17 February 2020

New Practices Arise, as Over 20% of Australian and New Zealand Patent Attorneys Change Jobs in Just Two Years

DoorsI have been writing about upheavals in the trans-Tasman patent attorney profession for a number of years now, including: the public listing of IP firms; the acquisition of firms by the listed groups; regulation of the profession in response to changes in ownership structures; the demise of long-standing brands such as Fisher Adams Kelly Callinans, Cullens and Watermark; mergers and acquisitions among the listed groups; shifts in market preferences in favour of smaller, privately-held firms; and a legal stoush over the alleged breach of restraint clauses by two former partners of a listed group firm.  It has certainly been an eventful period for the profession!

For the most part, my analysis has focused on developments at corporate and firm level, such as how listed group firms are faring compared to privately-held firms, or how larger firms are performing relative to smaller firms.  And while there is no lack of upheaval among IP firms in the Australian and New Zealand markets, when I drill down to the level of individual attorneys, the rate of staff turnover seems quite remarkable. 

I have performed an analysis of the movements of individual registered trans-Tasman patent attorneys over a 25-month period, and found that during this time just over 200 attorneys have changed jobs.  This may not sound like many, but because the patent attorney profession is small, it actually represents nearly 22% of all attorneys.  To put this in perspective, the most recent National Profile of Solicitors, published by the Law Society of NSW, put the number of members of the legal profession in Australia at 76,303 in October 2018.  Thus if lawyers had been churning over at the same rate as patent attorneys over the past two years, that would be over 16,500 people moving to new jobs!  By way of further comparison, a recent long-term study of a cohort of US lawyers found that 35% had changed jobs over the decade between 2006 and 2016, i.e. a period five times as long as that covered by my data.

A significant proportion of the turnover of attorneys has been into new practices.  There are now 47 pre-existing attorneys, and five recently-registered entrants to the profession, working in patent practices that did not exist in January 2018.  A few of these are practices that have been established within existing legal or other advisory firms.  The majority, however, are new micro practices comprising three attorneys or fewer.  In particular, there are now 22 more solo practitioners than there were at the start of 2018.  Whether you regard this as a strengthening of competition, or a worrying fragmentation of the profession, probably depends upon your point of view.  (I am pessimistically inclined to the latter interpretation.)

A number of the newly-emerging practices have made a solid start in terms of Australian patent filings, with four making it in to the top 50 firms for total filings over calendar year 2019.

Data Sources

Since January 2018 I have been maintaining a database, updated monthly, of the contents of the Register of attorneys maintained by the Trans-Tasman IP Attorneys Board (TTIPAB).  The analysis presented in this article is based on net changes in the register between the beginning of January 2018 and the beginning of February 2020, i.e. I have looked only at where registered attorneys were employed at the start and end of this period, and have not attempted to track movements of people who may have changed roles more than once during this time.  The data sources for patent filing numbers are the same once used in my recent article on the top applicants of 2019.

The usual disclaimers about dependence on the accuracy and integrity of the source data apply.  In particular, I am reliant upon attorneys keeping their registrations up-to-date when they finish in one role, or commence in another.  Most are pretty good about this, in my experience, although the data is most reliable shortly after registration fees fall due in July each year.

To keep things simple, when I use the word ‘attorney’ in the remainder of the article, I mean ‘person qualified and registered as a trans-Tasman (i.e. Australian and New Zealand) patent attorney’.

Size of the Patent Attorney Profession

The diagram below shows the number of attorneys at the beginning (‘Jan 2018’) and end (‘Feb 2020’) of the analysis period.  I have divided the profession into four sectors:
  1. listed group firms, i.e. attorneys employed by firms owned by one of the publicly listed holding companies, IPH Limited (ASX:IPH) (including the former subsidiaries of Xenith IP Group Limited) and QANTM IP Limited (ASX:QIP);
  2. privately held firms, i.e. attorneys employed by, or operating, firms with a more traditional equity ownership structure, and including solo practices;
  3. in-house, corporate and government roles, i.e. attorneys employed by organisations in which they generally provide services internally, rather than to outside clients, including attorneys employed in university and public research organisations; and
  4. ‘other/unknown’, i.e. attorneys whose roles and/or employment status cannot be determined from the information available on the register, including people such as myself who may no longer be working in any form of ‘conventional’ attorney role.
Sector totals
The main points to note here are that while the profession has grown as a whole (from 1,004 to 1,029 attorneys), the bulk of this growth has been within the ‘privately held’ sector, while the number of attorneys employed across the listed groups has declined by 12.5%.  It is likely that ‘growth’ in the ‘other/unknown’ sector actually represents a decline in practising attorneys, despite the fact that members of this group are continuing to maintain their registrations – at least until annual registration fees become due in July 2020.

Exits and Entries

Each year, some attorneys retire or otherwise leave the profession, and allow their registrations to lapse, while a few new entrants complete their qualifications and become registered for the first time.  The diagram below illustrates these exits and entries, broken down into the four sectors introduced above.
Entries and exits
The ‘listed group’ and ‘privately held’ sectors each experienced a net gain in attorney numbers across exits and entries from and to the profession.  The larger firms in both of these sectors continue to perform the ‘heavy lifting’ in training and providing employment opportunities for new attorneys.  FB Rice alone employed just over 20% of newly-registered attorneys in the ‘privately held’ sector, while Spruson & Ferguson (IPH), Griffith Hack (XIP/IPH), Davies Collison Cave (QIP), and FPA Patent Attorneys (QIP) collectively account for over 75% of new attorneys employed in the ‘listed groups’ sector.

Losses and Gains in the Listed Groups

The diagram below shows attorney movements within, to, and from, the listed group firms.
Listed group movements
Most notably, 38 attorneys departed listed group firms for privately held firms, including a number that established or moved to new practices.  Indeed, there has been a net exodus of attorneys from the ‘listed group’ sector to all other sectors, consistent with the decline in attorney numbers within listed group firms noted above.  Additionally, 10 attorneys employed by firms within the listed groups moved to work for different firms within the listed groups.

Losses and Gains Across Other Sectors

The following diagram illustrates attorney movements across the three ‘non-listed-group’ sectors.
Other attorney movements
Notably, privately held firms gained attorney numbers from every other sector, while 42 attorneys moved between firms within the ‘privately held’ group, including those who established or moved to new practices.

New Practices

At the start of February 2020, there were 41 new Australian and New Zealand based private practices (i.e. patent attorney firms, law firms, sole practitioners, and other organisations providing IP advisory services) employing one or more registered attorneys that did not do so, or did not exist, in January 2018.  The diagram below shows the number of attorneys moving into these new practices from each of the four sectors, or upon entering the profession for the first time.  (Note that, although shown separately for the purposes of this illustration, each one of the new practices is itself a member of the ‘privately held’ sector.)
New practices
Relative to the size of the sector, attorneys in listed group firms as at January 2018 were only a little more likely than attorneys in privately held firms to establish, or move into, a new practice: 5.3% (15/281) of ‘listed group’ attorneys, and 4.9% (25/514) of ‘privately held’ attorneys did so.

All but seven of the new practices comprise only a single patent attorney, i.e. they are either new solo practices, or new patent practices established within an existing law firm or other organisation that have, to date, taken on only one attorney.  The two largest are the new patent practice established within Dentons New Zealand, which now employs four attorneys, and the ‘start-up’ firm BOSH IP, formed by four former principals of listed group (XIP/IPH) firm Griffith Hack.

Overall, the establishment of new micro practices has increased fragmentation in the market for patent attorney services, and resulted in a larger number of individual attorneys working in relative isolation.  Where there were 177 practices comprising three or fewer attorneys in January 2018, there are 201 in February 2020.  In particular, the number of solo practices has risen by 15%, from 142 to 164.  The number of small practices, with between four and nine attorneys, has also risen, from 18 to 24.

Performance of New Practices

When I looked recently at the 2019 Australian patent filing performance of attorney firms, new practices did not feature, even though many of them saw increases in filing numbers between 2018 and 2019 that would otherwise have placed them on the ‘winners’ tables.  The reason for their exclusion from that analysis is, hopefully, obvious – since they did not even exist at the beginning of 2018, showing a relatively large gain in filings in 2019 was hardly an achievement, and would have made for an unfair comparison with established firms.  For an apples-with-apples comparison, I have looked at how the new practices all performed on Australian patent filings in 2019.

The table below lists the top 10 new practices, based on total number of Australian patent filings in 2019 (note that these numbers do not include applications filed by other firms and subsequently transferred to a new practice).  The table also breaks down:
  1. how many of the filings were on behalf of Australian or New Zealand (AU/NZ) applicants (i.e. ‘local’ or ‘domestic’ clients) versus the number of behalf of overseas (O/S) applicants; and
  2. how many of the filings were for provisional (Prov.), versus innovation patent (Innov.), versus standard patent (Std. – including PCT national phase entry) applications.

Firm Name Total AU/NZ O/S Prov. Innov. Std.
RNB IP 137 1 136 0 1 136
DENTONS 117 4 113 3 4 110
BOSH IP 71 32 39 17 2 52
LAMINAR IP 69 10 59 5 12 52
COOPER IP 41 34 7 21 4 16
MANN IP 34 32 2 22 2 10
MARTIN IP 32 25 7 12 3 17
FORWARD IP 27 26 1 18 2 7
STELLAR IP 27 26 1 18 8 1
ANDERSON IP 25 23 2 14 5 6

Notably, three out of the top four new practices, in terms of total filings – RnB IP,  Dentons, and Laminar IP – were all more-focused in 2019 on providing filing and prosecution services to foreign applicants, rather than services to domestic clients.  BOSH IP, at number three, had a fairly balanced mix of domestic and overseas filings, while the remaining six members of the top ten – Cooper IP, Mann IP, Martin IP, Forward IP, Stellar IP, and Anderson IP – predominantly filed on behalf of domestic applicants.  Since domestic work generally involves providing IP and strategic advice, as well as drafting and filing applications for new inventions, these firms naturally filed fewer applications overall, but a greater number of provisional applications than firms with a larger overseas client base.

Although the above numbers are probably quite good for start-up practices, all have some way to go to catch up with comparable established firms.  Only the top three new practices ranked in the top 50 firms for patent filings in 2019 – RnB IP at 29th, Dentons at 32nd, and BOSH IP at 50th (with an honourable mention to Laminar IP at 51st).  The 10th-placed new practice, Anderson IP, came in at 87th overall in 2019 Australian patent filings.

Conclusion – Why So Many Restless Attorneys?

While changing jobs from time-to-time can be a good thing – e.g. to gain new insights, experiences, challenges, and opportunities – too much volatility is not a good sign in any profession.  It is often a symptom of low levels of employee engagement and satisfaction.  From an employer perspective, it represents a cost in terms of lost knowledge and experience, recruitment, and retraining, and can be accompanied by client departures (efforts to legally restrain former employees notwithstanding).  For clients, it can be disruptive to find that trusted individuals, with whom they may have worked for many years, have moved on to new, and possibly untested, firms.

It is possible that the past couple of years in the trans-Tasman attorney profession have been an anomaly – many of the former partners/principals of firms acquired by the listed holding companies reached the end of their ongoing employment obligations during this period, and have become free to move on.  But I am not so sure that this is a significant factor.  The numbers above show that turnover within the ‘privately held’ sector is also high, and that there has been no greater trend overall for attorneys to establish or move to new practices from listed group firms than from privately held firms.  Furthermore, attorney movements were almost equally distributed across each of the two years covered by my data.  The dissatisfaction and restlessness – if that is, indeed, what is driving the volatility – appears to exist across the entire profession, and does not yet show any clear sign of abatement.

I keep writing about the problems Australia has with innovation and commercialisation – about the country’s poor innovation efficiency, about Australian businesses’ lack of knowledge and sophistication around IP, about the Government’s continuing lack of any long-term policy around innovation – and about the challenges this creates for patent attorneys operating in a stagnant market for IP services.  I am not making this stuff up, it is all based on data.  And what the data tells me is that many attorney firms are having a tough time.  Is it any wonder, then, that individual attorneys might be feeling dissatisfied with life in the profession?


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