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.

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