05 March 2024

Large vs Small, Group Ownership vs Independent – What Factors Influenced Firms’ Patent Filing Share in 2023?

Business ups and downsAs I recently reported, Australian patent filings in 2023 fell slightly, by 2.4%, over the previous year.  This implies, of course, that patent attorneys filing applications on behalf of domestic and foreign clients should, overall, also have experienced a similar decline new filings.  But, of course, individual firms fared differently in the competition for this work.  Looking at new complete (i.e. non-provisional) patent filings across Australia and New Zealand, declines were experienced by all firms held within the two groups owned by Australian Securities Exchange listed entities IPH Limited (ASX:IPH) and QANTM IP Limited (ASX:QIP).  IPH firms Spruson & Ferguson, Griffith Hack, AJ Park, and Pizzeys filings declined by 5.0%, 3.6%, 14.9% and 6.9% respectively,  QANTM IP firms Davies Collison Cave and FPA Patent Attorneys filings declined by 13.2% and 8.8% respectively. 

But it was not only the listed group firms that saw declines in excess of the 2.4% average.  Of the leading ten firms, only Phillips Ormonde Fitzpatrick (+3.1%) and Madderns (+10.3%) achieved growth in filing numbers.  While ownership structure is one possible factor influencing client choice, firm size (irrespective of ownership) appears also to be (negatively) correlated with filing growth.  Additionally, the number of new patent filings fell significantly in New Zealand, which disproportionately impacted those trans-Tasman firms – most notably A J Park – with a higher exposure to the market for New Zealand patent services.

Overall, the share of Australian patent filings has continued to shift generally away from larger and/or listed group firms in favour of smaller independent firms.  But even this trend is not simple to unpack.  For many years now, IPH firms have shed filing share, while the QANTM IP firms have held fairly steady, although they experienced a notable decline in share in 2023.  On the other hand, the top six independent firms that have been in continuous operation since IPH initially listed in 2014 have collectively gained 6.3% filing share over this period.  However, bigger gains have been made by the numerous small (i.e. employing fewer than 10 patent attorneys), independent, practices that account for just over half of the trans-Tasman patent attorneys working in private practice.  There are over 150 such practices, including the two rapidly-growing recent entrants RnB IP and GLMR, which have collectively gained 11.8% filing share since 2014, and now account for nearly 23% of all Australian complete patent filings.

Let’s 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 2023.

Australia and New Zealand Provisional, Complete and Total Applications 2023

Compared with 2022, the number of provisional applications filed in both Australia and New Zealand have increased slightly – from 4035 to 4239 in Australia, and from 425 to 440 in New Zealand.  The number of complete (i.e. non-provisional) applications filed in Australia fell by 2.4%, as I have previously reported (note that IP Australia’s data is a living creature, and the actual number has changed slightly, from 31,447 to 31,449, during the intervening time).  There has, however, been a significant drop in complete filings in New Zealand, by 8.8% from 6,852 to 6,249. 

While there are many more applications filed in Australia then in New Zealand, 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.  In particular, we shall see that the decline in applications has a notable impact on firms with a greater exposure to New Zealand filings.  Except where otherwise indicated, I have included filings in both countries in the 2023 figures below.

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 2023 – 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 12, by Spruson & Ferguson.

2023 Leading Firms' Patent Filings by Application Type

Compared with the previous year, all of the same firms make up the top 10, with the only change being A J Park (now 8th) and Pizzeys (now 7th) having swapped places.  Among the remaining firms in the list, RnB IP has fallen behind James & Wells.  GLMR has debuted, ahead of Allens, which has slipped from 13th to 15th.  The other entrants in 2023 are IP Gateway and Halfords, with Adams Pluck, Oxygene IP and Dentons having been displaced.

After overtaking Griffith Hack to take third place in 2022, FB Rice is now tantalisingly close to surpassing Davies Collison Cave also.  As we shall see, however, this is not a result of gains in filing numbers by FB Rice – both firms’ filings declined in 2023, but DCC suffered greater losses than FB Rice.

The following chart shows the same total numbers of filings, but now broken down into Australian and New Zealand applications.  As in the previous year, it is no surprise that the New Zealand based firms AJ Park and James & Wells have the largest proportions of New Zealand applications making up their total filing numbers.  Notably, however, James & Wells – which has been building a presence in Australia since around 2020 – has increased its proportion of Australian filings, increased its total filings by over 9%, and moved up one place in the rankings.

2023 Leading Firms' Patent Filings by Country of Filing

Firm Gains and Losses in Patent Filings

With total complete (i.e. non-provisional) patent applications having fallen by 2.4% in 2023, we would expect that attorneys firms would, on average, have experienced a commensurate drop in filings.  The chart below shows the percentage change in complete filings for the top 18 firms, as well as for non-attorney agents and self-filers.  (Note that while this data covers both Australian and New Zealand filings, unlike the preceding charts it does not include provisional filings.)

2022-3 Relative Change in Standard Patent Filings (Total AU and NZ)

GLMR, having only been established in mid-2022, and therefore coming off a very small base into 2023, is literally off the chart in terms of growth.  The next couple of years are likely to provide a more realistic indication of the firm’s growth.  Other than this, it appears at first glance that firms were more likely to achieve growth in filings if they were smaller and independent, i.e. not members of the IPH group (Spruson & Ferguson, Griffith Hack, Pizzeys and A J Park) or the QANTM IP group (Davies Collison Cave and FPA Patent Attorneys).  However, I believe that this would be an oversimplification of the factors at work here.

While total filings in Australia fell by 2.4%, filings by applicants in the US – which was the origin of 44% of all Australian patent applications in 2023 – fell by 6%.  Furthermore, New Zealand patent filings fell by 8.1%.  All else being equal, then, firms with greater relative exposure to US applicants, and/or with a greater reliance on New Zealand filings, could be expected to take a bigger hit in 2023.  As we have already seem A J Park, which experienced a decline of nearly 15%, is the firm most dependent on New Zealand filings.  In contrast, fellow New Zealand firm James & Wells – which we should now regard as truly trans-Tasman, with the growth in its Australian-based practice – was able to achieve a 9.3% gain.

The chart below shows the number of complete 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.  The firms with above average exposure to US-originating filings are Spruson & Ferguson (54.1%), Davies Collison Cave (47.1%), FB Rice (47.2%), FPA Patent Attorneys (56.7%), Pizzeys (74.5%), A J Park (48.2%) and RnB IP (85%).  All of these firms suffered declines of 5% or greater in filings during 2023.  A J Park, it might be said, was hit by the perfect storm of exposure to both New Zealand and US-originating filings.  So size and ownership structure may not have been the main factor dictating the performance of the leading firms in 2023.  Long-term business strategies in relation to client development and their target markets appear also to have been strongly influential.

2023 Australian and New Zealand Filings by Country of Origin

Filing Shares of Listed Group and Independent Firms

The chart below shows the total share of all new Australian patent filings from 2012 to 2023, broken down according to the current grouping – i.e. IPH, QANTM IP (QIP), or Independent – of the responsible agent.  Note that this data does not include New Zealand filings, or provisional applications.  The analysis commences prior to the emergence of the new ownership structures (IPH listed in November 2014, and QIP in August 2016) and thus captures how the filing share of firms that are now part of each group has changed collectively during the period of listings, acquisitions, and mergers.  I define ‘filing share’ as the number of applications filed by an organisation, divided by the total number of applications filed by all attorneys/firms, excluding applications that have been filed without the assistance of an external attorney (which I do not consider to form part of the available ‘market’).

Australian Patent Application Filing Share by Firm Group

Firms in the QIP group substantially maintained filing share between listing in 2016 and 2022, but lost 1.3% share in 2023.  It remains to be seen whether this is an aberration, or the beginning of a longer term trend.  What is absolutely clear, however, is that since the listing of IPH in 2014, firms in the group have consistently lost collective filing share every year, and that this trend has not been slowed by a series of acquisitions and mergers.  Independent firms have been the beneficiaries of this decline in IPH filing share.

The following chart provides some insight into which independent firms have benefited the most at the expense of IPH group firms.  It shows the filing share of the top eight independent firms in 2023, along with the collective filing share of all other independent patent attorney practices in Australia (of which there were 152 actively involved in filing patent applications in 2023).

Australian Patent Application Filing Share of Independent Firms

FB Rice is now the largest employer of patent attorneys, with 63 on staff according to the Register of trans-Tasman patent attorneys.  (Please note that in providing numbers I am reliant on firms/attorneys keeping their registration records up to date.)  The firm’s filing share has grown from 6.4% in 2014 to 9.5% in 2023, after peaking at 9.8% in 2022.  Phillips Ormonde Fitzpatrick is the fourth largest employer of patent attorneys, at 42, behind FB Rice, Spruson & Ferguson (53) and Davies Collison Cave (46).  Its filing share has declined from 8.2% in 2014 to 7.1% in 2023.  Wrays is the seventh largest employer of patent attorneys, at 24, behind the above firms, A J Park (41) and Griffith Hack (38).  It’s filing share has grown from 2.3% in 2014 to 3.7% in 2023.  Madderns is the tenth largest employer of patent attorneys, at 18, behind all of the above firms plus FPA Patent Attorneys (22) and James & Wells (21).  Its filing share has grown from 1.4% in 2014 to 2.5% in 2023.

Among the new entrants to the market, RnB IP made its first filings in 2019, and now holds 2.3% filing share.  GLMR made its first filings in 2022 and now holds 1.2% filing share.  And while James & Wells has long filed in Australia from its New Zealand base, it has made substantial gains since establishing an Australian presence in 2020, now holding 1.8% filing share.

But the revelation here is the collective filing share of the numerous smaller firms consolidated under ‘other’ in the above chart.  The filing share of this segment of the profession has almost doubled, from 10.9% in 2014 to 19.3% in 2023.

Conclusion – It’s Complicated!

The story that this data tells is not as straightforward as ‘listed group bad, independent firm good’.  Most listed group firms have lost filing share, but not all – A J Park (IPH) and FPA Patent Attorneys (QIP) gained share between 2014 and 2023.  Most of the leading independent firms have gained filing share, but not all – as noted above, Phillips Ormonde Fitzpatrick has lost share.  Among the leading filers, what most of the ‘losers’ have in common is that they are larger firms, employing more than 30 patent attorneys, while most of the ‘winners’ are smaller firms employing fewer patent attorneys.  But it is not purely a case of ‘big versus small’ either, because the two notable exceptions are FB Rice (big, independent) which has gained filing share, and Pizzeys (small, IPH group) which has lost share.

So… it’s complicated.  All else being equal, clients appear to have been developing a preference for smaller firms over larger ones.  This might be due to cost, service offering, culture, dissatisfaction with larger incumbents, or something else – I do not pretend to know.  But all is not equal, and there are also indications of an exodus of clients from firms within listed groups.  But here there is a huge disparity between IPH, whose firms have shed over 15% filing share since its original listing in 2014, and QANTM IP, which substantially maintained filing share between listing in 2016 and 2022, only suffering a significant decline in 2023 (which may yet prove to be a one-off).

Whether IPH regards this as a problem is another question.  It is not necessarily a bad thing, purely from a business perspective, to shed less profitable clients in order to service more profitable clients while cutting operating costs.  I have not looked closely enough at IPH’s annual reports to try to work out whether that is what is happening.  But while its opening share price today (5 March 2024) of A$6.28 is well below the peak of just over A$10 in February 2020, it is still nearly double its initial price of A$3.28.  This, of course, includes the value of its offshore businesses across south east Asia and in Canada, as well as its trade mark business, Applied Marks, which may be masking declines in the value of IPH’s Australian and New Zealand firms.

Meanwhile, QANTM’s share price, which has been languishing around or below A$1.00 since mid-2022, has seen recent gains, opening today (5 March 2024) at A$1.33.  This may have been partly in response to the release of its half-year results on 19 February 2024.  But it may also be related to its announcement, on 27 February 2024 in ‘response to media speculation’ [PDF, 296kB], that ‘it has received a non-binding indicative proposal from Rouse International Holdings Limited in relation to a potential acquisition of all the shares in QANTM.’  Any transaction would appear to be some way off and, unlike ‘the media’, I do not intend to speculate, or to pass further comment until there is something more concrete – and public – to report.

In any event, it looks like 2024 is shaping up to be yet another interesting year for the patent profession in Australia and New Zealand.


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