On 27 November 2018 QANTM IP Limited (ASX:QIP) and Xenith IP Group Limited (ASX:XIP) announced that they have entered into an agreement to merge through an all-scrip scheme of arrangement. The merger is subject to approval by a court, and by Xenith shareholders. If it goes ahead (as seems likely), each Xenith share will be exchanged for 1.22 QANTM shares. Existing QANTM and Xenith shareholders will end up owning 55% and 45%, respectively, of the merged group, which will comprise five Australian specialist IP firms (Davies Collison Cave, FPA Patent Attorneys, Griffith Hack, Shelston IP and Watermark), along with IP valuation, innovation and advisory service provider Glasshouse Advisory (currently owned by Xenith IP) and Malaysian IP firm Advanz Fidelis (which was acquired by QANTM IP in June 2018).
Based on the closing share price of QANTM and Xenith on 26 November 2018, the merged group would have a market capitalisation of A$285.2 million, which still places it well behind the original listed Australian IP group, IPH Limited (ASX:IPH), which had a market cap of A$1.11 billion as at close of trading on 30 November 2018.
An additional interesting piece of information to fall out of the QANTM/Xenith announcement is the fact that IPH had itself been courting QANTM with a view to a possible merger or acquisition. In an ASX announcement on 27 November 2018, in response to ‘media speculation’, IPH confirmed making a number of approaches to QANTM on the basis of non-binding, conditional proposals, culminating on 20 November 2018 with a proposal with an equivalent value of A$1.80 per QANTM share (a notional premium of 37.4% over the A$1.31 at which QANTM shares were trading on that day). QANTM countered by announcing that its Board did not consider this proposal to be in best interests of its shareholders, due to its ‘highly conditional’ nature and ‘significant execution risk’.
All this would appear to confirm something that I have long suspected – that the Australian market is not big enough to sustain three publicly-listed groups of IP service providers. IPH obviously saw QANTM as a potential acquisition target, while QANTM clearly did not wish to be acquired on IPH’s terms! Instead, QANTM and Xenith have decided that they will be stronger together than they are separately.
But why is it such a struggle for these groups to flourish in the Australian market? One advantage of the public listing of these companies is that, through their annual reports, there is now far greater transparency than ever before in respect of the financial performance of IP services businesses. In combination with publicly-available data on Australian filings for IP rights, this provides useful insights into where the revenues – and profits – are coming from. I have looked at these numbers, and I am afraid that my conclusions are not rosy. The Australian market appears to be stagnant, with firms struggling to enhance profitability. Growth in the listed groups has come through acquisitions rather than genuine new business, with revenues per professional staff member being pretty consistent across the industry. Low-value, transactional work, which ought to have the greatest exposure to competition and downward price pressure, continues to be significantly more profitable than high-value, bespoke services. Yet, despite the obvious challenges and risks that these circumstances present, as far as I can tell firms are continuing to do the same old things that they have done for years, in terms of professional staff management and marketing, with the predictable result that nothing much is changing. Read more »
A recent appeal decision by a Full Bench of the Federal Court of Australia has clarified what is meant by the requirement for a patent specification to be framed with ‘reasonable skill and knowledge’, finding that this is a collective responsibility that arises among everybody involved, including inventors, patent attorneys, and any other corporate managers or intermediaries. Under Australian law, this requirement arises in relation to the effect of amendments on the rights of a patentee. In particular, a patent is only enforceable during the period prior to making an amendment if the specification without the amendment was ‘framed in good faith and with reasonable skill and knowledge’.
This decision should be of interest not only to Australian patent attorneys, but to patent professionals globally who are involved in drafting specifications that may ultimately be filed in Australia, and result in the grant of Australian patents. It confirms that responsibility for ‘framing’ a specification with ‘reasonable skill and knowledge’ does not lie solely – or even primarily – with the person tasked with actually drafting the specification, but is shared between all those involved in the process.
A competent patent attorney might be expected to have reasonable knowledge of the law and practices relating to the drafting of patent specifications, and to make reasonable efforts to obtain necessary information from a client. However, the client has a key role to play in ensuring that the patent attorney is properly instructed. And while the patent attorney is not necessarily expected to share the level of domain-specific technical expertise of an inventor, the specification will nonetheless be assumed to have been drafted with the benefit of the client’s knowledge of the invention, including knowledge that the client reasonably should be taken to have had, in all of the relevant circumstances. Ensuring that this is the case is at least as much the responsibility of the client as it is of the patent attorney (or other patent professional) tasked with drafting the specification. Read more »
The Commissioner of Patents has been added as an ‘interested person’ to the parties involved in the appeal (no. NSD734/2018) by Encompass Corporation Pty Ltd against the decision of a single judge of the Federal Court of Australia in Encompass Corporation Pty Ltd v InfoTrack Pty Ltd  FCA 421. As I reported back in June, the case involves a pair of innovation patents owned by Encompass, which survived attacks based on alleged lack of novelty and innovative step, only to be found invalid on the basis that they did not relate to patent-eligible ‘manners of manufacture’. In reaching this conclusion, the judge appeared to be strongly influenced by the state of the prior art, as represented by the evidence upon which InfoTrack relied for its novelty and innovative step cases.
The Encompass appeal is of particular significance, because an expanded panel of five judges has been assigned. Usually, only three judges sit on a Full Bench of the Federal Court of Australia to hear appeals against decisions of a single judge. An expanded panel has the power to overrule prior three-judge decisions (such as those concerning the patent=eligibility of computer-implemented inventions in Research Affiliates LLC v Commissioner of Patents  FCAFC 150 and Commissioner of Patents v RPL Central Pty Ltd  FCAFC 177), and its decision will be binding on all Australian courts and tribunals (including the Patent Office), other than the High Court.
The nature of the Commissioner’s interest in the outcome of the Encompass appeal is therefore clear. The eventual decision may determine whether the current approach of the Patent Office to computer-implemented inventions – which is increasingly reliant upon consideration of the state of the prior art – is legitimate, or whether the Office has in fact been denying patents on the basis of flawed reasoning. (Not that there is anything – other than filing divisional applications and keeping fingers crossed for a change in law and/or practice – that applicants can do about this.)
Furthermore, the Commissioner is currently involved in three appeals before single judges of the Federal Court which will undoubtedly be impacted by the Encompass decision: Rokt Pte Limited v The Commissioner of Patents, NSD1292/2017; Repipe Pty Ltd v The Commissioner of Patents, WAD323/2018; and Aristocrat Technologies Australia Pty Ltd v The Commissioner of Patents, NSD1343/2018. Of these, the Rokt case has already been heard and is awaiting judgment, so the potential for an outcome that is inconsistent with whatever the expanded Full Court decides in Encompass will be of concern to all parties involved (including, presumably, the judge). The Repipe and Aristocrat cases appear unlikely to be heard until well into 2019 (a hearing date is yet to be set for Repipe, while Aristocrat is currently set down for hearing in September 2019), making it likely that a decision will be handed down in Encompass in plenty of time for the parties to consider its effect on their positions – with the possibility of this resulting in settlement prior to trial.
It appears that the Commissioner intends to make substantive submissions, and to be represented at the hearing in the Encompass case. According to orders issued by the Chief Justice on 2 October 2018 [PDF, 160kB], the Commissioner is to file a summary of submissions of up to 10 pages in length by 4.00pm on 17 October 2018, following which both Encompass and InfoTrack will have a week within which to file and serve any submissions in reply, also of up to 10 pages. The implication is clearly that one or both of the main parties to the appeal may take issue with what the Commissioner has to say. Read more »
Last week, Australia got a new Prime Minister, with former Treasurer Scott Morrison replacing former lawyer, investment banker, tech investor, and republican Malcolm Turnbull. However, lest any foreigners, hermits, or future historians who have perhaps stumbled upon this article in the National Library’s Pandora Archive, assume that this is a sign of a robust democracy recognising the will of the people, I should point out that it was not as a result of a general election, but of internal sniping and fighting within a governing party. As many readers will be aware, this is now ‘normal’ in Australia – the last elected Prime Minister to actually lead their party to a subsequent election was John Howard in 2007. Since then, we have had just three further elections, but five changes of Prime Minister.
In September 2015, when Turnbull deposed Tony Abbott as Prime Minister of Australia, a wave of positive sentiment swept through Australia’s innovation community – among which I count the many entrepreneurs, scientists, researchers, technologists, investors, and associated professional services providers (including patent attorneys) whom I encountered at various meetings, events, and seminars during those heady early days of the Turnbull Government. The reason for this was partly because many of those people viewed Malcolm Turnbull as a kindred spirit, with personal, hands-on experience as an investor in technology businesses, and a generally progressive and positive attitude towards science, technology, and innovation. Additionally, Turnbull’s first major policy announcement was of an investment of A$1.1 billion over four years in a ‘national innovation and science agenda’, in which he called for an ‘ideas boom’ to replace the ‘mining boom’ (and, more generally, Australia’s reliance on primary industry for exports), and declared his desire to see a cultural shift to embrace risk-taking, and destigmatise failure.
Ah… halcyon days!
Over less than three years, however, most of that initial positive energy has dissipated, to be replaced with disillusionment and disappointment, as talk of innovation at the top levels of government petered out to little more than a whisper. And now, with the change in ‘leadership’ (I use the word advisedly), it seems that ‘innovation’ is completely off the agenda. In particular, in announcing his new Cabinet, Prime Minister Scott Morrison has ditched the word entirely, with Karen Andrews being appointed Minister for Industry, Science and Technology (which presumably means that the Department formerly known as Industry, Innovation and Science is to be similarly renamed), and former Minister for Jobs and Innovation, Michaelia Cash, now appointed as Minister for Small and Family Business, Skills and Vocational Education.
So how did this happen? How did ‘innovation’ go from a A$1.1 billion policy imperative to being a dirty word in government in under three years? Read more »