04 June 2021

Is Corporatision Creating a ‘Brain Drain’ in the Australasian Patent Attorney Profession, or is it Just Slick Marketing?

Brain drainAn article appeared on the Lexology legal news service in the past week that riled me a little – not least because it mentions my name and (in my view) misrepresents something that I wrote a few months ago.  For those who may be unfamiliar with Lexology, it is a service that aggregates content from legal and attorney firms, and other service providers, creating a searchable archive and delivering tailored email bulletins to subscribers.  It is free to subscribe and read, but the firms that provide all the content pay handsomely for the privilege of being aggregated and distributed.  In other words, it is not so much a ‘news’ service for readers as it is a marketing service for the contributing firms.  Most of the content is originally published on the firms’ web sites, from which it is automatically picked up (‘ingested’) by Lexology. 

While many of the articles appearing on the Lexology site are useful and informative – e.g. reports of the latest legal developments in various jurisdictions served by the contributing firms – some are pure marketing.  The piece that has so irked me falls, in my opinion, into the latter category.

The article in question is entitled ‘The brain drain: why are senior patent attorneys leaving?’  Authorship is attributed to James & Wells partners Ceri Wells and Adam Luxton.  Wells is one of the firm’s founders, while Luxton recently joined the firm having previously worked for Spruson & Ferguson – a firm owned by listed holding company IPH Limited (ASX:IPH).  Lexology picked the article up from James & Wells’ website, although that was not its first outing – it was originally published as a sponsored article in Australasian Lawyer [PDF 1.04MB]

Never let it be said, then, that James & Wells has not extracted maximum value from the piece, which bears all the hallmarks of having been written not by Wells and Luxton themselves, but rather by a marketing professional.  It takes the classic public relations form of ostensibly objective reporting, interspersed with quoted and paraphrased comments from Wells and Luxton in support of the article’s main theses, which are that:

  1. there has been an ‘exodus of senior patent attorneys from formerly private firms’ because of ‘corporatisation’, and the acquisition and merger strategies of the listed holding companies IPH Limited and QANTM IP Limited (ASX:QIP);
  2. as a result, those firms are losing the benefit of these senior practitioners’ experience, and they are ‘being replaced by younger people with a lot less experience’ who are ‘missing out on the mentorship they need at that point in their career’;
  3. this may lead to junior attorneys feeling ‘overworked and stressed’;
  4. practitioners in ‘corporatised’ firms may lack the autonomy and discretion to keep clients ‘at the forefront’ and to build strong relationships ‘based on trust and respect’; and
  5. established firms now owned within corporate groups are no longer able to guarantee clients that ‘whoever you engaged in that organisation would be able to deliver’.

Overall, the tenor of the article is simply that ‘corporatised firms = bad’ whereas ‘traditional privately held, partnership type models (like James & Wells) = good’.  Perhaps it feels plausible that this might be so, and doubtless there are people around who will attest, anecdotally, to some experience that supports the argument.

I am just not persuaded that it is true, or that having firms going around claiming that it is are doing the Australasian profession any favours.

Setting the Record Straight

I want, firstly, to get my personal beef with the James & Wells article out of the way.  It may be a fairly minor thing, but it bothers me, and since I have my own platform on which to correct the record, I am going to do so!

In reference to something I said here back in January, the James & Wells article states:

Respected Australian commentators like patent attorney Mark Summerfield have said ‘there is a silver lining’ to the loss of patent attorneys. Writing on his Patentology blog, Summerfield noted that the replacement of outgoing attorneys with trainee patent attorneys “represents an admirable commitment to the training and development of the next generation of practitioners.”

OK, I appreciate ‘respected’ but – respectfully – that is not really what I said.  Or, at least, what is implied by this statement is not what I intended to say.  I do not think that there is anything good about replacing experienced attorneys with inexperienced trainees.  Clearly, any well-managed firm benefits from having a range of experience, along with opportunities for advancement and succession.  I certainly did not intend to state, or imply, that the commitment to training and development is in service to the need to replace outgoing attorneys or, indeed, that there is any causal relationship, either way, between the two.

The fact that the larger firms within the listed corporate groups – which are primarily the ones that can afford to do so – are maintaining a commitment to training and development of new practitioners absolutely is admirable.  I wrote that, and I meant it.  Some critics feared that these corporatised firms would not continue to employ so many trainees, because it is a long term investment in the business – and the wider profession – that has a negative impact on the bottom line in the shorter term.  We now know that this fear was unfounded.

At the same time, some more senior practitioners have been leaving.  That may or may not be a bad thing, depending on who they are, why they are leaving, and the extent to which they can be replaced through lateral hires.  But it is a separate thing from the employment of trainees.  Yes, it is beneficial for the firm in question that they have new blood coming through to help compensate for the losses.  But it would probably have been better if fewer of the more experienced practitioners had left.  I never intended to suggest otherwise.

Can ‘Brain Drain’ Claims Be Substantiated?

So, is there any evidence to support the claims in the James & Wells article that there has been an ‘exodus’ or ‘brain drain’ from the corporatised firms?  Well, yes and no.

Here are the facts, based upon records from the Register maintained by the Trans-Tasman IP Attorneys Board (TTIPAB).  In the period between the start of January 2020, and the end of May 2021:

  1. the total number of registered patent attorneys grew by 31, from 1,026 to 1,057;
  2. the number in ‘private practice’ (i.e. providing professional services to clients, whether from a privately held or listed group business) fell by seven, from 813 to 806;
  3. the number working for firms in the IPH Group fell by 25, from 186 to 161;
  4. the number working for firms in the QANTM Group remained steady, at 77; and
  5. the number working in privately held businesses (including sole practice) grew by 18, from 550 to 568.

The greatest ‘churn’ was in the IPH Group, which shed 48 patent attorneys, while also acquiring 10 lateral hires (i.e. existing registered attorneys) from outside the group, along with a further seven newly-registered attorneys (most of whom would, presumably, already have been working as trainees within the IPH firms).  Of the attorneys that left IPH, 23 are now with privately-held firms, three moved to firms within the QANTM Group, four are employed within other sectors (e.g. government or academia) and 18 are not currently associated on the Register with any firm or employer (although I am aware that a number of these are in the process of establishing or moving to new firms and/or waiting out non-compete periods, while others may be transitioning to retirement or taking a career break).

Looking within the IPH Group, it is difficult to say that there is any particular firm that experienced a greater share of attrition.  While 15 patent attorneys have left Griffith Hack, that number includes five former Watermark attorneys.  Spruson & Ferguson lost 13 patent attorneys, AJ Park lost nine (including four formerly of Baldwins), Shelston IP shed six attorneys, while five departed Pizzeys.

If someone were to ask me, based purely upon these numbers, what I thought about goings-on within the IPH Group, I would have to say that there does appear to be a problem there.  After all, to lose 48 employees (26% of a starting number of 186) over a period of less than 18 months should cause any employer some concern.  And it does not look like the IPH firms were planning to downsize by this amount, since they have been working hard to replace at least some of the departing attorneys.  (I know this because, like many others in the profession, I have heard from their recruitment consultants, some of whom seem to have difficulty taking ‘no’ for an answer, if the multiple contact efforts are anything to go by.)

However, if there is a problem at IPH it is not fundamentally with the corporate ownership model.  Over the same period, the QANTM Group lost just nine patent attorneys (12% of its starting – and ending – number of 77), replacing all of them via seven lateral hires and two newly-qualified attorneys.  This is a far more ‘normal’ rate of attrition.  Indeed, across all of the privately-held firms, the total number of departures (including those who switched employment to other privately-held firms) was 49, i.e. 9% of the starting number of 550.  So IPH is an outlier here, but not QANTM.

Do Not Be Sucked In by the Vacuum!

I think it is pure hyperbole to say – as the James & Wells article does – that the recent departures are ‘an unsurprising consequence of corporatisation’, or that they leave ‘a vacuum of knowledge and experience’ within the departed firms.  If the first statement were true, attrition rates at QANTM would be comparable to those at IPH, instead of being akin to those within the privately held sector of the profession.  And while 48 attorneys may have left IPH firms since January 2020, a number of whom were certainly senior practitioners, 138 attorneys did not leave.  Furthermore, the 10 lateral hires into IPH firms include patent attorneys with over ten years post-qualification experience.  There is, therefore, plenty of knowledge, experience, and mentoring capability within the IPH firms – far more, indeed, than in many smaller privately held firms.

I also stand by what I said previously (or, at least, what I had intended to say).  It is extremely encouraging to see that firms within the two listed groups are continuing to invest in the education, training, and mentorship of the next generation of Australasian patent attorneys.  But – contrary to what might be inferred from the James & Wells article – I do not believe that this is part of some strategy to ‘replace’ outgoing attorneys with trainees.  Quite aside from anything else, this would make no business sense.  Senior practitioners – despite their higher salaries – generate significantly greater revenues and profits than junior attorneys.  Trainees, especially in the early stages of training and development, typically cost money.  I am fairly confident that, in taking on trainees, the listed-group firms are making a genuine investment in their futures, and that the attrition among more experienced attorneys at IPH is an entirely separate issue.

Conclusion – What’s Wrong with Corporatisation, Anyway?

So what, actually, is the problem here?  And why do firms like James & Wells feel the need to extol the virtues of their own ownership arrangements over those of the ‘corporatised’ firms?  Corporate structures are commonplace across the vast majority of professions and industries.  Being an ‘employee’ rather than a ‘business owner’ does not, inherently, lead to poor job satisfaction, a lack of opportunity for growth, advancement and professional development, or inferior client/customer service.  Nor does corporatisation necessarily imply a reduction in professional ethics, or an increased propensity to put profits or shareholder interests ahead of legal and ethical obligations.  Many industries are highly regulated, and there is nothing unique in companies and their employees having obligations that override their duties to shareholders.  In any case, privately-held firms have shareholders, too – namely the partners in the business.  I have never quite understood why the direct conflict between their obligations to clients and their own self-interest in running a profitable business should be inherently any easier – or harder – to resolve that the supposed conflict in a corporatised business with the interests of external shareholders.

I am neither for nor against either model of firm ownership.  I just genuinely cannot understand the vehement aversion some people seem to have to the corporate ownership model.  I was an engineer before I was a patent attorney.  I worked for a huge corporation; I worked in academia; I worked for two start-up companies (one of which had offices in four countries); and these days I just work for myself.  Every environment and organisational structure I have ever worked in has had advantages and disadvantages.  I would not say that one was inherently ‘better’ than any other.

I get that some people want to be business owners.  That is perfectly fine, and certainly those people should not work for corporate organisations in which they can only ever be an employee – no matter how senior.  I also have no doubt that some experienced attorneys have left corporatised firms for precisely this reason.  And so they should, since they will never be happy otherwise.  But that is not an ‘exodus’ or a ‘brain drain’.  It is simply a rebalancing of the profession so that people end up working in environments where they can thrive and gain fulfilment from their work. 

This is all good, not bad.  Because, you know what?  There are also people who prefer to be employees.  Who prefer the security of receiving a steady salary.  Who want to hold senior decision-making positions, but are happy to move up in the organisation (and salary scales) via promotion, rather than having to remortgage their homes to buy into the business, which they may then need to manage in an uneasy collaboration with a motley collection of other partners.

And there is a new generation coming through that will have a different attitude from some of those disgruntled senior practitioners, because now there is more than one model for the type of organisation they can choose to work for.  Because they have not always had the carrot of future partnership dangled in front of them.  And because they did not enter the profession in the first place with the sole notion that equity ownership is the pinnacle of achievement.

And there is one last thing I want to say about all this, which is that I really do not think that it is good for the profession when attorneys are seen to be disparaging each other’s businesses in this way, or casting aspersions upon their competitors’ standards of service, their level of client focus, or even their ethical credentials, based primarily upon the way in which their firms are owned or structured.  It is an unedifying spectacle for outsiders to the Australasian profession, and it reflects on all of us.  I would remind all of my fellow registered members of the trans-Tasman profession of our obligation under paragraph 11(1)(d) of the Code of Conduct to act in the interests of the profession as a whole.  Slick marketing efforts that create potential imputations against the integrity of our colleagues sail a little close to the wind, in my estimation.

There are doubtless some people – not least at James & Wells – who will take issue with my views on this topic.  That is good, and I am all for transparent and respectful discussion and debate within the profession.  The comments are open below – go for it!


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