Part 1. Overseas originating filings – the basics
The patent attorney profession in Australia is conservative and not particularly high profile. It has traditionally been a profession that has lagged behind the innovations in business and firm governance that even accountants and lawyers would regard as relatively routine. For the most part, even when incorporated, firms of patent attorneys followed the partnership model of decision making. So, the arrival in the last few years of three patent attorney companies (IPH, Xenith IP and Qantm IP) as publicly listed companies on the Australian Securities Exchange (ASX) has come as a bit of a shock…to put it mildly! This is particularly the case as the public listing of firms for other professions has met with mixed and occasionally unfavourable results, Slater & Gordon being a case in point.
The listed companies do not handle the business of being a patent attorney firm in their own right; they are holding companies for subsidiaries that were formerly partnerships. These partnerships in turn were, and the subsidiary companies still are, firms that have been part of the patent landscape for decades and sometimes for over a century: in particular, Spruson & Ferguson, Davies Collison Cave, and Griffith Hack are some of the oldest, largest and most respected firms in Australia and each is a subsidiary of one of the holding companies. So, the appearance of these listed companies is not a small exception to the rule, as could be argued for example for the presence of the patent attorney firm Murgitroyd on the UK stock exchange.
So how, and why, did this explosion of listed Australian patent attorney firms take place? Can the model work or it is simply a small glitch which will rectify itself as senior rainmakers leave and set up their own firms once again? Could it work elsewhere? (ie, in jurisdictions where it is permitted to form a patent attorney company)
These are excellent questions! They are not easy to answer but I am prepared to go out on a limb. I do think there are some features of the business of the larger patent attorney firms in Australia that lend themselves to a corporate model. I would like to explore them in the early posts of this blog.
What do I mean by a corporate model? It’s probably easier to explain it by comparing it to the traditional model for patent attorney firms – the partnership. In a partnership, only patent attorneys can be owners or partners in the business. The partnership structure is set up in a way that assumes that each partner is a small business in their own right who shares costs for running their business with the other partners. In a sense, each partner has to perform every function of the business. They are each responsible for controlling costs, managing staff, bringing in business and managing the firm. As owners, they also collectively manage the business regardless of the level of training in management that they hold.
There is a fundamental tension between partners in a partnership in that each partner is competing at a certain level with their fellow partners while also behaving as a team member at another level.
In a more corporate model, patent attorneys do not necessarily run and/or own the entire firm. There is more of an emphasis on teamwork and less on competitiveness. In part, this may be because individual functions (management, business development, etc) are performed by specialists. One example would be coordination of business development efforts so that they are best for the overall firm rather than having each individual partner chasing their own leads. Another might be not having patent attorneys perform work that is not suitable for their specialisation simply because they have the client contact.
Of course, there are shades of grey between the partnership model and the corporate model I have described above. However, obviously, as an investor in a listed patent attorney firm, you would prefer to see that firm run more along the lines of a corporate model than a partnership.
One important factor that contributes to patent attorney firms having a more corporate mindset is the work stream of overseas originating patent filings. These filings are the most significant and consistent contributor of revenue in patent attorney firms and are an even more significant contributor to profitability. They are also the most likely patents to generate significant follow-on work, such as large pieces of advice, oppositions and litigation. The mindset of the overseas clients that are the source of overseas originating patent filings and the long tail of revenue that each filing generates means that patent attorney businesses have stickier clients and a more annuity style business than most professional services. Each of these contributes to a more corporate mindset.
For many of you, this source of work will be well understood, but I thought it worth setting out a few basic points on how the system operates and in later blog posts I will explore how this feeds into client stickiness and a more corporate model.
Once a client has an invention that they wish to patent, the initial stages of generating a patent are common to patent attorneys in every jurisdiction. These are to draft or write the patent specification and then to file it with the patent office of your jurisdiction (or usually your jurisdiction, there can be reasons you might start elsewhere) to create a patent application.
The patent specification is the document setting out the invention or technology you are hoping to protect. The term application refers to the administrative designation that each individual patent office applies to your specification and an application number is assigned to it, like a license plate designates your car. The term application also implies that the patent cannot be enforced as the scope of the protection provided by the patent is being assessed, or is yet to be assessed, by the patent office. If the patent application is granted, it becomes enforceable and is termed a patent, granted patent or registered patent.
If you want to have corresponding patents in other jurisdictions, say you are a multinational or a small biotech company with big dreams and high hopes, then you can choose one of a number of vehicles to do this.
You can file the same patent specification in other jurisdictions at around the same time, or you can delay the filing and still use the same specification by relying on the Paris Convention or the Patent Convention Treaty (PCT). Importantly, each of these requires an agent (ie another patent attorney) in the other jurisdiction to do it for you.
This is overly simplified I know. Let’s continue.
If you file the patent specification in a number of other jurisdictions, you create what is known as a patent family. Effectively you have are progressing the same patent specification as an application in a number of different countries but each application will be subject to the laws and idiosyncratic rules of each particular country.
The progression of the patent application to grant in each particular jurisdiction varies considerably but in each case it is a matter of years and on occasions can take more than a decade. It is not a continuous process, but rather a series of discrete events, each of which is required to be actioned. I’ll touch on these over the course of the blog where relevant.
Usually, as the patent attorney who filed the original patent specification, you have oversight of the entire family – ie how each application is progressing, common issues, and the (possibly shifting) commercial objectives of your client. You also correspond with your agents in other jurisdictions about the particular family member that they are handling.
As one of the patent attorneys or agents who filed the application in the other jurisdictions, you have a far more limited role. You keep your instructing patent attorney informed of the progress of the application, monitor the dates by which various actions need to happen, and act as a resource in relation to the law of your country. You do not have the same oversight as your instructor and certainly do not have the same level of contact with the ultimate client.
These are the basics of the overseas originating patent filings, ie the patent applications that Australian patent attorneys are asked to handle in Australia on behalf of an overseas firm or company. As I have stated above, how this contributes to client stickiness and a more corporate model for patent attorney firms than other professional services firms will be expanded upon in the later blog posts.
Bye for now.