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News, articles and blog posts related to Intellectual Property, Trademarks and Patent Law

Burns IP shares articles, news, updates and blog posts related to Intellectual Property, Trademarks and Patent Law.

State of Play - Current Ownership of Australia’s Intellectual Property Law Firms

In late November last year, QANTM IP issued a media release announcing that QANTM IP Limitedand Xenith IP Group Limited have entered into an agreement to merge. On the 21 March 2019, the ACCC (Australia’s competition watchdog) issued a statement that they would not oppose this merger stating:

The merged QANTM-Xenith would have a market share of about 30 per cent of total patent filings. However, we found that a number of alternative firms are likely to continue to provide sufficient competitive constraint on the merged entity.

Trademark services require less technical expertise than patent services, and therefore we believe several IP firms and commercial law firms are viable alternatives for customers, providing a competitive constraint.

This latest merger announcement is the most recent in what has been a 5-year long spate of mergers and acquisitions between some of Australia’s most well-known IP firms. When this merger goes ahead, it will mean that the QANTM/Xenith firm will be Australia’s largest IP law firm in terms of intellectual property (IP) filings.  

Who are the players?

Currently there are 3 large publicly traded IP holding companies in Australia: IPH LimitedQANTM IP Limitedand Xenith IP Group Limited. Interestingly, IPH Limited is a major shareholder of Xenith IP Group Limited purchasing 19.9% shareholding interest in February of this year and in April putting forward a proposal to acquire all the shares of Xenith. This is expected to be completed by 5 August 2019.

The table below shows Australia’s largest IP law firms and the business names they currently trade under

State of Play - Table 1.jpg
 

Below is a graphical representation of the corporate structure of the top 3 companies as provided by each of these companies on their websites. Full details of the directors and shareholders of each of these companies is publicly available on ASIC (Australia’s company register). Please contact me if you would like a copy of the current director and shareholders.

IPH Limited

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QANTM IP Limited

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Xenith IP Group Ltd

state of play zenith.png
 

POST-MERGER STRUCTURE

After the merger between QANTM IP Limited and Xenith IP Group Limited, the structure of Australian IP firms will look like this:

State of Play - Table 2.jpg
 

Australia’s IP law firm market is certainly unique with the extensive use of the IP holding company structure. But does it matter?

What does it mean for you?

Higher prices?

There is no doubt that a publicly listed company has to focus on shareholder returns. However, with increasing downward pressure on IP fees for transactional work, it will be interesting to see if these publicly traded companies are responsive to this market pressure.

Alignment of values

A publicly listed company has multiple stakeholders: its clients, its employees, its overseas service providers (foreign associates) and its shareholders. Not all of these stakeholders have values that are aligned.

I think we can expect to see movement from staff at these IP firms and from clients who feel that their values are no longer being met by firms that are publicly listed.

Risk of conflict

Sure – there has to be. Even if a firm operates independently, the reality is that each firm is owned by the same, single entity. The law firms know this, and if there is a conflict, you will undoubtedly be asked to sign-off your acknowledgement of their corporate structure.

Less choice?

All the law firms claim to operate independently. So, this should not mean less choice in the IP market.

However, I think we can reasonably expect each independent firm to align their firm’s service and price offerings with the overall objectives of the holding company. Surely there must be some alignment – otherwise what is the benefit of a single group holding?

Long-term sustainability?

It’s still early days for Australia’s listed IP firms, but already we can see some tell-tale signs foreshadowing financial pressure. Just days before QANTM IP Limited announced its agreement to merge with Xenith Group Holdings Limited, IPH Limited tried to acquire QANTM IP. Now, IPH Limited is putting forward an aggressive share acquisition of Xenith.

Growth for these companies has been a result of acquisitions rather than new business as revenue per professional staff stays fairly consistent. I am not sure that publicly listed IP firms have long-term sustainability. 

 Because these firms are publicly listed and trading on the Australian stock exchanges, all corporate and financial information is publicly available. If you would like a copy of the current director and shareholder ownership of any of Australia’s IP holding companies, or the most recent financial reports please contact me.