Vast majority of listed Australian IP firm clients think reduction of private ownership is against their interests 15 May 17
Australia has led the way in adoption of the public traded company model for IP law and attorney practices. But the findings of recent market research indicate that more than three-quarters of these firms’ clients believe that a reduction of private ownership in the sector is against their interests – again stoking critics’ concerns about the business model’s ethical implications and its impact on client-counsel relationships.
Research and consulting company Beaton recently surveyed 143 domestic and foreign clients of Australian IP law and attorney firms to gauge their perceptions about the publicly-traded model. Among the headline findings was that over half of respondents indicated that they did not know whether or not their IP legal service provider was publicly or privately held. “It is unclear whether this reflects time in the market, poor communication from firms or a lack of interest from clients,” Beaton states in a blog post.
According to the Patentology blog’s analysis of the report, Beaton further found that less than half of surveyed clients of Spruson & Ferguson – which, as part of IPH Limited, was the first IP practice to go public in Australia, in November 2014 – were able to correctly identify the firm as being listed. Almost a fifth of those who had used the firm’s services believed it to be privately held. The “overwhelming majority” of surveyed clients of Shelston IP did not know that it is owned by ASX-listed Xenith IP.
Likely of more immediate concern to practitioners are client perceptions about the effect of public listing on service provision. Just 5% of respondents felt that being publicly traded could benefit an IP firm and make it stronger. On the other hand, close to 80% either agreed or strongly agreed that a reduction in the number of privately held IP firms goes against clients’ interests; only 2% disagreed or strongly disagreed with the statement. Moreover, around two-thirds of respondents agreed or strongly agreed that IP firms owned by publicly traded companies have an obligation to put the interests of their shareholders above the interests of their clients – something that publicly held firms have been keen to refute.
Since Xenith’s US$113 million acquisition of Griffith Hack completed in February this year, a total of nine Australian IP law and attorney firms – comprising over a quarter of Australia’s registered patent and trademark attorneys – are now owned by publicly traded companies. The listed firms hope that their new ownership structures grant them access to capital that can fund their Asian expansion plans and attract top talent. But, as explored in a feature in issue 64 of World Trademark Review, the trend has come in for criticism from those who see the new role of shareholders – and their need to secure a return on investment – in the legal services market as a threat to the sanctity of the client-counsel relationship.
Australia and New Zealand’s Trans-Tasman IP Attorneys Board released a consultation paper last month in which it recognised the “listed group scenario is a valid legal structure” and stated that it found no actual conflict-of-interest issues with regards to the current crop of listed firms. That the regulatory body for IP attorneys in Australia has come to this conclusion shows that there can be a gulf of difference between client perceptions and the reality of the situation. Moreover, Beaton’s survey only collected responses from a relatively tiny sample of clients, and the researchers themselves caution that they cannot confirm if the surveyed sample is representative.
Nevertheless, the fact that significant proportions of the client sample seemed not only unaware of their firms’ ownership changes, but also disapproving of them, should provide plenty of food for thought for professionals working at listed practices – particularly regarding their communications with clientele.
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