IP: home and away

Intellectual property law is increasingly being viewed from a global perspective. Despite the credit crunch and slowing of the US economy, there are still areas of growth. Richard Szabo investigates state by state what law firms can expect for the next 12 months

Bouyant is how Michael Williams, a partner at Gilbert + Tobin, describes the demand for IP-related legal services over the next few years.

The Sydney-based law firm, which specialises in internet and technology-related IP, has observed that large corporations are increasingly shifting their work from large firms to specialised firms, bringing them greater amounts of transactional work. "We acted for Autodesk in a A$100m claim over copyright in software in Australia. That followed acting for IP owners in the Kazaa case, which was a global dispute run in Australia," said Williams.

Meanwhile, Paul Whenman, managing partner at FB Rice & Co, says there has been significant growth in patent and trademark work for health care companies. The bulk of the Sydney- and Melbourne-based firm's clients operate in the life sciences, ICT, engineering and science sectors.

In Melbourne, Keith Leslie, a partner at Davies Collison Cave, says there continues to be steady growth in patent work in the biotechnology, chemical, information technology, software and mechanical engineering sectors.

A study conducted by Davies revealed that approximately 26,000 patent applications were filed in Australia during the 2007/08 financial year, a 4% increase on the previous period. Of these, Davies filed 4,000 or 16%, and claims to have filed the highest number of IP cases at the Victorian Registry of the Federal Court in the same period.

Davies has explored new areas of IP law, and incorporated a litigation team into the IP group, giving the firm more revenue, a wider range of partners and a broader client base. Ian Pascarl, a partner at the firm, claims that there has been, and will continue to be, much IP law activity in Australia.

When asked whether patent and trademark attorneys could lure clients away from large IP practices, Williams remains sceptical. His argument is that large IP practices can offer a broader scope of work than a trademark and patent firm. "I guess it's a case of ‘be careful what you wish for', because if you compete with a big firm you need to compete with both pricing and results," said Williams.

National IP firm Griffith Hack is positive about work availability for the next 12 months. Wayne Condon, a senior patent litigation partner, expects the firm, which handles major pharmaceutical and mining work, will continue to see an increase in patent litigation work. Condon provided ALB with statistics showing that as of 30 June 2008 his firm had 39 IP cases, the highest number filed in the Australian Federal and Supreme Courts. "I can't see the basis for the claim that there will be a downturn in IP work," said Condon. "I guess I'm more bullish than other lawyers are."

In Brisbane, IP litigation and dispute resolution are on the rise, according to Michael Long, an associate at Redchip Lawyers. The firm – whose client base consists of several software developers, manufacturers and technology businesses – believes that there will be more trademark and patent disputes in the future as there are a number of Queensland companies that still have unresolved IP matters.

Cooper Grace Ward (CGW), a Brisbane IT and commercial specialist firm, is also seeing an increase in software-related IT work. Charles Sweeney, a CGW partner, says this is partly because the Queensland government is supporting start-up businesses. "The Queensland economy is generally one of the strongest in Australia, which makes it a good place to set up business. Particularly with the commodities boom, there are a lot of IT companies providing software to mining companies," said Sweeney.

Michael Hutton, a partner at Lynch Meyer in Adelaide, believes that litigation enforcement and licensing work will increase. Similarly to G+T, the firm has benefited from large corporate clients moving to more specialised firms.

In New Zealand, Simon Martin, a partner at Hudson Gavin Martin (HGM) says that, although there has been a slight downturn in the market, overall workflow for technology has not been affected.

HGM has a variety of work in the technology and IP areas. Wayne Hudson, also a partner, works with a large number of small to medium companies. He says that tighter financial times have not reduced the number of deals he is doing. "The clients are still doing the joint ventures and acquisitions; they're just doing them in innovative ways, such as share swaps," said Hudson.

Beating the blues

Since the credit crunch took a bite out of profits, Kiwi companies have seen the practicality of consolidation. The slowing market has, however, forced them to sell at a lower price.

Hudson says that he used to do M&A transactions where companies were paid six times more than their usual annual revenue. In contrast, the same kind of deal would now only attract half of that. Nevertheless, some clients have found a way around this. "I have two share-wrap deals, mergers, where two internet companies will combine their IP. There's no money changing hands in this deal, which shows that there is still a willingness to consolidate," said Hudson.

In Queensland, there is still strong demand for commercial IT and software work, says Long. This is due to many Queensland startups being funded by owners, friends, family or employees, he said, meaning they are not as exposed to the effects of general market volatility.

Sweeney says biotechnology clients continue to face complications in developing patents strategies for industrial chemicals or drugs. It is a similar case for CSIRO, according to Whenman. The government scientific research organisation has faced a funding cut in the most recent federal budget, which could limit its spending on patent protection.

Hutton believes that if residential construction continues to slow, then South Australian firms may face a downturn in plan copyright infringement, startup and trademark application work.

Davies says there is little doubt that the proportion of heavy engineering patents or trademarks – namely ships, trains and buildings – has decreased when compared with other patents. Filings have, however, increased for IT, software and nanotechnology. "A survey conducted by IP Australia by the top technology groups of patent applications filed by Australian applicants were: handling and printing, civil engineering, building and mining, information technology, consumer goods and equipment, and medical engineering," said Leslie.

Going global

Over the past 25 years, FB Rice has observed that patenting and IP has increasingly been viewed in a global sense. Whenman says that if a client wants to maximise the value of its IP, it needs to have patents throughout the world. "This will increasingly require their patent advisers to thoroughly understand global patenting processes and to take a more strategic approach to IP protection," said Whenman.

Williams agrees with this, adding that in the past decision-making for IP work only used to take place within Australia. However, law firms are now finding that they are liaising with global headquarters, which presents new challenges.

G+T considers the US and the UK to be its main markets for cross-border IP. However, the European market is expanding, while IT and telecommunications cross-border work with Indonesia, Malaysia, Thailand and Vietnam is increasing.

Cross-border work between New Zealand and Australia is on the rise, according to Hudson. This is particularly the case for software outsourcing and implementation, he claims, where Kiwis are increasingly being recognised as competent software developers.

Michael Wolnizer, a partner at Davies, has observed an increase in the use of websites to promote a company's products for international sale and says that this has increased the need and importance for Australian companies to register their trade marks internationally.

New internet jurisdictional issues have arisen in relation to virtual reality games such as Second Life, says Wolnizer. He points to well-known trademarks that have allegedly been misused. "The law is currently struggling to work out the best way to address these [new internet jurisdictional] issues. It will be interesting to see how the law evolves in this area over the coming years, and in particular what courses of action will be available and who has jurisdiction over the dispute," he adds.

Lynch Meyer has undertaken licensing for new steel framing to be used in residential construction in the Middle East. It is also involved in African and Indian cross-border work. "India has a common law system; we can talk to Indian lawyers and they can understand where we're coming from, but the bureaucracy means that it takes a long time for something to go to trial. For example, it can take a year for a land title search to go to trial, which would only take a minute on a computer in Adelaide," said Hutton.

China IP unrest

Condon believes that Australia's recent participation in an IP dispute between the US and China at the World Trade Organization is showing the world that it is a leader in protecting innovation and IP. "It is not likely to have a direct impact, but it does display to the world that Australia is very serious about protecting innovation. That means that the Australian market place is more attractive for cross-border business," said Condon.

An Australian firm told ALB that Chinese courts are "not reliable [for] dishing out justice." The source said that clients are not confident that a PRC court would apply the law fairly, giving the example of an Australian company litigating a local defendant who might use political contacts to have the case dismissed.

Hutton agrees that traditionally there has not been a great deal of confidence in IP litigation within China. The main difficulty, he says, is that China does not have a similar legal system to Australia. "Enforcing rights in China is difficult because you don't know what the outcome of the case will be," says Hutton.

"If you can advise clients on a predictable foreign legal system, you will have clients that feel comfortable in enforcing their rights in that system," he continues.

Mark Gavin, a partner at HGM, says New Zealand's free trade agreement with China has provided opportunity for more business between the two countries. However, the firm has not seen much activity from clients, because of the difficulties they have faced in enforcing IP rights in China. "Many Kiwi businesses are probably still a bit overwhelmed by the effort of establishing business within China, when committed to other jurisdictions," said Gavin.

Sweeney believes that more successful IP litigation would have a positive effect on business, creating more confidence that foreign companies will be able to protect their interests in China.

It may, however, be naive for some Australian firms to think that China will align itself to western IP protection standards. Given the size of its economy, Hutton says, the rest of the world might be left with no choice but to align itself to Chinese law. "I don't know whether the West will manage to achieve uniform laws with China. When you talk about trademarks and patents there's certainly been a lot done, but we have to remember it's a massive economy. It has its own momentum and may not need to change"  ALB

IP matters before the Federal Court (30 June 2008)

IP matters before the Victorian Registry of Federal Court (FY 07/08)

Outlook for IP work