Hello!
I guess you thought you had me nailed down. I know Patent Busting you were thinking. He’s a bit low-brow. What with his references to Scrooge McDuck, schlock horror films, Marilyn Monroe and Jaws, this is a guy who spends his sad lonely leisure time watching B-grade movies and cartoons. The chump!
And then, bam!, out comes a sophisticated reference to the title of Gabriel Garcia Marquez’s famous novel, “Love in the time of Cholera”, cleverly reworked to fit this blog’s focus and the extraordinary times in which we are living. A touch of magical realism anyone! Double bam!
You think you know somebody…
Anyway, what was this post about again? Ummm, (Scrooge?), (Cholera?), (Coronavirus?) Oh, that’s right. How are Australian patent attorney businesses going to go through the pandemic that is currently affecting the globe? I know it’s a question that nobody is asking, but that’s the style of Patent Busting. We go where angels fear to tread and ask the questions nobody can be bothered to ask. (Please note my random use of “I” and “we” when referring to Patent Busting, simple error?, or toying with the singular and plural like a cool writer type? You be the judge.)
Well, if you check out my very first blog posts – here, here, and here – you have the right framework to consider how it’s going to play out. Let’s consider the big firms first – IPH and QIP in the listed space, and Wrays, FB Rice, Phillips Ormonde Fitzpatrick and a few others in the unlisted space.
Unlike other professional services firms (such as lawyers and accountants and the like), these big boys rely on a business model which is essentially an annuity stream. Overseas originating filings are their bread and butter. And each filing generates ongoing work, much of which is difficult to slow or stop unless you want to abandon your patent protection. And the major clients of these big firms are unlikely to risk that. Given my assumption that the coronavirus is going to substantially slow economic activity for about six months, this annuity stream will serve to carry these firms’ revenues sufficiently well to avoid any particular issues. They may have to tighten their belts, and conditions won’t be ideal, but on the whole they will be ok. Indeed, until the Global Financial Crisis (GFC), patent attorney firms were widely considered to be recession proof. And they came through the GFC reasonably well, it’s just that patent filings into Australia reached a steady state after the GFC (rather than growing at a rate recently matched only by the coronavirus).
Things may change if it goes on for longer than six months as businesses may start to stop their new patent filings, which has a number of flow-on effects. Let’s talk about them if it happens.
Things are a little different for the smaller firms who rely more on local work. There much of the business is generated at an earlier stage and many clients do not proceed to the annuity style work, at least not in large numbers. These firms may suffer as business conditions deteriorate.
So, there you have it. I ran out of time to talk about whether QANTM IP has turned the corner but let me say a few things about its recent half-year report which I believe to show good signs.
- Even though it has significantly raised the salaries of its vendor principals (so they get paid more than their senior associates), its dividend is only slightly lower than last year despite soft Australian filings.
- It has shown an increase in Australian filings vis a vis its competitors.
- It is hiring an M & A specialist which shows a commitment to acquisitions and expansion, particularly in Asia, which previously I thought was lacking.
Au revoir (that’s French, also sophisticated. Triple bam!)