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Outsourcing Intellectual Property Services

Pratibha Gupta, LLB, Post Graduate Diploma in IP laws, Cyber Laws and International Trade Laws

Pratibha Gupta is Manager IP Services with Sumpraxis BPO Services Pvt. Ltd. (Wholly owned Subsidiary of Sumpraxis, LLC, USA), New Delhi, India

Introduction

“Outsourcing" services to countries that provide cheap labor - This term has now taken a totally different overtone in the face of the IT revolution. The term now implies to the process of handing over, some part of an organization’s work to another company with strict set of guidelines and criteria to follow. This process is mutually beneficial for the outsourcer and the service provider as it helps to cut costs and specialize in core competencies while providing business to the other. It has been mentioned earlier that outsourcing is no more a corporate obligation but turning out to be requirement.

The Indian Outsourcing Industry

The IT industry in India has existed since the early 1980s. Outsourcing emerged only in the mid 90s. One of the first services to be outsourced was medical transcription and data processing. Customer support too caught on by the late 90s when big multinational companies started establishing subsidiaries to serve the off-shoring requirements of the parent companies. Some of the early entrants in to the outsourcing scenario were American Express, GE Capital, and British Airways. The Indian Business Process Outsourcing industry, which was formerly recognized for its cost effectiveness to attract customers, is now under an entirely different dictatorship. “Quality” is the new buzzword and is taking over business processes and services like never before. India with its major intellectual pool of Lawyers, Engineers, Chartered Accountants, Doctors, MBAs, Research Analysts, Scientific Researchers and PhDs with effective “English language skills” is well positioned to address the global needs. Outsourcing to India can provide huge dividends.

Over the past few years outsourcing of Legal/Paralegal/Techno-legal work overseas has increasingly become a popular global phenomenon. Foreign workers often command salaries a fraction of those earned by their United States counterparts. Countries like India and China form a very nice blend of labor pool consisting of technologists covering all realms of science and technology. The attractive prospects of overseas labor cost savings are especially present in patent preparation and prosecution work. Patent drafting can be expensive, with general counsels expecting to regularly pay $25,000 or more for drafting a patent application. Offshore professionals offer these services at less than $4000 per draft. The global legal services market stands at some $260bn, and about $160bn of it is in the US. Between 60% and 70% of this work can technically be offshored, and 70% of this offshorable work is likely to go to India.[i]

[pic][ii]

The annual growth rate for patent applications has been approximately 8% and 9% respectively. In contrast, as of July 2006, 25,024 active attorneys and 7,823 active agents were registered with USPTO and this number has grown by only 3.5% annually during the last decade. In India, there has been a tremendous growth in the number of Patent Attorneys having an additional technical background.

To contain the Attorney costs in this highly specialized field of work, it is imperative to seek a resource pool which can provide best in terms of quality and prices. Many IP divisions of large, medium and small organizations, as well as many IP law-firms, are already outsourcing some of their work (e.g., drafting of figures, literature searches, prior art searches, and invalidation studies) to third parties within the United States and other countries.[iii]

Requirements of the trade

The potential and capabilities of patent drafting experts can be rated on a number of counts like technical expertise and skills set available at a single place, availability of legal/ techno-legal/paralegal interpretation, databases for conducting research, issues of confidentiality and data security needs, cost effectiveness, turn around time, English language skills and maturity of IP structure in the country.

Competency of Foreign professionals

In any area of outsourcing, there is a risk in a drop-off in the level of quality of services provided by the foreign workers.[iv] Concerns about the quality of work mainly stem from the fact that the foreign lawyers are not trained in the U.S. Laws and also not bound by US legal Practices. With growth of IP related services being increasingly outsourced, these concerns have now been placated to a large extent. IP related services being offshored today include:

a. Prior Art Searches – These mainly include search for Patents and Non patent literature over the internet databases of USPTO, Delphion, Espacenet and other Proprietary and Non-proprietary databases.

b. IP prosecution related services – These include writing a portion of work or processing of certain standard USPTO or EPO forms, or conducting various services for the benefit of the client.

c. Patent Landscaping and Mining Services - These include graphical representation of a large numbers of patents related to each other, on the basis of keyword search, citations, or patent classifications.

d. Patent Portfolio Analysis - These services are required mainly by licensing, strategy and business development organizations, as well as and IP brokers, especially in the scenario of mergers and acquisitions or patent mining and licensing of patent portfolios.

e. IP docketing services – These involve paralegal work of keeping a record to various legal issues in the current scenario.

f. IP Licensing services – Processing of various standard formats for IP related services to be provided for the benefit of the end clients and Technology Transfer Services.

With the growth of these services, there has been an overall awareness of the latest trends and practices for IP related work and best practices of the Trade. This ultimately results in growth of a more mature and knowledgeable foreign professional.

Confidentiality

In addition to signing the Non-Disclosure Agreements (NDAs) and ensuring legal jurisdiction is in the US, the US-based organization would need to understand the processes that the offshore organization follows, in order to maintain confidentiality. This includes signing appropriate documents with its employees as well as taking appropriate technical measures to minimize leakage of confidential information (e.g., eliminating writing capabilities on individual PCs).[v]

Additional care needs to be taken by facilitating the use of secure site for transfer of information and content. An additional trail on the mode of conduct of services for the reasons of data protection is also created. Additionally, for any event of professional error, an additional coverage of “Professional Errors and Omissions” insurance may also be taken to cover the outsourcing interests.

U.S. Export Control Concerns

Technology Transfer to a limited extent is permissible in all countries of the world. For technology products, the US Commerce Department's Bureau of Export Administration ("BXA") administers non-defense and dual-use products (military and commercial use). The guidelines for exporting these products are set forth in the Export Administration Regulations ("EAR"). Companies may export most types of technology, including software and other computer products, by checking the export control list.[vi] Most large companies have an internal department that deals with export controls and related issues. Various Technology Transfer Offices also adhere to the strict guidelines for export of technology.

Current IP Outsourcing Models

With respect to the latest trends in outsourcing of Intellectual Property Services, we generally come across the following models to contain the services with the parameters of legal adherence and to construct the correct combination of good services with best pricing systems. These are:

US Law Firms and Foreign Law Firms forming alliance

This model has not been able to see much success mainly because of strong legal structures in various countries which do not allow foreign law graduates to practice in their respective country, for example, India. However, this position is inevitably going to change, especially because of global nature of innovation and IP laws. More and more law firms need to come together and form a global alliance to have a universal platform for providing legal services.

US based Law firms forming Subsidiaries in Foreign Country

Some law-firms in the US and India are setting up subsidiaries so that they do not practice law in India but provide such IP services for export purposes only. The law firm of Thompson & Knight LLP has announced the formation of a subsidiary company that will provide energy consulting services to the international marketplace. Thompson & Knight Global Energy Services, LLC plans to offer a wide range of specialized services to the energy industry including the identification and assessment of exploration and production investment opportunities, asset evaluations, portfolio optimization, and risk mitigation.[vii]

Technology Companies forming “Captive centres” in the foreign country

The trend of establishing a firm's own facility — known as a "captive center" — in locations like India, China, or Russia continues to find converts. During the past two years, more than 300 North American and European companies started their own offshore setup to lower the costs of product development or back-office operations.[viii]This model has not seen much of success.

Offshore Service Providing Companies

Some offshore companies that are providing domain specialized services to the multinational, small and medium size companies based in US. These companies hire technocrats and train them to jurisdiction specific laws for example, USPTO for US centric laws. These trained experts then provide all the patent-related services. Few of the offshore service providing companies are assisting their clients in entering the local markets. For example, Sumpraxis is one such service provider which provides patent drafting and prosecution assistance to SME’s. Sumpraxis additionally provides strategy for market entry and commercialization of the invention into new markets like India and China. This provides tremendous advantage to the SMEs as their Brand Equity is further enhanced.

Contact Centres for Large Technology Companies

Twenty-two percent of enterprises plan to expand their contact centers, with most large companies indicating plans to continue to directly manage their operations in-house. Currently, only a small percentage of enterprises use managed services, but 38% of European and 22% of North American companies express some interest in managed services for IP contact centers. Companies are gradually migrating to IP contact centers, but less than one-quarter indicate full or partial deployments for converting their operations to IP. However, companies that currently deploy IP for their contact centers anticipate strong adoption during the next four years. As concerns regarding reliability and scalability for IP diminish, Forrester predicts that a greater number of enterprises will upgrade their legacy contact centers to an IP platform during the next five years.[ix]

Freelancing IP work

Another model for provision of high quality work at extremely competitive costs can also be achieved by freelancing IP work to individuals or small companies through certain specific web portals. As more and more people have achieved a high degree of expertise in the organized fields of IP paralegal support, conducting Prior Art Searches, Patent Landscaping work, etc., small inventors and investors can look at getting this type of work done at highly competitive prices.

India is a fast growing economy with a very large English speaking base of technical experts. IP related work has already been off shored to Indian Companies. US patent drafting and marketability reports related tasks are already being performed by various companies in India. India provides easy access to the best combination of available resources for taking up the IP related and Patent Drafting work. The large resource pool covers all the features of the trade, including, technical and legal expertise, Confidentiality and Data protection issues, best quality drawing experts, access to kinds of search databases, cost advantage, best quality and short turn around time.

Another advantage, especially for the small inventors and Technology Transfer offices is felt in the field of providing extended Marketability to the inventions, wherein the added potential of a hitherto unknown technology may have a good potential in the third world markets. This would generate new revenues to the inventors by extending the licensing of the inventions to markets of India and other such countries.

Indian Perspective

Technical Expertise

India has some inherent advantages in the area of science and technology, namely,

• Powerful engineering and multidisciplinary professional talent base

• World-class institutions

• Cost-effective manpower & research facilities/infrastructure

• Increased Industry-Institute partnerships

• Government’s investment in R&D and technological leadership

• High tech industries becoming IP savvy

• Good legal and administration infrastructure in the cities, and a democratic,

liberal and stable polity & a great business ambience.

• Growing awareness of IP protection

• Imaginative legislative measures – balancing national interest & international obligations

• Emergence as a Global research design & development platform[x]

All these channels provide and enhance the technological capability and expertise available with India, for taking up an all revolutionary field of IP protection and Patent Drafting.

Academicians and Institutions have addressed the requirement of creating expert professionals capable of drafting patents and provide other IP related services. National Law University, Jodhpur has taken an initiative in blending science and law together in a manner to create attorneys having the expertise to service this demand. Further, the Indian Institute of Technology – Kharagpur is not behind. IIT Kharagpur has set up Rajiv Gandhi School of Intellectual Property Law. This envisages that India has the required expertise and is capable of providing good quality IP services, especially patent drafting.

International Agreements

India is a signatory to various international treaties and Agreements and therefore provides a sound base for maturation of IP related growth in and around the country. The legal standards are constantly enhanced by amendments and being aligned to the best in the world. Moreover, there is a common platform for the explanation of laws since both the countries derive their legal systems from the English legal Regimen. The accession to these treaties provides a clear view to the status and maturity level of IP regime in India.

1. Trade related Aspects of Intellectual Property Rights (TRIPS)

2. Patent Co-operation Treaty (PCT)

3. Paris Convention

4. Berne Convention

5. Universal Copyright Convention (UCC)

Various revisions come up from time to time to cover up the gaps in the alignment with laws of various IP leading countries of the world. India is potentially a great market and also a destination for establishing the base for future innovations.

Marketability Reports

India provides additional geographical advantage in terms of covering at least two different continents in terms of formulating market potential reports. Thus for certain inventions, which have lost the potential in developed economies, it may be possible to find good long term markets in India. Such licensing activity can provide additional revenue benefits to small inventors and Technology Transfer offices where any additional income would lead to more innovation.

Inventors would be able to get a better picture of market perception/ responses on marketability of their products, esp., with respect to new inventions. This would thus lead to developing frameworks and market entry strategies for their products and services. The Inventor would also have the advantage of being able to file in two or more geographical areas simultaneously through the foreign associate offices.

Cost Advantage

India has a large technical resource pool and offers globally competitive labor costs. The per capita cost of technical experts is also reasonable. India would surely emerge as a leading provider of Patent Drafting and Marketability Reports services.

Time Zone Advantage

India and United States fall under two different Geographic time zones. With different time zones, Indians are able to work during the US night. This accentuates and provides a 24 hour work time to the attorney to complete the tasks. Additional flexibility of Indian counterparts provides a space of time for adjustment and clarity of thoughts translated and reviewed in all drafting scenarios.

Case Study[xi]

The recent case study on based on Gary Blankenship’s study includes US Bar enquiry started by an Attorney (Florida Bar Member) is on an outsourcing based legal services scenario. In the current instance, California based law firm took help of an Indian IP Offshoring Company to do legal research, develop case strategy, prepare deposition outlines, draft correspondence, pleadings and motions, since they had no particular experience in the area. The Indian lawyers working on the case were not licensed to practice before California Bar Association.

California Attorney reviewed all the work done by the Indian outsourcing company including conducting the presentation before the Court. The outsourced work was billed to the client as “legal research” and “preparation of pleadings”. A favorable summary judgment ruling was held.

Questions before the San Diego Bar Association were:

1. Did the California Law Firm assist the Indian Company in the unlicensed practice of law?

2. Was there a duty to inform the client about the arrangement with the Indian firm at the time the contract was signed?

3. Was a California ethics rule violated by the extent to which the law firm relied on the Indian company for substantive expertise?

The ethics panel found that the law firm did not assist in unlicensed practice of law because it retained independent control and judgment over the case, and fiduciary responsibilities to the client were not altered by the outsourcing arrangement.

The panel further held “We believe that, in the absence of a specific understanding between the attorney and client to the contrary, the ‘reasonable expectation’ of the client is that the attorney retained by the client, using the resources within the attorney’s firm, will perform the work required to develop the legal theories and arguments to be presented to the trial court, and that the attorney will have a significant role in preparing correspondence and court filings.”

The role of the Attorney will also include supervision by determining the competence, education, and training of foreign lawyers and personnel to make sure of the confidentiality of the client’s work.

The Bar Committee’s decision favors the growth of outsourcing industry and launches a new growth trend for the lawyers/ Law firm’s areas of expertise.

Conclusion

The comparison between advantages and the disadvantages of outsourcing of patent drafting services concludes that advantages will outnumber the disadvantages. Initially foreign attorneys and/or agents were skeptical about outsourcing patent drafting to India, but now they are appreciative to the levels of quality displayed by Indian experts.

Increasing numbers of foreign agencies, law firms and companies are forming base with Indian law firms or third party vendors. This clearly proves that outsourcing of patent drafting to foreign countries is a necessity rather than an alternative resource to compete in this global scenario. Today, if a law firm does not provide cost effective patent drafting services, the clients in order to keep their IP spending within budgetary limits, may look for alternatives to provide the same.

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[i] Forrester Research,

[ii] Data for the chart has been taken from USPTO Website

[iii] Dr. Alok Aggarwal, Best Practices in Offshoring of Intellectual Property Services, July 31, 2006.

[iv] Stephanie Overby, The Hidden Costs of Offshore Outsourcing, CIO MAG., Sept. 1, 2003.

[v] Dr. Alok Aggarwal, Best Practices in Offshoring of Intellectual Property Services, July 31, 2006.

[vi] U.S. Export Controls On Technology Transfers,

[vii] Renato Bertani, T&K Launches Energy Consulting Company, March 01, 2007

[viii] Sudin Apte with John C. McCarthy, Christine Ferrusi Ross, Francesca Bartolomey, Allison Thresher

Shattering The Offshore Captive Center Myth - More Than 60% Of Captive Centers Struggle With Escalating Attrition And Costs, April 30, 2007

[ix] Elizabeth Herrell with Simon Yates, Christine E. Atwood, 2007 Contact Center Purchase Plans

Expansion Continues With Moderate IP Adoption, May 15, 2007

[x] Anuradha Goswami, Confederation of Indian Industry, Intellectual Property Rights: Ensuring Protection in India

[xi] Gary Blankenship, Outsourcing legal work to India? Can you really do that? Bar committee studies the ethical implications, June 15, 2007

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