invention.  As most readers will doubtless be aware, this is significant because in the absence of such provisions, any disclosure – such as publication or public use – of an invention before securing a priority date becomes prior art that can be used to invalidate patent claims on the basis of lack of novelty or lack of inventive step.  While there are a number of countries that provide a general period of grace of this kind, notably including the USA and Canada, the majority of countries do not.

Furthermore, most countries (Australia included) have provisions in their patent laws to permit time limits to be extended in appropriate circumstances, such as when an inadvertent error or omission has occurred, or when circumstances beyond someone’s control have prevented them from meeting a deadline.  Typically, however, grace periods cannot be extended beyond the legislated period (i.e. 12 months, in Australia’s case).  There are a number of ways to rationalise this restriction.  One approach is to observe that an inventor (or successor in title, such as an employer) is under no obligation to file a patent application at all and, until an application of some sort is filed, does not make themselves subject to any provisions of the patent system.  Thus, once a disclosure has occurred, the onus is entirely upon the prospective applicant to ensure that an application is filed before the expiry of any applicable grace period, given that there is no public record within the system of any relevant filing ‘deadline’ that could be extended.

Another approach is to consider that a grace period operates retrospectively, rather than prospectively.  That is, when applying the patent laws to an application, the effect of the grace period is to permit certain disclosures to be disregarded, so long as they occurred no more than 12 months prior to the actual filing date of the application.  This is in contrast, for example, to the filing of an initial priority application, which formally establishes a specific date 12 months in the future by which any further applications must be filed in order to obtain the benefit of the priority date.  Extending a grace period thus has the effect of increasing the period further back in time, as opposed to granting the applicant additional time to complete an act for which a specific time limit has already been established within the system.

Permitting extensions to grace periods is problematic for a number of reasons.  Firstly, it may leave no obvious trace of the fact that a patentee has been permitted to obtain a patent despite having made a public disclosure of the invention more than 12 months prior to filing an application.  A member of the public would need to dig into the details of the Patent Office files to discover exactly what additional period of grace has been allowed, and in what circumstances.  Secondly, due to the retrospective effect of a grace period extension, the applicant is effectively permitted to file an application later than should have been allowed, which is advantageous because a patent that is filed later also expires later than would otherwise be the case.  In priciple, however, the grant of an extension of time should do no more than place the applicant in the same position that they would have been in had they not missed the deadline in the first place, and no better.

Notwithstanding these issues, it has recently been brought to my attention that IP Australia is, in fact, granting extensions to the grace period.  I must confess that I had not believed such extensions to be possible (although, as I shall explain, there is a single published Patent Office decision from 2002 that suggests otherwise).  Indeed, as will become clear, I remain sceptical about the validity of extending the grace period, in the absence of any judicial consideration of the matter.

28 May 2019

Patent Attorney Survey Part 1: Respondent Demographics

Analysis As many readers will already be aware, between mid-March and April I conducted a survey with the objective of gaining some insights into how members of the trans-Tasman IP profession (primarily patent attorneys) are faring in the face of a challenging market and substantial structural changes within the profession.  Over the coming weeks I will be publishing a number of article reporting on the results of the survey.  This is no small task, in view of the number and diversity of responses received.  While some of the observations resulting from the survey will be uncontroversial, there are others that I expect (and, indeed, hope) may lead to further conversations about the impact of change on the profession.

This first article, however, should be relatively free of controversy.  It is primarily concerned with an analysis of the overall demographics of respondents to the survey, by comparison with the profession as whole.  What these results indicate is that there is a sound basis for belief that responses to the survey are broadly representative of the wider profession.

In the end, I received 247 responses to the survey.  Unsurprisingly, the overwhelming majority – over 90% – of these were from patent attorneys, and trainees, working in private practice in Australia and New Zealand.  (I am using the term ‘private practice’ in its conventional sense here, i.e. to mean attorneys providing services in the role of external advisors to clients, regardless of whether they are doing so as sole practitioners, members of privately-held practices, or members of publicly-listed groups.)  Many of the survey questions were not generally applicable to patent attorneys working other contexts (e.g. in-house), or to trade mark attorneys or lawyers.  I received a few complaints from people who felt excluded as a result, and I do appreciate that those people genuinely felt that they were being denied an opportunity to express their views.  However, this survey was intentionally focussed on those who are are most directly affected by current market conditions and the ongoing structural changes in the profession.

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.

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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