February 14, 2018

New code backs trans-Tasman IP concerns

Sanity appears to have prevailed with the release of a new trans-Tasman Code of Conduct for patent and trade mark attorneys that addresses recent concerns about the direction of the intellectual property (IP) profession in Australasia.

The new Code was registered on 10 January this year by the Trans-Tasman IP Attorneys Board, which was established in March last year to review the existing Code, following the move to a single Australasian patent attorney regulatory regime. The new Code, which is accompanied by a set of Guidelines, will come into effect on 23 February 2018.

The review was initiated to ensure the Code was in line with the shift to a single Trans-Tasman IP regime, but also in response to concerns about potential conflicts arising from the new business model of publicly listed companies acquiring, and operating in a group with multiple patent attorney firms.

Those concerns were magnified for New Zealand business with the purchase of the formerly independent New Zealand IP firm, AJ Park, by Australian Stock Exchange (ASX) listed company Intellectual Property Holdings (IPH) in October last year.

Eight of the top 10 IP firms in Australia are now owned by the three main Australian IP firm-holding companies, a development in recent years that alarmed the industry and business in New Zealand for a number of reasons:

  • A concern that aggregation and co-ownership of IP firms could bring a conflict of interest for the IP attorney between the duty to the client and the obligation to generate maximum fees to meet shareholder profit expectations;
  • The real prospect of a conflict of interest where attorneys from different firms within the same holding company are on opposite sides of a dispute;
  • A sense that cashed-up partners in ASX-listed firms would be less concerned about client service;
  • Senior attorneys and rising stars in those firms losing interest where there were no prospects for equity partnership; and
  • Rises in regulatory costs through being a listed company leading to fees increases.

With conflict issues in mind, the Code of Conduct 2018 requires greater transparency from Australasian IP firms. Specifically, it obliges them to inform their clients whether they are operating as an incorporated company, whether the company is public or private, and to identify all related (i.e. other IP) firms if they are members of a group.

The Code also explicitly deals with the issue of conflicts of interest between related firms, by treating members of a group of related firms as having a single body of clients. Potential for conflict must be considered both within those firms and across the different firms unless the firms are operating independently.  The Code then makes it clear that a conflict of interest arises if related firms act for clients on opposing sides in contentious proceedings – unless the client gives informed written consent to the attorneys involved.

The Guidelines accompanying the Code go further to explain that “client-facing” attorney professional services such as the provision of advice and the prosecution of applications should not be provided by employees common to multiple firms if those firms want to remain as independent operations and avoid cross-firm conflicts. It also cautions firms to avoid the use of a common database, where attorneys from one firm can access client confidential information of another firm, to remain as independent operations.

Those of us in the industry who value the importance of independence and not having the distraction of potentially conflicting shareholder demands welcome the release of this Code.  While unfortunately, it can’t turn back the recent trend towards holding-company ownership of IP firms, it does acknowledge the risks of the new industry model and give some protection to clients and the public.

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