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.

Patent Attorneys Employed Within Listed Groups

The chart below shows the number of registered patent attorneys employed by firms within each of the three listed groups – IPH, Xenith (‘XIP’), and QANTM (‘QIP’) – at the time of each of my monthly snapshots.  Both IPH and Xenith have experienced a decline in patent attorney numbers of around 14% (from 110 to 95 in the case of IPH, and from 91 to 78 for Xenith).  Both groups also appear to have been hiring over the past couple of months, following lows in January and February 2019.  Patent attorney numbers within the QANTM group have been a little more stable, falling by a maximum of 11%, from 79 to 70 in September 2018, before recovering a little, to 73 as of March 2019.
Listed group employment

Shift of Patent Attorneys to Privately-Owned Practices

The following chart shows consolidated numbers of patent attorneys employed within the listed groups, compared with the total number of attorneys employed across all privately-owned practices (including sole practitioners).  Patent attorney numbers in the listed groups have dropped by 34 – or 12%, from 280 to 246 – over the past 15 months, while attorneys in privately-held practices have increased by almost exactly the same number, i.e. by 36, from 515 to 551.
Listed versus private employment
While these changes do not necessarily indicate that patent attorneys are leaving firms in publicly-listed groups for places in privately-owned practices – although doubtless a number are – they do strongly indicate either (or both) a preference, or greater demand, for employment in privately-owned firms.  Furthermore, the fact that firms in all of the publicly-listed groups appear to have been hiring patent attorneys over recent months suggests that lack of demand for staff may not be the sole reason for attorneys choosing ‘private’ over ‘public’ practice.

Patent Attorney Employment in Other Sectors

While the majority of patent attorneys has always worked in private practice (as that term has been traditionally used), there are a number of other sectors that also have an established history of directly employing attorneys in-house.  While the numbers in Australia and New Zealand are relatively small by global standards, some corporations employ in-house patent attorneys.  Some patent attorneys are also employed in the public research and university sector, while still others are employed in other roles within government.  The chart below shows the number of patent attorneys employed in each of these three sectors over the past 15 months.
Other sectors employment
The number of patent attorneys employed across these three sectors combined has been fairly stable, changing from 132 to 130 between the start of 2018 and March 2019.  There has been some growth over this period in the number of attorneys employed within research institutions and universities, largely balanced by a reduction in numbers within other areas of the public sector.  There is no evidence of any significant overall shift in attorney employment between these three sectors and traditional private practice (whether in publicly-listed groups or privately-held firms).

Overall Employment of Patent Attorneys

At the beginning of 2018, there were 1004 registered trans-Tasman patent attorneys.  As at March 2019 there are 1019.  So the profession has grown by 15 people over this period.

At the beginning of 2018, here were 927 registered trans-Tasman patent attorneys whose registration details indicate that they were employed by service-provider firms, in corporate in-house roles, or in research institutes, universities, or government.  As at March 2019 there are still 927 attorneys employed in such roles.

The remainder – which has grown from 77 to 92 – are not necessarily unemployed patent attorneys.  A number, I am aware from personal knowledge, are retired, semi-retired, or taking a voluntary break from their careers.  Others may be providing consultancy services, either directly or indirectly related to their qualifications and experience as patent attorneys (I would count myself among this number).  However, I have no doubt that there are many who are seeking, but have been unable to secure, more traditional roles within one of the sectors represented in the charts above.  And the fact is that over the past 15 months, the number of registered patent attorneys has grown, on average, by one per month, while the number of patent attorney roles has grown by precisely zero.

Conclusion – What Does This All Mean?

As I noted at the outset, cause-and-effect are difficult to discern.  In all likelihood, there are elements of both changing workload (client driven) and preference-of-employer (attorney driven) present. 

The fact that follow-on filings – which rely more upon efficient processes and IT systems, rather than attorney time, for high-volume handling – have stagnated within the publicly-listed groups suggests that falling demand has likely preceded attorney departures, at least in this area of business.  There is a limited amount that most employed attorneys can do to affect the choices of Australian and New Zealand firms made by foreign attorneys on behalf of their clients.

On the other hand, there appears to have been a recent acceleration in the shift of original drafting and filing work away from larger firms, and firms in listed groups, towards smaller and privately-held firms.  Since this type of work is far more intensive of attorney time, and developing this business more dependent upon attorney involvement and outreach, it makes some sense that this shift would follow, rather than precede, attorney movements.

Is there, then, an overall pattern?  It is hard to say definitively, but one possible narrative goes something like the following.  High-volume incoming patent filing and prosecution work is moving, proportionately, away from firms in publicly-listed groups.  These firms are thus motivated to improve processes and systems, and reduce head-count (patent attorneys being the most expensive heads) to improve margins and profitability, so as to maximise shareholder value.  There is, then, inevitably a movement of patent attorneys back into privately-held practices, resulting on those firms building capacity to take on the (arguably) more interesting but less profitable work of servicing smaller domestic clients.

There is mounting evidence that something like this is happening.  If so, then the question that arises is, how will it all end?  Is there an equilibrium point, where a balance is struck between the interests of employed patent attorneys, clients, and the differing expectations of private firm operators, on one side, and public investors on the other, to determine the ultimate size and market share of publicly-listed and privately-held firms?  Or will there be a runaway effect, where business and attorneys are sucked out of the publicly-listed groups back into privately-held firms, resulting in the ultimate failure of the public ownership model?  While this latter outcome seems extreme and unlikely, especially given the market clout of some of the brands within the listed groups, I do not think that it is entirely inconceivable.

Perhaps more-pressingly for individual patent attorneys – and aspiring patent attorneys – what are we to make of the seemingly complete lack of growth in employment opportunities within the profession?  I will not labour the point, because I have made it before, but I see this as entirely consistent with a general malaise in the market for IP services in Australia (and, I expect, New Zealand).  Without some change resulting in more significant growth in this market, it is hard to see how there can be any corresponding growth in the demand for patent attorneys.


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