The business plan of IPH – the world is just enough

There’s finally some clear air before the half year results come out for IPH, QANTM IP and Xenith IP and with no further news on the merger of substantially equals.

I’ve been threatening to blog on IPH for a while.  I think IPH are a very impressive operation.  They have transformed, for better or worse, the entire landscape of the patent attorney profession in Australia and are looking at positioning themselves globally.  The vision and drive behind their plans are remarkable.

Let’s turn then to IPH’s plans for global domination…I am not joking about this. My take is that everything about the way IPH are approaching their business says that they looking to be the dominant player in the “second tier” patent market (by which I mean every country in the world except US, Europe and Japan).

Before we look at the steps IPH are taking to make this a reality, let’s look at the logic behind this…

First, if you don’t remember them (so last year!), here are links to my first three posts of Patent Busting:

The listed patent attorney firm – a uniquely Australian animal? Part 1

The listed patent attorney firm – a uniquely Australian animal? Part 2

THE LISTED PATENT ATTORNEY FIRM – A UNIQUELY AUSTRALIAN ANIMAL? PART 3

These set the scene for my comments on the IPH business plan. Let’s first look at the benefits to IPH of having offices in, and being able to file patents in, second tier jurisdictions. Following posts will look at how they can pitch this business plans to their most important clients – the overseas corporates – and the steps IPH are taking to reach their objective.

In my first post, I talked about the concept of the patent family. That is effectively you 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.

I also commented that 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.

I went on to say that 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.

In my second post I talked about how overseas corporate clients viewed their filings into Australia.

I discussed the fact that in Australia patents are relatively straightforward to obtain if you have obtained a patent in the US, Europe or Japan.

That’s enough to set the scene. Let’s look at the benefits to IPH in offering to file patents in every second tier jurisdiction for their overseas corporate clients who predominantly originate in the US, Europe and Japan.

By second tier jurisdictions, we are talking about countries like China (although that’s arguable), India, Pakistan, Australia, New Zealand, the Latin American Countries, the South-East Asian countries and the Middle Eastern countries. Not trivial markets but in many cases countries with a less user friendly patent system where overseas corporates have been less interested in filing for various reasons and therefore countries in which they do not have a great deal of expertise.

The first benefit to IPH of expanding into other jurisdictions is that the effort and cost of coming up to speed with the contents of the patent in one family can be leveraged across each member of the family. In principle, the more family members you have the more the cost of dealing with that patent family is amortised and the more profit you can make per family member.

Second, your instructor, who has carried out prosecution of the patent in US, Europe and Japan, has experience in the difficulties to be faced in bringing the patent to grant. As for Australia, bringing a patent to grant in just about every second tier jurisdiction is straightforward if you are comfortable with the scope of your protection in the US or Europe. A lot of the hard thinking – both in a commercial and patent sense – has been done for you.

Third, being a listed entity, IPH has access to capital that other patent attorney firms simply cannot access. That is, they can invest in expansion into other countries in a way that other firms cannot. This means IPH can give effect to their business model in a way that most other firms cannot – providing a Warren Buffet-esque moat.

Fourth, and I will touch on this in more detail in later posts, your overseas corporate clients, and even your US, European and Japanese agents are less interested in engaging with these countries. They are more invested in handling the patents in the tier 1 jurisdictions rather than dealing with the administrative headaches of the patent systems of the more minor countries.

And the latter is a key value add for IPH, dealing with many second tier jurisdictions is often tricky, not because of the substantive comments they have to make on the merits of your invention but because of the administrative formalities that they have in place which are painful to deal with.

If you are a company that only occasionally files into these jurisdictions, negotiating the maze of formalities is confusing and often wasteful of valuable time. Not so much for Australia, but for anybody who has dealt with Thailand, Brazil, India, or even New Zealand, the frustrations in dealing with the patent office are often incommensurate with the value of the commercial protection afforded by the patent.

If, however, you are a company that has sufficient volume to do file routinely into the less favoured jurisdictions, then you have another Warren Buffet-esque moat. You not only have experience with the patent systems of various countries to give you an edge, you also have the contacts within the patent system to lobby on behalf of your clients, making you even more attractive as a service provider.

So the benefits to IPH in being able to file in a number of second tier countries are the ability to leverage multiple members of a patent family and the barriers to entry provided by their access to capital and the first mover advantage of gaining significant volume in second tier markets quickly. In subsequent posts we will look at what they have to pitch to their clients and the steps they are taking to position themselves.

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