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Patent Outsourcing – India as a Solution


“Outsourcing” is no more a new term in today’s global marketplace. It has become one of the key factors in formulating the overall corporate strategy in the emerging and highly competitive market scenario. The reason as why more and more companies are getting attracted to this concept is because it offers less capital expenditure, improved efficiency, saves on recruiting, training and operating costs and gives access to specialized skills. India being a land of highly skilled professionals is thus becoming a hub of outsourcing.

General Outsourcing Trend

Outsourcing is an arrangement in which one company provides services, sometimes from overseas or sometimes within the same country, to another company that could also be or is usually provided in-house. It is a straightforward concept based on the principles of comparative advantage and division of labour. Thus, the decision for a business to outsource is often made in the interest of lowering firm costs or to make more efficient use of labour, capital, technology and resources. Off-shoring, on the other hand is process where work is sent across the borders of a country which can be even within the same organisation itself.

 

But outsourcing offshore is now a more popular corporate strategy, which is used, to a large extent, by enterprises in developed countries to increase profitability, by investing overseas in relatively ‘low-wage’ developing countries such as Brazil, Russia, India, China (commonly termed as BRIC) to name a few. Personnel in creating offshore outsourcing alliances stress the savings as being the prime driver, which lead to lower costs while maintaining high quality. This is due to a combination of factors, such as high level of education and skills appropriate to the tasks outsourced.

 

Service organizations like Intellectual Property practitioners, lawyers, physicians, surgeons, dentists, clinical laboratories, hospitals are relying on developing countries to manage non-core processes for them. The motive of doing so is to focus more on their core competencies. Today India has become the hub of outsourcing and is capable to providing varied types of services to the developed countries, few of them being:

  • Call Center Services
  • Legal Services (LPO)
  • Research & Analysis Services (KPO)
  • Healthcare Services
  • Transcription Services
  • Banking & Financial Services
  • Software & IT Services
  • Data & Document Management Services

 

Legal Process Outsourcing

Legal services or precisely the Legal Process Outsourcing (LPO) has picked up high momentum in the recent years. Legal Process Outsourcing is one of the value added Business Process Outsourcing (BPO) services which involves legal work that companies outsource to more economical destinations.  It includes various processes and services which requires varied level of legal acumen and knowledge to perform a particular type of task.

 

LEGAL PROCESS OUTSOURCING

  • IPR Portfolio Management
  • Patent Application Drafting
  • Legal Research
  • Document Review
  • Contract Management
  • Litigation
  • Support
  • Paralegal Services
  • Immigration  Data Analysis
  • Legal Memo Drafting

 

 

IP Regime & IP Outsourcing

In law, intellectual property (IP) is an umbrella term for various legal entitlements which attach to certain types of information, ideas, or other intangibles in their expressed form. The holder of this legal entitlement is generally entitled to exercise various exclusive rights in relation to the subject matter of the IP.  Intellectual property laws are designed to protect different forms of intangible subject matter, although in some cases there is a degree of overlap.

 

The existing frame work of intellectual property laws recognized internationally are those identified by TRIPS (Trade Related Aspects of Intellectual Property Rights) and governed by WTO (World Trade Organization). They are:

  • Patents
  • Trademarks
  • Copyrights
  • Industrial Designs
  • Geographical Indications
  • Trade Solutions
  • Layout Designs of integrated circuits

 

IP outsourcing is one of the most talked about services when it comes to legal outsourcing. IP as we understand includes patent, copyrights, trademarks, industrial designs, trade secrets, geographical indications and Layout designs, but when we talk about IP outsourcing it is majorly Patent work which is being outsourced currently. Patents are the most valuable informational source of technical and competitive information. During the last few years these have gained a lot more attention. Due to increase in the globalization and competition, it is very important for the companies to protect their innovations and also make their R&D activities more efficient, by means of Patents.

 

As we know, obtaining patents has become part of business strategy now but at the same time the cost of obtaining patents is high. Reduction of patent costs therefore has becomes a high priority for many organizations. Outsourcing of patent work is hence considered as a means of reducing that cost. India is well recognized as a knowledge hub, due to its rich talent pool. A lot of IP services providers have emerged in India during the last few years and have become the giants in providing specialized IP services. Lots of Indian law professional and law firms are also now trying to enter into the market to provide the highest quality analysis and research services.

Most of these firms are located in the metropolitans of India like Bombay, Delhi, Hyderabad and Bangalore cities, with well developed infrastructures, internet access and US or UK contacts. Almost all firms are providing the following types of Patent services:

  • Prior –Art Search
  • Application Filing, Drafting & Prosecution
  • Landscaping
  • Invalidation Study
  • Freedom to Operate  Opinion
  • Infringement Analysis
  • Novelty & Inventiveness Assessment
  • Patent Illustrations & Drawings
  • Competitive Intelligence
  • Commercialization & Valuation
  • Docketing & Maintenance

Trademark comes the second in the list when we discuss IP outsourcing. But as compared to Patents, trademark still is in a blossoming stage and there are very few service providers who have gained expertise in this domain. Few of the Trademark related services catered by the Indian service providers are:

  • TM Search
  • TM Registration
  • Preparation Of Cease & Desist
  • Filing & Docketing Services

 

Issues related to IP outsourcing & their solutions

Associated with outsourcing are many issues which can be alarming if not considered properly before outsourcing the IP work.

 

1. Export Control Regulations

Mostly all the developed countries who are indulging into outsourcing offshore have well developed export laws in place. The export law generally pertains to “technology transfer” across the border of the country. Taking an example of U.S. for this scenario, we can talk about two distinct bodies which functions for controlling export law. Firstly, Commerce Department and secondly the Patent office (United States Patent & Trademark Office – USPTO) itself. The Commerce Department has set of rules known as Export Administration Regulation (EAR) which regulates the “export of technology” across the border of U.S., similarly USPTO restricts “export of patent application” which generally is sent to off-shoring countries for drafting purpose.

Solution: Almost every U.S. organisation have found a solution to this problem of outsource off-shoring by getting export waivers from the Commerce Department, for the technologies which they want to off-shore. This has helped them in getting away with the regulation of EAR. Similarly other countries can follow the steps of U.S. export control bodies by providing a solution to the organisations interested in off-shoring technology or patent work across the border.

 

2. Confidentiality Concerns

Maintaining confidentiality is one of the major concerns of the foreign organisations when sending work to someone who is not a citizen of that country or who is not physically present in that country. Keeping track of documents sent miles away from the country becomes the highest priority as losing trust of the client is directly associated with losing confidentiality.

Solution:  Indian law is well established and in practice since decades now. As per the laws it becomes duty of the employee to make sure that each and every employee of the organization has signed agreements or contracts which abide them to follow and maintain confidentiality of the clients’ details. Violations of the legal document which forbid them from sharing the details with any third party can thus lead to punishable offence under Indian Laws.

 

3. Maintaining Work Quality

When it comes to patent work, quality plays a vital role. Unlike other services, patent services cannot be compromised on quality. A single words presence or absence in claims or specification of the patent application may lead to heavy aftermaths. Hence U.S. or U.K. attorneys are really concerned of a real good quality of work as per their own standards. They are concerned whether service providers in India can deliver as good as what their clients expect.

Solution: The best way to combat this concern of U.S. or U.K. attorneys is to provide quality training to the associates working on behalf of the service providers in India. An extensive training of about one or two years (depending upon the type of work) by U.S. or U.K. attorneys (who are in practice) will lead to a quality work. Though it again adds to the cost of off-shoring, but if the training is imparted efficiently, then it becomes a onetime investment and can be an ever lasting solution to his concern.

 

4. Cost Savings

The last and the foremost which any off-shoring party can ask is will there be any real cost savings from off-shoring.

Solution: An associate in India for doing a patent related work (specifically drafting of a patent application) will not cost more than $10-15/hr. On the contrary a U.S. attorney for doing the same work will charge ten times of that. Considering training to be a onetime investment, the associate under the supervision of a senior associate can thus produce the same quality of work. Thus, the foreign law firm can expect a 10% saving by off-shoring the work. Apart from cost saving the off- shoring of work like patent docketing, proof reading etc. can reduce the work load of the in-house attorneys. (Outsourcing and Offshoring, A Summary of the Issues”, National Law Journal, September 12, 2005)

India as a solution

India has been the most preferred choice among global organization when it comes to outsourcing. In the U.S alone, more than 80% have ranked India as their first choice, when outsourcing software and IT services. The U.S has also recognized India as an outsourcing superpower. The number of organizations outsourcing services to India has only been increasing over the years. Thus the reasons to outsource to India are:

  • High Quality & Wide range of Services
  • High End Technology & Best of Breed Infrastructure
  • Sound Knowledge of US & UK Law
  • Cost Effective Services with Maximum Revenue
  • Quick Turnaround Time
  • Stable Indian Government
  • Skilled, Talented & experienced professionals

 

Future Scope

Revenues from the Indian patent services off-shoring industry were nearly $46 million for the calendar year 2007 and are expected to reach $206 m by end 2012. Large corporations are in favour of off-shoring patent related (and other legal) work to India as they are the ultimate beneficiaries of the cost savings. The current addressable value of the patent services off-shoring market is estimated at $2.2 billion. Typically catering to the international markets, patent services outsourcing to India is still in its infancy with a history of only about 3 to 4 years behind it. There are about 50 vendors in the industry with an estimated 1,550 professionals employed as of end 2007. While a few vendors have been in this business longer, this industry has gained momentum only in the last few years. The Indian patent off-shoring industry will grow 35% per annum over the next four years. As for the number of employees it is estimated that about 6959 people will be employed by the end of 2012 (“India is new hub for patent outsourcing“, Times of India, 8th July 2008, p: 19).

 

Conclusion

By virtue of WIPO & TRIPS the IPR regime has attained globalization which has further enhanced the scope of IP Outsourcing. Legal outsourcing in India is still in a beginner stage when compared to the heights which BPOs have attained in India, but the foundation has already been laid and within no time India will shine as a master in LPO industry as well.  While there are pitfalls, IP off-shoring has huge potential cost savings. If handled correctly, this can create history in the field of outsourcing. Indian companies that provide IP outsourced services thus can place themselves at an additional competitive advantage. As the Indian Patent Laws are getting more stringent and effective the Indian vendors are able to backup the U.S. and U.K. attorneys in a more competent manner. Thus, IP Outsourcing is a route to reduce cost and increase effectiveness by outsourcing work to India.