Some observations on Australian patent firms proposed mega-merger

By David Stewart

13 December 2018

On 27 November 2018, the listed holding company of leading intellectual property businesses Davies Collison Cave Pty Ltd (DCC), FPA Patent Attorneys Pty Ltd (FPA) and Advanz Fidelis IP Sdn Bhd (ADVANZ) announced a proposed merger with the listed holding company of Griffith Hack, Shelstons IP, Watermark, and Glasshouse Advisory.

According to press releases associated with the proposed merger, QANTM Intellectual Property Limited (ASX:QIP) and Xenith IP Group Limited (ASX: XIP) together are home to almost 350 IP professionals. Most of these people are Australian patent attorneys. This means that the merger will result in five of the best known and most capable Australian patent attorney firms sitting under a single ownership entity.

The other Australian listed entity focussing exclusively upon intellectual property is IPH Limited, consisting of the firms Spruson & Ferguson (which in turn has fused with Fisher Adams Kelly, and Cullens), Pizzeys, and New Zealand firm AJ Park.

According to a fascinating analysis by website Patent-Pilot.com, the top filers of patents in Australia from 2014 to 2018 (and approximate filing figures) are:

1. Spruson & Ferguson – 16000 patents
2. Davies Collison Cave – 15600 patents
3. Griffith Hack – 14200 patents
4. Phillips Ormonde & Fitzpatrick – 10000 patents
5. FB Rice – 10000 patents
6. Pizzeys – 10000 patents
7. Shelstons IP – 9000 patents
8. FPA Patent Attorneys
9. Fisher Adams Kelley
10. Watermark

The last three firms are reported by Patent-Pilot.com to fluctuate between 6100 and 7300 patent filings. Of the top ten, only Phillips Ormonde Fitzpatrick and FB Rice sit outside the grouping of IPH, Qantum or Xenith.

A merger between Qantum and Xenith will mean that numbers 2, 3, 7, and 10 sit within one ownership structure, and numbers 1, 6 and 9 sit in another.

According to Patent-Pilot.com, all other Australian patent law firms sitting outside the top 10 represent less than 4,000 patent filings over this period of 2014-2018.

There is a recently arisen twist in this scenario. On 27 and 29 November 2018, IPH confirmed that it had previously approached Qantum with a proposal to “combine” the two entities, and that the proposed merger between Qantum and Xenith did not deliver value to shareholders.

So it seems that some sort of very substantive consolidation of the Australian patent attorney industry is underway, one way or the other, with the result that the bulk of patents in Australia will be filed by one of two ownership groups.

What does mean for patent attorney clients? The Trans-Tasman IP Attorneys Board has issued the Code of Conduct for Trans-Tasman Patent and Trade Marks Attorneys 2018 specifically addresses the issue of commonality of ownership of patent attorney firms (below, extracts from the guide to that Code):

21.1 A registered attorney’s membership of an ownership group has particular relevance to the duty of loyalty owed to a client, and to the obligation to avoid the creation of actual or possible conflict between the interests of the registered attorney and a client or between the interests of two clients. Where a registered attorney is a member of an ownership group, for the purposes of the duty of loyalty and the obligation to avoid a conflict, a client of another member of the group will be regarded as a client of the registered attorney unless the registered attorney is operating independently of that other member of the group in the provision of attorney professional services.

21.4 Even where a registered attorney that is a member of an ownership group is operating independently of another member of the group in the provision of attorney professional services, by virtue of subsection 21(3) the registered attorney must not act for a client in a proceeding against a party that is a client of that other member of the group unless the registered attorney’s client has given informed consent to the registered attorney so doing. In addition to a proceeding before a court, a tribunal or a like adjudicative body, the type of matter to which this provision applies includes a proceeding before an intellectual property office.

Informed consent (a well-trodden path by law firms) is the remedy to this problem.

But it is in patent disputes – both patent oppositions and patent litigation – that patent attorney clients will find themselves with a reduced choice of expertise because of conflicts of interest. The Australian patent attorney industry, comprising around 760 patent attorneys, is very fragmented outside of the top ten firms, with many small firms competing with large firms. But patent disputes involving esoteric subject matter require high levels of specialist expertise from patent attorneys.

These eight firms, sitting within three and, perhaps soon, two ownership structures, harbour a significant amount of that expert knowledge.

Disclaimer: The information published in this article is of a general nature and should not be construed as legal advice. Whilst we aim to provide timely, relevant and accurate information, the law may change and circumstances may differ. You should not therefore act in reliance on it without first obtaining specific legal advice.