20 February 2023

IPH Sues Again, as Competition Hots Up for Australian and New Zealand Patent Filings in 2022

CompetitionAs I recently reported, Australian (standard) patent filings in 2022 remained close to the historic highs of the previous year.  This implies, of course, that patent attorneys filing applications on behalf of domestic and foreign clients should, overall, also have maintained high numbers of new filings.  But, of course, individual firms fared differently in the competition for this work.  Looking at total new standard patent filings across Australia and New Zealand, gains were made by the two firms owned by QANTM IP Limited (ASX:QIP), namely Davies Collison Cave (up by 5.7% to 4094 applications) and FPA Patent Attorneys (up by 3.9% to 2444 applications, after incorporating filings originally made by Cotters).  Other firms to make notable gains, in terms of both filing numbers and percentage growth, were FB Rice (up by 7.6% to 3697 applications), Wrays (up by 16.2% to 1380 applications) and RnB IP (up by 10.5% to 864 applications).  Firms that also made good percentage gains, albeit off a lower base of filings, included Allens (6.0%), Michael Buck IP (6.6%), Adams Pluck (22.6%), Dentons (30.7%) and Collison & Co (18.7%).

On the other side of the ledger, Madderns’ filings fell by 13.5%, to 801 applications.  Within the group of firms owned by IPH Limited (ASX:IPH), Spruson & Ferguson, AJ Park and Pizzeys all saw declines in new filings (by 7.9%, 2.8% and 2.9% respectively), while Griffith Hack held steady with a small (0.6%) increase in filings.  IPH has just reported its half-year financial results (for July-December 2022) [PDF 255kB], and while the news was positive for the group overall – a 24% uplift in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) to A$80.4 million – like-for-like EBITDA for the Australian and New Zealand IP businesses declined by 6%.  IPH has blamed this partly on travel expenses, with activity increasing following the end of COVID-related travel restrictions.  But it is apparent that a decline in Australian and New Zealand patent filings has also contributed. 

In related news from the IPH group, while Pizzeys settled its legal dispute with RnB IP late last year, Spruson & Ferguson recently commenced similar proceedings in the Federal Court of Australia (case no. NSD6/2023) against upstart firm GLMR and its four principals.  And, just as the founders of RnB IP were former employees of Pizzeys, the principals of GLMR are all former employees of Spruson and Ferguson.  Through its Federal Court action, Sprusons is seeking an order for preliminary discovery – presumably fishing for evidence of GLMR’s contact with Sprusons’ clients – which is precisely how Pizzeys commenced its action against RnB IP in June 2019.  To date, GLMR has filed just 194 applications (with the earliest being in February 2022).  However, it has also taken over responsibility for at least 629 applications that were previously filed and/or managed by Spruson & Ferguson.  It is early days yet, but we can perhaps expect to see this dispute take much the same course as Pizzeys v RnB IP.

Let’s have a look at the numbers in more detail.

Australian and New Zealand Filings

Patent attorneys in Australia and New Zealand operate under a single ‘trans-Tasman’ regulatory regime, meaning that registered attorneys are able to practise in either one or both countries.  Many Australia-based firms therefore file and prosecute some applications in New Zealand, and vice versa.  The chart below shows the numbers of provisional, complete (standard), and total applications filed in each of the two countries during 2022.

Australia and New Zealand Provisional, Standard and Total Applications 2022

As can be seen, there are many more applications filed in Australia then in New Zealand.  However, the number of New Zealand filings is not insignificant, and makes a substantial difference to the total filings of some firms – particularly those based in New Zealand – and I have therefore included filings in both countries in the 2022 figures.

Leading Firms – Total Filings

The chart below shows the total number of Australian and New Zealand patent filings, broken down into standard and provisional applications, made by the top 18 firms.  The chart also shows filings made by ‘non-attorney’ agents (i.e. where the filer is a person or entity other than a registered patent attorney, attorney firm, or any named applicant or inventor), and ‘self-filings’ (i.e. where the filer is a named applicant or inventor).  While it remains possible to file innovation patent applications in Australia, this can only now be a divisional or a converted application based upon an existing application having a filing date prior to 26 August 2021.  As a result, very few innovation patent applications were filed in 2022 – too few to be visible on this chart – and I have therefore not bothered to include them.  For the record, the largest number of innovation patent applications filed by any firm in the top 18 was just 14, by Griffith Hack.

2022 Leading Firms' Patent Filings by Application Type

Once again, Spruson & Ferguson was easily the biggest filing agent for Australian patent applications.  Fellow IPH firms Griffith Hack, AJ Park and Pizzeys placed fourth, seventh and eighth respectively.  The two QANTM group firms, Davies Collison Cave and FPA Patent Attorneys, placed second and sixth.  The numbers for FPA include filings originally made by Cotters, which was integrated into the other two QANTM firms in mid-2022 [PDF 508kB], with the patent applications in its care being transferred to FPA.  The top ten was rounded out by ‘traditional’ privately-held firms FB Rice (3rd), Phillips Ormonde Fitzpatrick (5th), Wrays (9th), and Madderns (10th).  (Oxygene IP, I should note for those who have not been following the various changes in the profession, is the firm formerly known as Houlihan2.)

Two changes in the top 10 since the previous year are notable.  Firstly, FB Rice overtook Griffith Hack to take third position, whether measured by Australian filings alone (as I did last year), or by the total number of Australian and New Zealand filings.  FB Rice is now hot on the heels of Davies Collison Cave.  Secondly, Alder IP, which placed 9th last year, between Wrays and Madderns, principally on the back of hundreds of innovation patent applications filed on behalf of Chinese Applicants, is predictably now nowhere to be seen.

The following chart shows the same total numbers of filings, but now broken down into Australian and New Zealand applications.  Unsurprisingly, the New Zealand based firms AJ Park and James & Wells have the largest proportions of New Zealand applications making up their total filing numbers.

2022 Leading Firms' Patent Filings by Country of Filing

Firm Gains and Losses in Standard Patent Filings

In 2021 there was an increase of 10.6% in new Australian standard patent applications, resulting in an all-time high in new national filings.  As a result, almost every firm in the top 18, with the sole exception of Griffith Hack, achieved at least some gain in new applications.  In 2022, however, with total filings stabilising, the year-on-year changes in total standard patent application filings are more of a mixed bag, as the following chart shows.

2021-2 Relative Change in Standard Patent Filings (Total AU and NZ)

Spruson & Ferguson experienced the largest decline in filings in absolute terms, being responsible for 596 fewer standard Australian and New Zealand patent applications in 2022 than during the previous year.  Madderns experienced the largest relative decline in filings, corresponding with 125 fewer standard Australian and New Zealand patent applications.  This was mostly due to a drop-off in new applications by a single US-based client (Qualcomm), which filed 79 fewer applications in Australia and 16 fewer applications in New Zealand in 2022 compared with 2021.

As I have already observed, 2022 was not a great year for filings by the IPH group firms generally, with AJ Park and Pizzeys also experiencing a decline, and only Griffith Hack holding steady.  The year was much better for the QANTM group, with both Davies Collison Cave and FPA Patent Attorneys increasing their filings.  The top three privately-held firms also fared well, with FB Rice and Wrays making significant gains, and Phillips Ormonde Fitzpatrick maintaining ground in a year when overall filings fell slightly.

Standard Patent Filings by Domestic Residents

The chart below shows the number of Australian and New Zealand standard patent applications filed by leading attorney firms naming at least one domestic resident applicant, i.e. an Australian applicant for a filing in Australia, or a New Zealand applicant for a filing in New Zealand.  The chart also indicates the proportion of ‘mixed origin’ applications, i.e. those additionally including one or more non-domestic joint applicants.  As can be seen, the majority of applications filed by domestic residents do not include any foreign co-applicants.

2022 Australian and New Zealand Filings with Resident Applicants

The ordering of firms in the above chart is based on the total number of applications filed, from all countries of origin.  It can thus be readily seen that firms such as Sprusons, Davies Collison Cave, Pizzeys, and RnB IP ‘underperform’ in filings from domestic residents relative to overall application numbers, while firms such as FB Rice, Griffith Hack, FPA Patent Attorneys, and Wrays relatively ‘outperform’ in filings from domestic residents.  However, it should be appreciated that this often reflects an intentional choice of business model and market focus.  Pizzeys and RnB IP, for example, are very much focused on attracting foreign – and particularly US – clients, whereas firms such as FB Rice and Griffith Hack have traditionally sought to maintain a more balanced mix of foreign and domestic clients.

There was a significant decline of around 17% (500 applications) in total domestic filings by Australian residents in 2022, following something of a bumper year in 2021 that was influenced by the demise of the innovation patent system.  As a result, most of the leading firms experienced some decline in domestic applications last year, with the notable exception of FB Rice which, as a result, became the leading filer on behalf of domestic residents.

Standard Patent Filings from Leading Countries of Origin

The following chart shows the number of standard patent applications filed by leading firms on behalf of applicants resident in Australia/New Zealand, and in the top five foreign jurisdictions – the USA, China, Japan, Germany, and the UK.

2022 Australian and New Zealand Filings by Country of Origin

In 2022, 45% of all Australian and New Zealand standard patent applications were filed by applicants based in the US, and therefore most firms handle a high proportion of US-originating filings.  There are, however, a few firms that are particularly focussed on serving US-based clients.  Among the firms most heavily skewed towards US business are RnB IP (84%), Pizzeys (75%), and FPA Patent Attorneys (56%).  Madderns, by contrast, is notable for a very low proportion (17%) of US-originating filings following the decline in applications by Qualcomm.  On the other hand, it has been achieving ongoing growth in filings coming out of China, with Chinese applicants making up 41% of applications filed by Madderns in 2022.

Conclusion – Competition Hotting Up for IPH Group Firms

Broadly speaking, in terms of new patent filings, it could be said that 2022 was a fair to good year for firms in the QANTM group, and for most of the leading privately-held firms.  It was, however, not a great year for firms in the IPH group, with the exception of Griffith Hack.

There is, of course, more to an IP attorney business than patent filings, but it has to be said that the declines in filings by IPH group firms in 2022 are consistent with the financial results disclosed in IPH’s recent half-year report.  And patent filings are an important predictor of future revenues, because today’s new filings are the source of further prosecution work over years to come.

In this context, it is telling that Spruson & Ferguson, like Pizzeys before it, is willing to spend money pursuing legal action against former employees and their new firm, presumably in an effort to limit the impact that this competition may have on its own filing numbers and ongoing revenues.  I am not in a position to comment on the legal merits of Sprusons’ case, and I accept that it is entitled to enforce the terms of what it believes to be valid employment contracts.  In general, however, I am pro-competition, and against restraint clauses except where they are absolutely necessary (and proportionate) to protect the legitimate commercial interests of an organisation.  In professional services, in particular, clients are entitled to select their service providers, and many have long-standing relationships and trust not only with firms, but with particular practitioners.  Imposing and enforcing restraints in this context is problematic, because they impact client choice as well as the practitioner’s freedom to practise their profession.  I would argue that the most legitimate way for a firm to retain a client might be by retaining the employee with whom they prefer to work.  But maybe that’s just me!

This is not to say that any concerns within IPH are not well-founded.  It is early days for GLMR, and it is yet to make an appearance on the lists above.  Meanwhile, RnB IP has now put its legal dispute with Pizzeys behind it, and is knocking on the door of the top 10 filing firms.  But it is not just – or even mainly – the new firms that are challenging IPH.  Among privately-held firms, FB Rice and Wrays are continuing to grow their filing numbers significantly, while the QANTM group firms also achieved growth in 2022.  Suing the competition will only get IPH so far.  Beyond that, it also needs to compete for business on the usual terms.

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