31 May 2022

Privately-Held Attorney Firms Have Built Filing Share Over the Past Decade, Thanks Largely to IPH!

Building 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.

26 May 2022

Division and Conversion – the Continuing Life of the Australian Innovation Patent

It's a convertible - geddit?!In the Patents chapter of its recently-published 2022 IP Report, IP Australia provides the usual annual filing statistics for 2021.  According to the report, there were 23,371 Australian standard patent applications filed as National Phase Entries (NPEs) from international applications under the Patent Cooperation Treaty (PCT), 9,026 standard applications filed directly in Australia, making up a record total of 32,397 new standard applications.  There were also 4,297 provisional applications filed, and 7,844 innovation patent applications ‘including … standard patents converted to innovation patents’.  On IP Australia’s figures, the top five applicants in 2021 were LG Electronics (259 applications), Huawei (255), OPPO (197), Nestle (157) and Apple (151).

All patent data is a moving target.  The patent office database is a living entity which is updated daily with new applications, and changes to existing applications, including status updates, completion of missing information, and even occasional backdating of records for reasons such as correcting errors or actioning successful applications for extensions of time to complete various actions.  It is not surprising, then, that there are some minor discrepancies between figures in the IP Report and numbers that I published back in January, when the dust was still settling on 2021.  The most notable difference is probably that I awarded the top filing spot to Huawei because, at that time, LG had only 251 filings officially recorded – an additional eight LG applications filed in December 2021 were yet to be fully processed.

A more substantial discrepancy is that I counted only 7,657 innovation patent filings in 2021.  A difference of 187 applications is hard to explain as a consequence ‘late year’ filings, given that most new innovation patent applications were filed prior to 26 August 2021, when the phase-out of the innovation patent system commenced.  The key to this difference is in the words I quoted from the Report above in italics – IP Australia’s numbers include applications that were converted from existing applications of other types, as well as newly-filed applications.

Whether conversions should be included with new filings or not really depends upon what you are trying to count.  On the one hand, converting an existing application to an innovation patent application does not add to the total number of applications in progress, because the original application is effectively replaced by the conversion.  On the other hand, the converted application is assigned a new number and a record of the original application remains in IP Australia’s database, and can be found via the AusPat online search system.  And, from IP Australia’s perspective, the ‘new’ innovation patent application has to be processed through the formalities examination, and granted as a patent, in exactly the same way as a ‘fresh’ filing.

A better approach may be to look more deeply at the circumstances in which conversions are occurring, and to try to account for the applicant behaviour in detail.  It is then possible to make an informed decision on how to account for all applications, depending upon your purposes.  Conversion of other application types to innovation patents remains relevant because, despite the phase-out of the system, it remains possible to convert any pending application filed prior to 26 August 2021.  It also continues to be possible to file new innovation patent applications as divisionals of any standard patent application with a filing date prior to 26 August 2021.

In this article I will therefore look at both division and conversion to innovation patents, and the circumstances in which these strategies have been used, as an insight into the continuing life of the Australian innovation patent during the phase-out period.  I will also endeavour to provide a ‘definitive’ count of new applications filed in 2021.

03 May 2022

Attorney Code of Conduct Passes ‘Health Check’ with Flying Colours

Health Check The Trans-Tasman IP Attorneys Board (TTIPAB) has published a report, and its response, on a Health Check of the Code of Conduct for Trans-Tasman Patent and Trade Marks Attorneys 2018 [PDF, 2.05MB].  The Report was prepared by Professor Andrew Christie, who was commissioned by the Board to conduct the review, commencing in July 2021.  The ‘health check’ covers not only the Code of Conduct, which is a statutory instrument by which all registered patent and trade marks attorneys are bound, but also the Guidelines to the Code of Conduct [PDF, 95kB].  The Guidelines are non-binding and are intended to assist people to understand the Code and the conduct it covers.  The purpose  of the review was to confirm whether the Code was working as intended, and to identify any improvements or clarification to the Code and Guidelines.  The review process included conducting structured interviews with 26 stakeholders (attorneys, general counsel of listed groups, representatives of attorney professional associations, and clients).  The interview questions were based on an analysis of issues raised by complaints made to the Board over the past few years.

The headline outcome of the ‘health check’ is that no amendments to the Code of Conduct were found to be necessary.  More particularly, Professor Christie concluded that the Code ‘has no major deficiencies, and there are no major problems with its provisions’.  He found, however, that ‘there is significant scope to provide more guidance on the application of the Code’s provisions by enhancement of the Guidelines.’  The Board has accepted a number of recommendations for specific improvements to the Guidelines.

Other key observations of the Report include:

  1. most stakeholders have a satisfactory awareness and understanding of the Code, and of the Board, but there is scope for improvement among junior attorneys and clients that do not have a registered attorney on staff;
  2. firms within the two publicly listed ownership groups provide appropriate disclosure to clients of their group membership, however individual firms (as opposed to the holding companies) need to improve the clarity with which they disclose the identities of other firms within their group;
  3. the evidence is that firms within ownership groups act independently from other members of their group in the provision of attorney professional services, as required under the Code;
  4. there is no basis to believe that attorneys in ownership group firms are in breach of their core obligations under the Code (i.e. to place following the law, and the interests of clients, the public and the profession, ahead of other considerations, including the interests of shareholders);
  5. clients of firms in ownership groups are being appropriately informed when their consent is required for firms within the same ownership group to act on opposing sides in adversarial matters; and
  6. some dissatisfaction with the Board’s complaint handling process has been identified within the profession.

The Board has identified and responded to 34 recommendations in the Report.  Ten of these are recommendations for no action to be taken, which the Board has merely ‘noted’ (there being nothing for it to do).  Of the remainder, the Board has ‘accepted’ 17 recommendations for enhancements to the Guidelines.  The Board has also ‘noted’ six substantive recommendations, where it recognises that a relevant issues has been raised, but proposes to pursue a different course from that which has been recommended.  Finally, there is one recommendation, relating to specific circumstances around potential conflicts of interest, that the Board has ‘not accepted’ because of concerns that it ‘would introduce unnecessary complexity and ambiguity’ to the Code.

I do not intend to go through every recommendation in detail – anybody who is that interested (which should include all registered attorneys) can read the Report and Response!  However, I would like to highlight the points that caught my attention, and add a little of my own commentary.

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