While some doomsayers predicted that the rise of publicly listed groups of patent attorney firms would lead to terrible problems, including a reduction of competition, in the Australasian market for IP services, the sky has yet to actually fall. After a few years of upheaval in the profession, two listed holding companies – IPH Limited (ASX:IPH) and QANTM IP Limited (ASX:QIP) – have established themselves, while the number of mid-sized firms has fallen slightly, as a result of acquisitions and mergers within the listed groups.
Despite this, however, there is no evidence of any lessening of competition. On the contrary, patent filing data shows that IPH’s strategies, in particular, have resulted in an increase in the share of new applications being handled by non-IPH, independent, firms. Indeed, in the present financial year, a greater proportion of Australian patent applications have been filed by smaller independent firms than was the case a decade ago.
How has this happened? Based on the data, I speculate that IPH’s strategies of acquisitions and mergers have resulted in its stable of firms becoming generally smaller – in the sense that they now collectively employ fewer attorneys than before acquisition – but also more efficient. They can therefore be more profitable, despite attracting a smaller share of new filings. Meanwhile, many of the attorneys who have left the IPH group firms have rejoined the independent sector, either as employees of established firms, or in a number of cases by establishing their own new firms. The net effect is that IPH’s overall share of filings has risen – although by less than would have been the case if the firms it acquired had maintained their own individual shares – while the share of filings going to new and established firms in the independent sector has also risen.
As a result, rather than lessening competition, the rise of the listed groups may have strengthened the viability of many existing independent firms, while also contributing to the successful formation of a number of new independent firms. It seems counter-intuitive, but that is what the data tells us is happening. Of course, these gains have not come from nowhere, and it is probably fair to say that the ‘losers’ have been the firms, such as Fisher Adams Kelly, Callinans, Cullens, Watermark, Baldwins, and Shelston IP, that have been acquired and ‘integrated’ out of existence.
In this article, I will present the data that underlies my speculation. In particular, I have analysed the share of Australian standard patent application filings by firms over the past decade (i.e. since before the public listings), to evaluate the relative performance of firms that are now incorporated into the listed groups, before and after acquisition, as against that of independent firms and attorneys. You can decide for yourself whether you agree with my conclusions. I would welcome any thoughts, in agreement or otherwise, in the comments.
